The recently enacted Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (the "Amending Act") while grandiose in title but, pleasingly, of limited length, has made some significant and welcome changes in respect of the law relating to casual employment in Australia that will create greater certainty for employers.
However, those amendments will, at least in the short term, impose further administrative burdens on the employers of casual employees. The Amending Act has the effect of amending the Fair Work Act 2009 (the "Act") in the manner in 3 main aspects as summarised in this update. Further, we set out what are employers' obligations under the amendments and our recommendations as to the steps that employers should take to comply with those obligations.
The definition of "casual employee"
First, there has been inserted a specific definition of "casual employee" at section 15A of the Act. Section 15A provides:
15A Meaning of casual employee
- A person is acasual employee of an employer if:
- an offer of employment made by the employer to the person 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 for the person; and
- the person accepts the offer on that basis; and
- the person is an employee as a result of that acceptance.
- For the purposes of subsection (1), in determining whether, at the time the offer is made, the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person, regard must be had only to the following considerations:
- 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;
- 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.
- To avoid doubt, a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work.
- To avoid doubt, the question of whether a person is a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party.
- A person who commences employment as a result of acceptance of an offer of employment in accordance with subsection (1) remains a casual employee of the employer until:
- the employee's employment is converted to full-time or part-time employment under Division 4A of Part 2-2; or
- the employee accepts an alternative offer of employment (other than as a casual employee) by the employer and commences work on that basis.
The corollary of this new definition (at sub-section 15A(1)) is that the previous definition contained in section 12 of the Act of "long term casual employee" has been repealed. In effect, the new definition broadly reflects the common-law definition of a casual employee which was espoused by the Federal Court in the decisions in Workpac v Skene  FCAFC 131 and Workpac v Rossato  FCAFC 84, at least in respect of circumstances at the start of the employment relationship.
However, where the new definition differs significantly from the common law position in respect of assessing casual employment (for the purposes of the Act) is in that the factors that can be looked at are limited to the circumstances set out at sub-section 15A(2) – that is, circumstances which are restricted to matters concerning how the employee was engaged. It is made explicit at section 15A that matters arising after the initial engagement of the employee – that is, assessing the true substance of the employee's relationship over the course of the employment as occurred in Skene and Rossato – play no part in the application of the new definition. As such, this new definition does largely resolve the fundamental problem with the common law definition of and approach to determining whether a casual employment relationship existed – that of uncertainty as to the proper classification at any one point in time.
Nevertheless, from a practical point of view, the nature and effect of this first significant aspect of the amendments are probably of no more than esoteric interest to most employers, as it is the second significant aspect of the amendments that will be of more pragmatic and commercial interest.
The second significant aspect is that a new section 545A has been inserted into the Act such that now, if an employee employed in circumstances where the employee is described as a casual employee but, in reality, the employee was not a true casual employee and later makes a claim to have been incorrectly classified as a casual and to be paid for entitlements that accrue to permanent employees1, a court must take into account any additional payments made to the employee by way of casual loading and reduce any such underpayment claim in respect of such entitlements by the amount of such casual loading that can be attributed as being in lieu of such entitlements. In practical effect then, bearing in mind that under most Awards the applicable loading is 25% which would usually be more than enough to cover the value of all such entitlements that may have accrued if the employee was determined to be properly classifies as a permanent employee, it is difficult to see how an employer that has properly paid its employees in accordance with casual loading rates clearly specified as being in lieu and satisfaction of entitlements that would accrue to permanent employees, could now be exposed to any claims for underpayments in respect of such entitlements.
The third significant aspect – and which is no doubt of more practical concern for most employers of casual employees – are the obligations imposed on employers regarding providing casual employees with the Casual Employment Information Statement now published by the Fair Work Ombudsman (explained in more detail below) and also making offers to "regular" casual employees (or responding to requests from casual employees) to convert their casual employment to permanent employment ("casual conversion"). This has been done by the Amending Act inserting a new Division 4A into Part 2-2 of the Act which sets out the NES (the minimum employment standards).
