The Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Act) commenced operation on 27 March 2021. The Act introduces significant amendments regarding casual employment and the obligations on employers of casual employees.
The amendment comes after the recent controversial decisions of the Full Court of the Federal Court in WorkPac Pty Ltd v Skene  FCAFC 131 and WorkPac Pty Ltd v Rossato  FCAFC 84, in which the Court considered the definition of casual worker and confirmed Workpac could not set off causal loading paid to employees against unpaid entitlements.
The amendments in the Act provide clarity for casual employment relationships via a definition of casual employment; introducing a mechanism for conversion from casual to permanent employment; and permitting, where an employee has been incorrectly characterised as a casual, a reduction of the amount of any unpaid entitlements by the amount of any casual loading paid.
New definition of casual employment
The new definition of casual employment introduced by the Act is based solely on the offer of employment. If an offer of employment is made and accepted with "no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person" that employee will be defined as a casual employee regardless of any subsequent conduct. A casual employee who is working a regular pattern of hours will now be defined as a "regular casual employee".
Further, the Act provides that a casual employee will remain a casual employee until they convert or accept an alternative offer of employment.
Employers must provide new casual employees with a Casual Employment Information Statement, available on the Fair Work Ombudsman's website.
Casual conversion – obligation on employers
The Act imposes a new obligation on employers to offer full or part-time employment to casual employees who have been employed for 12 months and have worked regular hours during at least the past 6 months. It is important to note that this does not apply to small business employers.
If an employee meets these criteria, their employer must, within 21 days of that 12-month period ending, make the employee an offer to convert to part or full-time employment, equivalent to the hours that they had been working as a casual employee. However, an employer may choose not to make the offer for conversion if they have 'reasonable grounds' not to, either at that time or in the foreseeable future. Reasonable grounds for deciding not to make a casual conversion offer include where:
- the employee's position will cease to exist in the period of 12 months after the time of deciding not to make the offer;
- the hours of work which the employee is required to perform will be significantly reduced in that period;
- there will be a significant change in either the employee's days or times of work in that period, which cannot be accommodated within the days or times the employee is available to work; or
- making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory.
If an employee has not received an offer of conversion from their employer and meets all the criteria, they can request casual conversion. Their employer can refuse if there are reasonable grounds for them to do so.
Employees also have a residual right to request casual conversion later in their employment if they meet the eligibility criteria.
Employers must not change an employee's hours of work or terminate their employment to avoid casual conversion.
Double dipping and set-offs
Finally, the Act addresses the "double dipping" concerns arising from Rossato by allowing employers to set off amounts paid for casual loading against any future claims for unpaid entitlements.
In Rossato the court found that workers who Workpac had employed and characterised as casuals were properly characterised permanent employees and were therefore eligible for payment of entitlements such as annual leave and personal leave. The court rejected Workpac's argument that all or some of these benefits had already been compensated for by the payment to the employees of a casual loading and that any further payment the Court determined to be owing to the employees should be reduced to account for the casual loading already paid. This decision has been widely criticised by employers as allowing casual employees to "double dip" by receiving both casual loading and payment for entitlements.
Under the Act, if an employee is incorrectly characterised as casual and later makes a claim for unpaid entitlements, the court must reduce any entitlements payment ordered by the amount of any casual loading paid by the employer. However, this only applies if the employer has paid the employee an identifiable loading amount to compensate them for not receiving the other relevant entitlements. Therefore, it is important for employers to ensure that both the casual employee's employment contract and pay slip clearly and separately identify the amount of any casual loading paid.
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.