The substantially reduced IR omnibus Bill passed Parliament on Monday 22 March 2021. Following contentious public scrutiny and prolonged debate, the House of Representatives passed the pared-back version of the ambitious Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill) which proposed a raft of changes to be introduced to the Fair Work Act 2009 (Cth) (FW Act).
The passing of the Bill remains a landmark development as it reforms a substantial and often problematic feature of the industrial relations system – casual employment.
The Bill introduces a definition of casual employment into the Fair Work Act 2009 (Cth) (FW Act) for the first time and confers a statutory right on long term casual employees to request conversion to permanent employment.
The passed bill includes the following key changes:
Casual employment defined
The Bill inserts a statutory definition of ‘casual employee’ into the FW Act for the first time.
The new definition states that a casual employee will be deemed as such 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” and “the offer is accepted” by the employee.
This person is a casual employee regardless of any changes in the employment relationship. That is, the assessment of whether a person is a casual occurs on the basis of the offer of employment, not on the basis of any subsequent conduct of the parties.
When determining whether a firm advance commitment to continuing and indefinite work exists, the Bill requires a Court to have regard to only 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; 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.
Although the new definition aims to clarify the confusion about casual working relationships, it has been met with controversy for not addressing subsequent conduct of either employees or employers in their respective roles, conflicting with earlier decisions in Rossato and Skene.
Right to casual conversion
The second key aspect of the Bill is a casual conversion entitlement.
Employers must offer to convert a casual employee to permanent employment if the employee:
- has been employed for 12 months; and
- during the last 6 months, has worked a regular and systematic pattern of hours without significant adjustment.
The offer must be to convert to either full-time employment (where the casual has worked the equivalent of full-time hours) or part-time employment consistent with the casual’s regular pattern of hours (where the casual has worked the equivalent of part-time hours).
When offer is not required
However, employers are not obliged to make an offer if there are “reasonable business grounds” to not make the offer. Such grounds must be known or reasonably foreseeable at the time of declining to make the offer.
The Bill defines reasonable business grounds to include:
- where the conversion would require a significant adjustment to the employee’s hours of work in order for the employee to be employed permanently;
- where the employee’s position will cease to exist in the 12 months after the conversion right arises;
- where the hours of work which the employee is required to perform will be significantly reduced in the 12 months after the conversion right arises; and
- if there will be a significant change in either the days or times on which the employee’s hours of work are required to be performed in the 12 months after the conversion right arises.
Where an employer determines not to make an offer of conversion, they must give notice of the decision to employees within 21 days of when the right to be offered conversion arose. If an employer fails to give this notice, the employee retains a residual right to request conversion at a later date.
These casual conversion provisions go further than the existing Award regime of provisions. This is because the existing Award regime entitles employees to request conversion. Under the amended Act, employers have an obligation to offer conversion regardless of any employee request.
That is, there is a new proactive obligation on employers.
Casual conversion does not apply to small business employers
Following substantial contests and lobbying by business and unions last week, the Bill has been amended to confirm that casual conversion rights do not apply to employees of small business employers. That is, employers with a head count of less than 15 employees.
Conversion right can be lost
The Bill makes clear that, where an employee refuses an offer to convert, they no longer hold a right to request conversion at a later date.
Equally, where an employer has determined that there a reasonable business grounds to not make an offer of casual conversion and notifies the employee in accordance with the provisions of the Bill, then the employees also cease to hold a right to request conversion at a later date.
Casual Loading Offset
Permanent entitlement claims pursued by persons misclassified as ‘casual employees’ will now be offset against the casual loading that was paid to them. In instances where a casual employee is paid an identifiable amount (loading amount) to compensate for not having one or more relevant entitlements over an employment period (Entitlements) or has made a claim to be paid an amount for the Entitlements, a court must reduce a claim for leave and other entitlements made by an incorrectly classified casual employee by an amount equal to a proportion of the loading amount the court deems appropriate.
An order of this nature may be made by a court with reference only to fair work instruments or the employee’s contract terms specifying the relevant entitlements the loading amount is compensating for. Notably, this provision will apply retrospectively meaning that business may rely on this new provision for permanent entitlement claims that have already be made.
New Casual Employment Information Statement
The Bill requires the Fair Work Ombudsman to create a new Casual Employment Information Statement that is to be provided to each casual employee when they start employment with their employer.
It appears that this Statement must supplement the Fair Work Information Statement that employers already need to provide employees.
Takeaway for Employers
The changes provide much needed clarity to employers and their employees about casual working arrangements. For most employers, it will be time to amend the arrangements and instruments that you have in place governing casual employment.
Employers should be looking to:
- introduce new casual contracts that align with the recent amendments;
- introduce processes for dealing with casual conversion that ensure the employer’s operational requirements are considered whilst simultaneously ensuring compliance with the FW Act; and/or
- for some businesses, it might also be time to reassess whether your existing arrangements can be optimised having regard to the changed regulatory landscape.