Tuesday, 30 March 2021

Changes to the Fair Work Act Regarding Casual Employment

The Omnibus Bill (the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021) (Bill) which now primarily addresses casual employment has passed through the Senate and received Royal Assent on 26 March 2021.  Despite many of the initially proposed industrial relations reforms being abandoned, the Bill will have a considerable impact on employers while at the same time providing much needed clarity around the nature of casual employment.

There are four key amendments that the Bill has introduced to the Fair Work Act 2009 (Cth) (FW Act) which are:

  1. A definition for ‘casual employee’;
  2. Expanded casual conversion rights;
  3. Requirements to provide a ‘Casual Employment Information Statement’; and
  4. Double dipping protections where employees have received a casual loading.

As the Bill received Royal Assent on 26 March 2021, the changes to the FW Act have taken effect from 27 March 2021.

Definition of Casual Employee

The first key amendment is the introduction of a definition for ‘casual employee’ to the FW Act, where an employee will be a casual employee if:

  • an offer of employment is made on the basis that the employer makes no ‘firm advance commitment’ to continuing and indefinite work according to an agreed pattern of work; and
  • the person accepts the offer on that basis; and
  • the person is an employee as a result of that acceptance.

In determining whether, at the time the offer of employment is made, the employer makes no firm advanced commitment to continuous and indefinite work, regard must be had only to whether:

  • an employer can elect to offer work;
  • the person can accept or reject the work;
  • the person will work only as required;
  • the employment is described as casual employment; and
  • an employee will be entitled to casual loading (or a prescribed casual rate of pay).

Importantly, a regular pattern of hours does not in itself indicate a firm advance commitment to continuing and indefinite work.

In effect this means that whether an employee is considered to be a casual employee will be based on the offer and acceptance of employment (and the terms of the employment contract) and any subsequent conduct will no longer be relevant when determining whether an employee is casual.

The new definition of casual employment will apply to offers of employment that were given before, on or after the commencement of the Bill (on 27 March 2021).

Expanded Casual Conversion

The second key amendment to the FW Act requires employers to offer eligible casual employees conversion to a permanent (full time or part time) employment if:

  • the employee has been employed for a 12-month period; and
  • in the last 6 months of that 12-month period, the employee has worked:
    • a regular pattern of hours on an ongoing basis; and
    • the employee could continue to work this pattern of hours as a permanent employee, without significant adjustment.

The casual conversion offer must be made in writing to the employee within the 21 days following their 12 months of employment and reflect the hours that the employee has worked.

An employer may not be required to make an offer for casual conversion if there are reasonable business grounds not to make the offer based on facts that are known or reasonably foreseeable.  In addition, an eligible employee may have a residual right to request casual conversion in certain circumstances.

Additionally, the requirement to offer casual conversion will not extend to small business employers with less than 15 employees (although such employees can still request it).

The expanded casual conversion amendments to the FW Act can be contrasted to casual conversion provisions that already exist in modern awards, which typically only require an employer to inform eligible casual employees of their right to request conversion to permanent employment (as opposed to a requirement to offer casual conversion).  In light of this, we understand the modern award casual conversion provisions will soon be reviewed by the Fair Work Commission (FWC).

Lastly, if a dispute arises regarding casual conversion, a dispute may be raised with the FWC.

Requirement for Casual Employment Information Statement

Similar to the Fair Work Information Statement which employees must receive on commencement of employment, the third key amendment to the FW Act requires employers to provide casual employees with a new ‘Casual Employment Information Statement’ (CEIS). The CEIS needs to be provided to:

  • new casual employees before, or as soon as possible after, they start their new position;
  • existing casual employees of a small business (employers with fewer than 15 employees) as soon as possible after 27 March 2021; and
  • existing casual employees of other employers as soon as possible after 27 September 2021.

Like the existing Fair Work Information Statement, the CEIS is distributed by the Fair Work Ombudsman (FWO). A copy of the CEIS can be accessed through this link.

Double Dipping Protections

The final key amendment provides the ability to offset entitlements against receipt of a casual loading.

Where an employee has been incorrectly classified as a casual employee and paid an identifiable amount (i.e. casual loading) to compensate them for not having certain entitlements during their employment, and an employee subsequently makes a claim to be paid an amount for one or more of the relevant entitlements with respect to the employment period, a court must, subject to limited exceptions, reduce any amount payable for the entitlements by an amount equal to the loading amount.

This aims to address issues that arose from recent Federal Court decisions regarding the backpay of permanent entitlements and will prevent employees from ‘double dipping’ by receiving both the casual loading and backpayment of permanent entitlements (such as annual leave, and personal/carer’s leave).

Importantly, the statutory offset will only apply to entitlements that accrue and loading amounts paid on or after commencement of when the Bill came into force (on 27 March 2021).

Where to from here?

While the amendments have now taken effect, we note a High Court constitutional challenge to the amendments has been flagged, and we will provide further updates as we learn more.  Regardless, moving forward we recommend employers:

  1. Ensure employment contracts accurately reflect the casual nature of employment in light of the definition to be inserted into the FW Act;
  2. Review the pattern of hours worked by casual employees to identify which employees will need to be offered casual conversion and when;
  3. Implement systems and processes in your business to satisfy new casual conversion obligations; and
  4. Provide casual employees with a Casual Employment Information Statement, as required.

This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.