New Definition of Casual Employment: What it means for Employers
The recently enacted Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (the Act) has made several significant changes to casual employment in Australia.
As of 26 March 2021, the Fair Work Act 2009 (Cth) provides that a person will be considered a casual employee only if the person accepts employment on the basis that the employer makes no firm advance commitment to the employee of continuing indefinite work and that there is no agreed pattern of work for the employee.
The Act provides that an employment relationship should be only assessed on the initially agreed upon terms of the casual employment (e.g. at the time the employment relationship is entered into). Therefore, this should be done without considering any later conduct such as the development of a regular pattern of work.
Why have these changes occurred?
A large reason for these changes is to prevent ‘double dipping.’ In the recent and widely-publicised case of WorkPac v Rossato, the Full Court of the Federal Court of Australia found that if a permanent employee is incorrectly treated and paid as a casual employee, they were entitled to backpay for permanent entitlements such as paid annual leave and personal leave. Critically, the Court found that the employer was not entitled to claw back or set off the casual loading of 25% it had paid to the employee against those permanent entitlements, hence the description of “double dipping”. See our article on the WorkPac decision here.
In response to WorkPac, the legislature has reversed this principle by requiring courts to offset the amount of any casual loading paid to a misclassified employee against any backpay for permanent entitlements arising from the same period.
Statutory right to casual conversion
If a casual employee has been employed for more than 12 months and has worked a regular pattern of hours on an ongoing basis for at least 6 months, their employer must offer the casual employee a part-time or full-time role . This is because the employee no longer fits the description of a casual employee, which is characterised by a lack of an agreed pattern of work and no commitment to continuing and definite work. Similar requirements have already been imposed under modern awards for some time now; the development here is to make the requirement part of the universally applicable National Employment Standards.
Importantly, the Act sets out some circumstances where employers will not be required to offer casuals the choice to convert to permanent employment, including where there are reasonable business grounds to do so.
Casual Employment Information Statement
A further development is that, under the changes, employers are obliged to provide a Casual Employment Information Statement (CEIS) to all casual employees when they begin their employment. This document contains information such as the definition of a casual employee and instances when an employer does and does not have to offer casual conversion. It is available on the Fair Work Ombudsman’s website.
When will these changes affect me?
These changes allow for a 6-month transition period from March 26 to comply with the casual conversion requirements . However, small businesses have slightly different rules, for example, they are required to provide the CEIS ‘as soon as practicable from now’ rather than having the transition period and also have exemption from the requirement to offer casual conversion.
How should I as an employer respond to these changes?
- At the time of an employee commencing, carefully consider whether a part-time or full-time contract would be more fitting for the nature of employment rather than defaulting to a casual contract automatically.
- Review all casual engagements to ensure they meet the new definition of casual employment. Employment contracts and payslips should also have a clause which shows the separate casual loading amount and state that the payment is in lieu of other ongoing entitlements.
- Distribute the CEIS to all existing casuals as soon as possible.
- Introduce a procedure for reviewing casual engagements for conversion to full-time or part-time contracts where appropriate to ensure compliance with the Act.
Please contact James Remington on 03 5337 0266 if you would like further information about these important changes.
Author: James Remington