From the outset it might be said that it would appear likely that the actual practical impact on most employers of this "new" casual conversion regime will likely be minimal. Most employers employing casual employees subject to modern Awards were already obliged under such Awards (at least for about the last 2½ years or so) – to make casual employees aware of the casual conversion provisions in those Awards and that such employees have the right (if eligible) to request that their employment be converted from casual employment to permanent employment. An employer could only refuse such a request on "reasonable business grounds". However, in this author's experience in dealing with employer clients, there was little to no take up of any such "opportunity" from most casual employees. Most simply, it would appear that most employees paid as casual employees (in spite of working regular and systematic hours) would prefer to receive the additional casual loading remuneration rather than become a permanent employee.
Nevertheless, the amendments do impose greater administrative burdens on employers as they are required to be more proactive in relation to making casual employees aware of their rights in respect of casual conversion and providing the opportunity to casual employees to convert from casual status to permanent. In this regard, employers are obliged:
- in respect of any casual employees engaged on or after 27 March 2021, to provide a copy of the Casual Employment Information statement to the employee as soon as possible;
- for small business employers (i.e. those with fewer than 15 employees), to provide a copy of the Casual Employment Information Statement to all casual employees as soon as possible after 27 March 2021;2
- for employers with 15 or more employees:
- to provide to existing casual employees as at 27 March 2021 a copy of the Casual Employment Information Statement as soon as possible after 27 September 2021.3
- In respect of existing casual employees as at 27 March 2021, to make an assessment by 27 September 2021 as to whether any such existing casual employees are eligible to be offered to convert to permanent employment. Within 21 days of completing such an assessment in respect of any casual employee, the employer needs to either:
- make a written offer to the employee to convert their casual employment to permanent employment; or
- write to the employee explaining why the employer won't be making an offer (and this needs to be done by no later than 27 September 2021).
Eligibility for casual conversion and associated obligations on employers
What does an employer need to do to make an assessment of whether a casual employee is, prima facie, eligible to receive an offer of casual conversion and, further, if an employee is prima facie eligible, what are reasonable grounds for not making an offer of casual conversion? To be prima facie eligible to receive an offer of casual conversion, a casual employee must:
- have been employed by the employer for at least 12 months;
- have worked a regular pattern of hours on an ongoing basis for at least 6 months; and
- could continue working these hours as a full-time or part-time employee without significant changes.
If those criteria are met and there are no reasonable grounds for the employer not to make an offer for casual conversion, then an offer for casual conversion must be made to the employee on or by (or, at the least, as soon as possible after) 27 September 2021 for existing employees who will have worked for at least 12 months as at 27 September 2021, or in all other cases within 21 days of the 12 month anniversary of a casual employee's employment.
Reasonable grounds for not making an offer of casual conversion (or for refusing a request by a prima facie eligible casual employee for casual conversion) relevantly include that, in the next 12 months:
- the employee's position will not exist;
- the employee's hours of work will significantly reduce;
- the employee's days or times of work will significantly change, and that cannot be accommodated within the employee's available days or times for work.
- the employer would have to make a significant adjustment to the employee's work hours for them to be employed full-time or part-time.
Summary of obligations in respect of casual conversion for non-small business employers
As such, prior to (or, at the least, as soon as possible after) 27 September 2021 employers should prepare in respect of all of its casual employees who have been employed for at least 12 months:
- Make an assessment for each casual employee whether they are prima facie eligible to receive an offer of casual conversion.
- For those who are eligible to receive an offer of casual conversion and there are no reasonable grounds not to make such an offer, a written notice of offer to convert to permanent full-time or part-time employment (as applicable). The author of this article would consider that it would be prudent in any such written offer to set out:
- what that will mean for the employee in terms of remuneration – for most employees that will mean a reduction in (at least hourly) remuneration as they will no longer receive the casual loading;
- but that the employee, in lieu of not being paid the casual loading, will now be entitled to other entitlements in the way of paid annual leave, paid personal leave, paid compassionate leave, payment for absence on a public holiday, payment in lieu of notice of termination, and redundancy pay.
