Big Changes To Casual Employment

For the first time, casual employees are now defined by law. Lawyer Brian Powles breaks down what this means for employers.

For several years, there has been growing uncertainty about the meaning of ‘casual’ employment in Australia, causing significant legal risk for employers relying on casual workers. This uncertainty was addressed by parliament in March 2021, and the changes are advantageous to employers, if the right steps are taken.

The uncertainty has developed primarily because the concept of ‘casual’ has never been defined in the Fair Work Act 2009 (Cth). Rather, the common law meaning of ‘casual’ has prevailed. Under the common law, a court will assess the substantive nature of the employment relationship over time, and determine whether a permanent relationship exists, independent of the agreement between the employer and employee. In some instances, employees who were originally engaged as casuals have been able to retrospectively claim annual leave and personal leave for the whole of their employment. This occurred in the recent cases involving the labour hire company Workpac. Perhaps more critically, when the employees were established to be permanent, the employer was unable to rely upon the fact that the employees had previously received a 25% loading to compensate for the lack of annual leave and personal leave. Many employers have regarded this as the employees ‘double dipping’ on leave entitlements. Business advocacy groups had estimated that this could have cost the economy up to $18 billion in claims.

What has changed?

In March 2021, the Federal parliament enacted a definition of ‘casual employee’ for the first time. A worker is now considered a casual employee if:

• an offer of employment is made with 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.

The new definition shifts the focus back to what was originally contracted between the employer and the employee. The subsequent conduct of the employer and the worker during the employment is no longer a factor. Under the new definition, a casual employee will remain a casual employee until they are either converted to a permanent role, or until they accept an alternative employment offer that is on a permanent basis.

Perhaps more critically, if an employer does face a claim for entitlements from an employee incorrectly classified as ‘casual’, the new legislation also allows for the 25% loading received by casuals to be offset in the future against any other entitlements that may be owed to the employee for these benefits, including annual leave, personal leave or redundancy pay.

With these new changes, in circumstances where back pay liabilities do arise, employers will now be able to offset any amount claimed by their employees against any casual loading that has already been paid.

Conversion from casual

To ensure balance and fairness, and to prevent this law from creating an over casualisation of the workforce, the changes also strengthen the pathway for casuals to convert to full-time or part-time employees, in certain circumstances. Any business that has more than 15 permanent employees, must now offer a casual employee conversion to a permanent role if:

• they have been employed for a 12-month period; and
• they have worked:
  • a regular pattern of hours on an ongoing basis in the last six months of that employment; and
  • the employee could continue to work this pattern of hours as a part-time or full-time employee, without significant adjustment.

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

An employer is not required to make an offer for casual conversion if there are reasonable business grounds not to make that offer and those ‘reasonable grounds’ are based on facts that are known or are reasonably foreseeable. This can include reasons such as the position will cease to exist within the following 12-month period, or the hours of work are to be significantly reduced. Importantly, if the employee is not eligible for conversion or if it is not reasonable to offer conversion, the employer is still obligated to notify the employee of the reasons why they are not entitled to, or are not being offered, conversion.

Employers should consequently assess the pattern of hours worked by its casual employees to identify their eligibility for casual conversion and to ensure that it will make offers for conversion or provide notification of refusal within the required time periods.

Lastly, employers must now give every new casual employee a Casual Employment Information Statement, which can be found on the Fair Work Ombudsman website (www.fairwork.gov.au). This statement must also be given to all existing casual employees as soon as possible after 27 September 2021.

Overall, these changes are great news for employers, primarily because they remove the dangerous uncertainty formerly involved in employing casuals. However, it’s important that the changes are understood and implemented correctly by employers if they are to benefit fully from the new laws. AMP

If casual employees are an important part of your business, reach out to PCC Employment Lawyers at www.pcclawyers.com.au or call 02 8436 2500.