01 Apr 2021

Casual employment: new legislation ends double dipping and creates the ability to ask for a permanent job

By Cilla Robinson, Sophie Whish and Danielle Crowe

Employers should introduce new clauses to casual contracts that reflect the recent amendments in the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020.

The Federal Government’s Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 passed through both houses of Parliament on 22 March 2021 and received Royal Assent on 26 March 2021. The Bill is a significant development for casual employment in Australia, and introduces:

  • a definition for casual employees into the Fair Work Act 2009 (Cth) (FWA) for the purpose of entitlements in the National Employment Standards (NES);
  • a protection for employers from double dipping claims by casual employees who claim they were misclassified and are entitled to permanent employment entitlements;
  • the requirement for employers to give each casual employee a copy of the new Casual Employment Information Statement; and
  • an express obligation for employers to offer eligible casuals conversion to permanent employment, while also allowing eligible casual employees to make requests to convert to permanent employment.

The amendments introduced take effect from 27 March 2021.

Definition of casual employee

As set out in the Bill, a person will be a casual employee if they are:

  • offered employment on the basis that the employer makes "no firm advance commitment to continuing and indefinite work";
  • the person accepts such offer; and
  • the person is an employee as a result of that acceptance.

This means that the determination of whether a person is a causal employee or not will occur at the point of offer and acceptance of employment. This position differs from that of the Federal Court in WorkPac Pty Ltd v Rossato [2020] FCAFC 84, where the court allowed for the post-contractual conduct of either party to be considered in the determination.

The Bill also provides an exhaustive list of considerations a Court must have regard to when determining whether a firm advance commitment to continuing and indefinite work exists:

  • 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.

The Bill requires the Fair Work Commission, within a six-month period from commencement, to review the casual employment terms in all awards to ensure they operate consistently and effectively with the amendments.

Offset of casual loading arrangement

Significantly, the Bill intends to eliminate the "double dipping" concerns arising from Rossato where an employee is incorrectly classified as a casual. Under the Bill, when employees are found to be misclassified as casuals there is now an express right for employers to offset any "relevant entitlements" owed to the employee against the 25% casual loading paid to casual employees. The relevant entitlements are set out in the Bill and include:

  • paid annual leave;
  • paid personal/carer's leave;
  • paid compassionate leave;
  • payment for absence on a public holiday;
  • payment in lieu of notice of termination; and
  • redundancy pay.

However, the Bill requires that there be an identifiable amount of casual loading that has been paid to compensate the employee for not having one or more relevant entitlements during a period.

Offers and requests for casual conversion

The Bill also includes casual conversion provisions which introduce an obligation that employers must make an offer to convert a casual employee to either full-time or part-time employment (depending on their regular work patterns) if the employee:

  • has been employed by the employer for 12 months; and
  • during at least the last six months, has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or a part-time employee (as the case may be). 

However, employers are not required to make an offer if there are "reasonable business grounds" to not do so, where such grounds are based on facts that are known, or reasonably foreseeable, at the time of deciding not to make the offer. As set out in the Bill, reasonable business grounds employers can rely on include:

  • 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 or both of the following in that period:
    • the days on which the employee’s hours of work are required to be performed;
    • the times at which 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;

  • 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.

Employers must give notice of their decision to not make an offer within 21 days after the end of the employees first 12 month period of employment. Once notice is given by the employer, the employee ceases to hold the right to request conversion for the next six months. If an employer fails to give this notice, the employee preserves a residual right to request conversion in the future. Additionally, if an employee refuses an offer to convert, they will lose the right to request casual conversion for six months.

Requirement for updated Casual Employment Information Statement

The Fair Work Ombudsman has prepared and published a new Casual Employment Information Statement which must be given to each casual employee when they start employment with their employer.

Small business employers must give casual employees the new Casual Employment Information Statement as soon as practicable after 27 March 2021. This differs from non-small business employers who are required give the statement to casual employees as soon as practicable after the end of the transition period (six months after the commencement of the Bill, being 30 September 2021).

What employers should be doing

There are practical steps employers should be taking now to:

  • minimise the risk of mischaracterising casual employees;
  • minimise any liability associated with permanent entitlements being owed to mischaracterised casuals (under a poorly drafted contract); and
  • avoid breaching the new requirements in legislation regarding casual conversion and providing the Casual Employment Information Statement.

Our recommended steps for clients include:

Introduce new clauses to casual contracts that reflect the recent amendments, including:

  • checking there is a clause that separately identifies the casual loading amount (eg. 25%); and
  • updating any clause that outlines what permanent entitlements are included in the casual loading amount to include the full list now outlined in the legislation.

Consider additional contractual clauses that enable the company to recover any casual loading paid to a casual as a debt if their employment is found to be permanent (as a safety net while this legislation is new and being tested);

Ensure that casual contracts do not have a clause stating that casual loading entitlements are paid in lieu of the "NES entitlements";

Implement processes to ensure compliance with the new casual conversion obligations (and revisit how these processes interact with award and agreement covered employees); and

Establish a process to ensure the Casual Employment Information Statement is provided to employees.

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Clayton Utz communications are intended to provide commentary and general information. They 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 communication. Persons listed may not be admitted in all States and Territories.