Changes to the Fair Work Act: clarity around casual employment or continuing uncertainty?

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Written by Philip Willox, Caitlin Babington and Claudia Taranto.

Following on from our previous article 'The new IR laws: 'incremental change' or a lost opportunity?', the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (the IR Amendment Act) has now been passed.

Despite its more ambitious scope when first introduced, all content of the IR Amendment Act was dropped during parliamentary debate, except for the provisions relating to casual employment.

This article unpacks the key changes for casual employment that commenced on 27 March 2021 and discusses its implications for employers.

Key changes

Definition of casual employee

We now have a statutory definition of "casual employee" in the Fair Work Act 2009 (Cth) (the FW Act). This change provides some much needed clarity after the uncertainty created for some employers by the WorkPac v Rossato decision (Rossato).[1]

The new definition provides that a person is a casual employee if they accept an offer of employment made by the employer with no firm advance commitment to continuing and indefinite work according to an agreed pattern of work. In assessing whether the criteria for casual employment has been satisfied, only the following considerations can be taken into account:

  • whether the employer can elect to offer work and whether the person can elect to accept or reject work;
  • whether the employee will work only as required by the employer;
  • whether the employment is described as casual employment; and
  • whether the employee is entitled to casual loading or a specific casual rate of pay.

This list differs from the factors Courts have been using to determine whether employment is casual or not. It has also been made clear that a regular pattern of hours does not of itself point to the existence of a casual employment relationship.

The new statutory definition limits the assessment of the status of employment to the time of offer and acceptance rather than by reference to any subsequent conduct of employer or employee.

The new definition applies to casual employment offers made before, on or after the new laws came into effect on 27 March 2021 and therefore has retrospective application. However, there is a carve out for employees who accepted or were given an offer before 27 March 2021 where the person:

  • is the subject of a binding court decision made before 27 March 2021 that the person is not a casual employee of the employer (for example, Rossato); or
  • converted their employment status before 27 March 2021 to employment other than casual employment.

Requirement for casual conversion

The IR Amendment Act has also enshrined a workplace right for long-term casual employees to convert to permanent employment. Employers (other than small business employers) must now offer a casual employee conversion to full or part time employment if they satisfy the following criteria: 

  • they have worked for the employer for a 12 month period;
  • they have worked a regular pattern of work on an ongoing basis for at least the past 6 months; and
  • the employee could continue to work their regular hours as a permanent employee without significant adjustment.

The new laws provide exceptions for small business employers or employers who can point to "reasonable grounds" that exist not to make an offer of casual conversion.

This strengthens the pre-existing right under many modern awards for casual employees to request permanent employment by putting the onus on employers to make offers of permanency and extends its application to a wider group of employees. There are also some procedural requirements on employers during the conversion offer and acceptance process and a prohibition on reducing or varying an employee's hours of work or terminating their employment to avoid having to make an offer or accept a request for conversion.

In addition, casuals retain a residual right to request to be converted to permanent employment if they satisfy the conversion criteria and neither the employer or employee have previously refused an offer.

The requirement for casual conversion applies in relation to periods of employment starting before, on or after commencement of the new laws, subject to the transitional period outlined below.

Ability of courts to offset for casual loading

In a deliberate attempt to resolve the 'double dipping' issue emerging from Rossato, the new laws introduce a statutory offset mechanism which applies where an employee was engaged as a casual and paid an identifiable loading and then brings a claim that they were not a casual employee seeking additional relevant entitlements. Relevant entitlements are defined as an entitlement under the NES, a fair work instrument or a contract of employment to annual leave, personal / carer's leave, compassionate leave, redundancy pay, payment for absence on a public holiday and payment in lieu of notice of termination.

When making orders in relation to a claim, a court must reduce any amount owed to the employee for the relevant entitlements by an amount equal to the loading amount already paid. The amount of this reduction is guided by considerations including whether the employment contract contains an identifiable amount to compensate them for not having one or more entitlements.  

These provisions are available retrospectively and apply to entitlements that accrue and loading amounts paid, before, on or after 27 March 2021 and regardless of whether the person is a current or former employee. The exception to this is for employees subject to the carve out mentioned in relation to the "definition of casual employee", who have not accrued, and cannot make a claim, for "relevant entitlements".

This amendment will significantly address the potential back payment liabilities on employers across Australia post-Rossato.

It is important to note that the provision only gives the court an ability to offset casual loadings where a claim has been made and therefore does not create a statutory offset mechanism which employers can utilise.

Casual Employment Information Statement

As discussed in our previous article, the Fair Work Ombudsman has prepared a Casual Employment Information Statement (CEIS) to raise awareness of and explain the relevant legislative changes. The CEIS can be accessed here. Employers must provide new and existing casual employees with a copy of the CEIS as soon as possible after 27 September 2021. For small business employers, they must provide this document as soon as possible after 27 March 2021.

Transitional period

The IR Amendment Act contains a number of complex transitional provisions governing the application of the new laws. For example:

  • Enterprise agreements: For enterprise agreements made before 27 March 2021, an employer and employee covered may make an application to the FWC to make a determination to vary the agreement to resolve any uncertainty with the new casual employee definition. Any variation to the enterprise agreement will not operate until the date specified in the determination, which can be retrospective.
  • Modern awards: For modern awards made before, or in operation on, 27 March 2021, which contain a term describing casual employment or casual conversion, the FWC has until 27 September 2021 to review those terms. Where there is any inconsistency or uncertainty, the FWC must make a determination as soon as reasonably practicable after the review is conducted varying the modern award where required. The FWC has published an issues paper and draft determinations which can be found here.
  • Casual employee definition: the IR Amendment Act provides employers with a 6 month transitional period to ensure compliance with the legislative changes relating to casual conversion. For all employers other than small business employers, during the transition period employers are only required to assess whether to offer conversion to any employee who was, or may have been a casual employee immediately before 27 March 2021. They are not required to make an offer for conversion during the transition period. During the transition period the timing of the conversion requirements are referenced to the date the assessment is made. The residual right to request casual conversion does not apply in the transition period. After 27 September 2021, the division providing for "offers and requests for casual conversion" applies as if a casual employee of an employer met the new definition.

Implications for employers

These legislative changes provide greater certainty for employers and employees in relation to casual employment and particularly by reference to the employment contract rather than any subsequent conduct by the parties.

We suggest employers should:

  • review all existing casual arrangements now to determine their eligibility for casual conversion;
  • consider the terms and content of casual employment contracts to ensure the benefits of the changes can be utilised;
  • ensure an employee's casual loading is expressly stated and easily identifiable (so it can be offset against any future claims);
  • provide casual employees with a copy of the CEIS (now for small business employers and as soon as possible after 27 September 2021 for all other employers);
  • get familiar with the process of and exceptions to making an offer of casual conversion; and
  • conduct a review of processes and systems relating to the engagement of casual employees.

[1] [2020] FCAFC 84.

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