Australia: Casual to permanent employment conversion: what does the Fair Work Commissions decision really mean?

What you need to know

• As part of its four year review of modern awards, the Fair Work Commission has decided to insert a 'casual conversion' clause into most modern awards that do not already have conversion clauses in place.
• The proposed clause will enable casual employees to request to convert to full-time or part-time employment, subject to certain rules and restrictions, and employers may be able to refuse such requests on reasonable grounds.
• The clause does not take immediate effect, but employers should be aware of the decision and consider how they will need to manage casual to permanent conversion requests when the time comes.

When the headlines blared "Casual workers could get permanent roles" last week some employers may have been caught off guard, concerned about their casual workforce suddenly coming forward and demanding permanent employment resulting in access to annual leave, personal leave and the other benefits of permanent employment.

The recent decision of the Fair Work Commission (Commission) may not, however, be as disruptive as it initially seems.

What has the Commission decided?

On 5 July 2017 a five-member Full Bench of the Commission handed down its decision concerning part-time and casual employment as part of its four year review of modern awards. Both unions and employer representative bodies alike submitted a broad range of changes to the awards.

As part of its decision, the Commission will insert a model casual conversion provision into 85 of the 88 modern awards which do not already contain a casual conversion clause. The proposed clause enables casual employees to request to convert to full-time or part-time employment, subject to certain rules and restrictions.

The proposed addition of the clause was in response to submissions from the Australian Council of Trade Unions (ACTU), although the decision did not go as far as the ACTU would have liked. The Commission rejected the notion that casual employees should have the right to elect to convert, having, in some awards, been deemed to be full-time or part-time employees after a certain length of time unless they elected to remain employed as casual.

What will the conversion clause look like?

The Commission has drafted the model conversion clause with a qualifying period of 12 months (that is, a casual employee must have worked for a period of 12 months before a conversion request can be made). It also allows employers to reject a request for conversion on 'reasonable grounds' which include (but are not limited to):

• it would require a significant adjustment to the casual employee's hours of work to accommodate them in full-time or part-time employment under the applicable modern award, or
• it is known or reasonably foreseeable that the casual employee's position will cease to exist, or
• the employee's hours of work will significantly change or be reduced within the next 12 months.

Where an employer refuses a regular casual employee's request to convert, the employer must provide the employee with the written reasons for the refusal within 21 days of the request being made. Disputes arising from the refusal can be dealt with in accordance with the dispute resolution procedure in the modern award.

The draft model clause also includes a requirement that casual employees are to be provided with a copy of the model clause within the first 12 months of the employee's engagement with the employer.

What does this mean?

Despite the mainstream press coverage and surrounding excitement, the concept of casual to permanent conversion is not new.

In early 2006, prior to the introduction of WorkChoices, Unions NSW applied for a test case standard in the form of a State Decision. Arising from this was the insertion of a provision in NSW awards that allowed the conversion of regular casuals to permanent status (full-time or part-time) after six months' employment.

While there were similar concerns from employers about a raft of casuals wanting to convert to permanent employment, this did not occur to the extent feared.

What's next?

The Full Bench is yet to issue determinations in relation to this decision and has invited parties to make further submissions about certain proposals including its draft model conversion clause. It not anticipated the changes will take effect until after August 2017.

Notwithstanding this, employers should be mindful of the Commission's decision and start thinking about what they will need to do when the final model conversion clause does come into force in a wide range of awards. This should include considering the mechanisms they will need to have in place to properly address each request for conversion, as well as reviewing their 'on boarding' procedures to ensure employees receive the correct information required, once the Commission's decision comes into effect.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories