Understanding the latest changes to casual employment laws

Following months of debate and several rounds of amendments, the Federal Government passed its ‘Omnibus Bill’ into law in March. Officially known as the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020, the Bill was significantly reduced in scope as the Government was forced to scrap much of its original content after failing to secure the necessary support from the crossbench.

However, what did pass into law should be of significant interest to all business owners, particularly those with a contingent of casual employees. The primary changes introduced to the Fair Work Act deal with casual employment; specifically, with how casual employment is defined and the obligations of business owners in dealing with these employees.

Clarity on the meaning of casual employment

The debate around the definition of casual employment has been a hot topic for more than 12 months, after claims brought forward by a coal mine worker, Mr Rossato, who was employed by labour hire company WorkPac.

The original decision, which we covered in detail in a previous article, was subject to a High Court appeal brought by Workpac in response to claims that the ruling could lead to ‘double dipping’ by casual employees.

Important update – August 2021: The High Court recently handed down its decision on the appeal brought forward by Workpac, overturning the original ruling by the Federal Court and finding that Mr Rossato was in fact a casual employee by the definition of the Fair Work Act.

It was found that Mr Rossato’s employment was expressly on an ‘assignment-by-assignment basis’, despite the fact these assignments were set well in advance. Importantly, Mr Rossato, as a casual, also gave no reciprocal commitment to his employer to work the days or hours – as is the nature of a casual employment arrangement.

This decision, combined with changes introduced as part of the Omnibus Bill, finally provides clarity around what constitutes a casual employee.

So, what does this mean for employers?

Prior to the High Court ruling, an employee was considered a casual under the Fair Work Act if they were offered and accepted employment without a ‘firm advanced commitment’ to continuing and indefinite work.

However, this ‘firm advanced commitment’ treatment has now been replaced by a clearer definition that defines an employment arrangement by the type of contract entered into between and employer and employee.

What this means is that the nature of employment, casual or permanent, should be clearly defined in an employment contract and the intention of the parties to enter into a casual employment arrangement must be clearly articulated in a written employment contract. This removes any ambiguity or any risk of the employee claiming they are a permanent employee with the associated entitlements.

Based on this new definition, a person employed on a contract that states they are a casual is considered casual, regardless of any subsequent conduct of the parties which may indicate otherwise.

However, it is important to still be aware of the other caveats that now apply following the passing of the Omnibus Bill, including casual conversion rules.

What does “firm advanced commitment” mean?

The most contentious part of the new definition is how to interpret the clause of firm advanced commitment. There is a rather robust list of factors that come into play when assessing whether, at the time an offer of employment is made, the employer has not made a firm advanced commitment to providing that employee with an agreed pattern of continuing and indefinite work. These factors are:

• Whether the employer can elect to offer work and whether the person can elect to accept or reject work;
• Whether the person will work as required according to the needs of the employer;
• Whether the employment is described as casual employment; and
• Whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument (e.g. an Award or Enterprise Agreement).

If you are unsure about how the new definition is applied, it is important to seek advice to ensure you maintain compliance with the latest legislation.

However, this is not the only change that has been introduced to the Act that employers should be aware of.

Casual Loading Offset

In response to the potential issue of ‘double dipping’ of leave entitlements, the Bill had also provided greater clarity for employees in how paid annual and personal leave entitlements are dealt with in relation to casual employees. The recent recision in the Work Pac case is consistent with this approach.

Under the Fair Work Act, employers can now offset any leave entitlements owed to the employee against the 25% casual loading that is often paid to the casual employee, provided that was the employment relationship agreed at the outset.

This means that if a “casual” employee is later found to be a permanent employee, a Court may be able to offset the amount equivalent to the 25% casual loading paid to the employee against any amounts owing for entitlements related to permanent employment, such as annual leave and personal leave. In other words, an employee cannot “double dip”, claiming on the one hand they are not a true casual and therefore entitled to paid leave but on the other hand, also receive a 25% casual loading. One will be “offset” against the other.

Changes to Casual Conversion

Another key aspect of the law is the introduction of a mandatory casual conversion mechanism, which requires an employer to offer an eligible casual employee conversion to full or part time employment (based on the pattern of hours they have worked) after 12 months of employment.

There is an exemption for small business employers not to offer permanency after 12 months but there is no exemption on an employee requesting to go permanent.

Employers must offer to convert a casual employee to permanent employment if the employee:

1. Has been employed for 12 months; and
2. During the last 6 months, has worked a regular and systematic pattern of hours without significant adjustment.

It is important to note that the employee is entitled to reject the offer of casual conversion at their discretion. Employers are also able to reject the request to convert to permanency if they have “reasonable business grounds” to do so. Employers should familiarise themselves with what constitutes reasonable business grounds on which they can refuse to offer permanency, which are:

1. The employee’s position will cease to exist in the period of 12 months after the time of deciding not to make the offer;
2. The hours of work which the employee is required to perform will be significantly reduced in that 12-month period;
3. In that 12-month period, there will be a significant change in the days or times that the employee’s hours of work are required to be performed, which cannot be accommodated within the days or times the employee is available to work during that period; and
4. Making the offer would not comply with recruitment or selection processes required by or under a law of the Commonwealth or a State or a Territory.

Going forward, employers will also now be required to provide every new casual employees with a Casual Employment Information Statement published by the Fair Work Ombudsman (FWO).

If you have any casual employees, now is the time to think about reviewing their casual employment contracts and establish a compliant up to date system for casual conversion. Please contact Perks People Solutions Director Cecilia White if you would like any further information or assistance with the changes outlined above.