- For those who do not meet the eligibility criteria (as set out above), a written notice that sets out that the employer will not be making an offer of casual conversion by reason that the employer has determined that the employee is not eligible to receive such an offer and specifying how the employee has failed to meet the eligibility criteria.
- For those who are eligible to receive an offer of casual conversion but there are reasonable grounds not to make such an offer, a written notice that sets out that the employer will not be making an offer of casual conversion by reason that the employer has determined that there are reasonable grounds not to make the offer and specifying the reasonable grounds.
- For those employees to whom an offer of casual conversion is made, if they wish to accept the offer they must respond in writing to the employer within 21 days after receiving the offer accepting the offer. If the employee does not respond within 21 days the employer can assume that the employee has declined the offer.
- In respect of employees who do provide written notice of acceptance of the offer, the employer must, within 21 days after receipt of the written acceptance, give written notice to the employee of the following:
- whether the employee is converting to full-time employment or part-time employment;
- the employee's hours of work after the conversion takes effect;
- the day the employee's conversion to full-time employment or part-time employment takes effect.
- However, that written notice from the employer with that information cannot be given by the employer until after the employer has discussed those matters with the employee. That is, there is a mandatory requirement that the employer discuss such matters with the employee.
- The start date for the permanent hours must be the first day of the first full pay period after the employer has provided the written notice referred to in the preceding paragraph unless the employer and the employee otherwise agree.
- An employer is only obliged to make one offer of casual conversion to an employee. There is no ongoing requirement for the employer to make any further offers of casual conversion. However, casual employees – even if they have previously not accepted an offer of casual conversion – may still make a request for casual conversion. The casual employee making such a request still needs to meet the eligibility criteria and, furthermore, may not make a request for casual conversion if in the preceding six months:
- they have refused an offer of casual conversion; or
- the employer has told the employee in writing that an offer of casual conversion will not be made because there was a reasonable ground not to make an offer; or
- the employer has refused a previous request for casual conversion because there was a reasonable ground to refuse the request.
Generally speaking, casual employees who believe they are eligible to become permanent can make a request for casual conversion every six months. The employer cannot refuse a request by an employee for casual conversion if the employee meets the eligibility criteria and there are no reasonable grounds for refusal of the request. Such matters have already been discussed above.
Conclusion – going forward
In summary, employers of casual employees should ensure that:
- the Casual Employment Information Statement is provided to casual employees when required. For non-small business employers of existing casual employees, that is by 27 September 2021. For small business employers, the Statement should be provided to all casual employees as soon as possible after 27 March 2021 – if you are a small business employer and that has still not been done, then do it! For casual employees who began their employment after 27 March 2021, the Statement should be provided to such employees as soon as practicable once their employment starts;
- for casual employees whose employment commenced after 27 March 2021, that the 12 month anniversary of their employment is tracked so that the employer can meet its obligations in relation to assessing and making (or not making) and offer for casual conversion within the 21 days of that 12 month anniversary;
- they have templated casual conversion documents prepared – that is, notices of offer, notices of not making an offer, et cetera. If any employer requires any assistance in the drawing and settling of such documents please do not hesitate to contact Bennett & Philp;
- of course, copies of all written notices given to employees in relation to casual conversion should be kept on each employee's personnel file. Similarly, a record should be kept on the employee's personnel file of the date upon which the Casual Employment Information Statement was provided to the employee and the manner in which it was provided.
1 Such as annual leave; paid personal leave; paid compassionate leave; absences on public holidays; payment in lieu of notice of termination; and redundancy pay.
2 Section 47A of the Amending Act.
3 Section 47 of the Amending Act. It should also be pointed out that an information page on the website of the Fair Work Ombudsman states that employers are able to provide a copy of the Casual Employment Information Statement by the following means:
- in person;
- by mail;
- if the employee agrees, by emailing a copy of the Casual Employment Information Statement or a link to the Statement on the Fair Work Ombudsman website.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.