Update to the Law of Casual Employment

On Monday, 22 March 2021, the Federal Parliament passed the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021.

This legislation significantly amended the Fair Work Act 2009 (Cth) (Amended FW Act) for employers of casual employees. The Amended FW Act received royal assent on 26 March 2021 and came into effect on 27 March 2021.

Non-Small Business Employers[1] have until 26 September 2021 to review their casual employment arrangements by determining who should be (and should not be) offered conversion to permanent employment. This creates an opportunity for these employers to set themselves up for success in managing their casual workforce.

All employers need to start providing the new Casual Employment Information Statement to its new casual employees. This document can be downloaded from the Fair Work Ombudsman’s website now. 

1. What are the changes to casual conversion under the Amended FW Act?

The Amended FW Act casual conversion provisions are aimed at “longer-serving regular casuals”[2], i.e. casual employees with 12 months of service and who, during at least six of the last 12 months, have worked regular shifts, which, without significant adjustment, can continue as full-time or part-time employment arrangements.

The two new paths to permanent employment for longer-serving regular casuals are as follows:

  • Non-Small Business Employers must proactively inform these longer-serving regular casuals at the end of their first year of employment whether they will be converted to permanent employment or not.  It does not require the casual employee to ask for permanent employment.

    This is a one-off exercise in that an employer is not required to proactively revisit this later during the employment. (Important: see our response to question 2 below for an explanation of the transitional arrangements that require all Non-Small Business Employers to complete a review of their current casual arrangements by 26 September 2021.)
  • For all employers (including Small Business Employers), longer-serving regular casuals (with at least 12 months of service) have the right to request conversion to permanent employment if they have not:
    • rejected an offer of permanent employment in the last six months; or
    • been rejected by their employer for permanent conversion in the last six months. 

The Amended FW Act’s “right to request” provisions look very similar to the casual conversion provisions in Modern Awards. Modern Awards will be updated between now and 26 September 2021 (i.e. the first six months of the Amended FW Act coming into effect – see our response to question 5 below).

When an employer offers permanent employment to a casual employee, it needs to be either on a full-time or part-time basis depending on the casual employee’s regular work hours.  

2. What does the Amended FW Act require in relation to considering current casual employees for conversion (or rejecting them for conversion)?

For Small Business Employers, longer-serving regular casuals (with at least 12 months of service) can now request conversion to permanent employment. 

For Non-Small Business Employers, there is a transition period ending on 26 September 2021 during which they must review all their current casual employees (i.e. those employed as casuals before 27 March 2021, when the Amended FW Act came into effect)[3] for conversion to permanent employment.  As part of this review, the employer must proactively inform these casual employees whether they will be converted to permanent employment or not, and give reasons if they refuse to offer permanent employment.  The employer is not legally required to offer permanent employment to anyone who is not a longer-serving regular casual.  The employer may refuse to offer permanent employment to a casual on “reasonable grounds” (see our response to question 3 below).

While Non-Small Business Employers are working through this review process, their current longer-serving regular casuals (i.e. those employed as casuals before 27 March 2021, when the Amended FW Act came into effect) will not have the statutory right to request conversion to permanent employment until 26 September 2021 (when the transition period ends). 

In these coming five months or so, Non-Small Business Employers have an invaluable opportunity to review how they use casual employees in their organisation, set expectations and right-size their casual workforce.

3. What rights does an employer have to refuse to convert a longer-serving regular casual to permanent employment?

Under the Amended FW Act, an employer can only decline to offer conversion on reasonable grounds.  The employer must document that refusal in a statement provided to the employee explaining the reasons for the refusal.

The concept of “reasonable grounds” is not exhaustively defined in the Amended FW Act, but any refusal by an employer must be based on facts that are known or reasonably foreseeable at the time that the employer decides not to make the offer to convert the casual to permanent employment. 

The Fair Work Commission is authorised to handle disputes in relation to casual conversion. 

4. What if the casual employee refuses to convert?

As mentioned above, if a casual employee refuses an offer to convert to permanent employment, they are not permitted to make a request for conversion for six months after that refusal.

Some commentators expect that casual employees will refuse to convert because they do not want to take a reduction in pay by losing the casual loading.  We anticipate that the rate at which casuals will accept offers to convert to permanent employment is likely to vary by industry.

5. What about the Modern Award casual conversion provisions?

As noted above, Modern Awards and many Enterprise Agreements also give certain casuals the right to request conversion to permanent employment.  The new conversion provisions in the Amended FW Act will operate alongside current casual conversion provisions in Modern Awards and Enterprise Agreements.  

Technically, casual conversion provisions in Modern Awards and Enterprise Agreements may provide another path to convert from casual to permanent employment, but the significance of those Modern Award and Enterprise Agreement provisions will diminish with time.  This is because the Amended FW Act requires the Fair Work Commission to review the Modern Award terms relating to casuals during the six-month transition period (ending on 26 September 2021).  We can expect that this process will align the casual conversion provisions in Modern Awards with the Amended FW Act, and, in due course, equivalent provisions in Enterprise Agreements will follow suit.

6. What are other changes in the Amended FW Act?

Statutory definition of “Casual Employee” – A safe harbour

The new statutory definition of “casual employee” gives employers a safe harbour if they have clear offers of employment stating that employment is on a casual basis, and evidence that those offers were accepted by employees.

No double dipping

A casual employee claiming to have been a permanent employee who was misclassified as casual (like the claimant in WorkPac v Rossato) will have their claim reduced by the amount of identifiable casual loading paid to them during the employment period related to their claim. 

Clarifying how the National Employments Standards operate after conversion to permanent employment

The National Employment Standards have been clarified to deal with minimum entitlements of employees who converted from casual to permanent employment.  For example, service as a casual is not taken into account when determining minimum entitlements to notice of termination or redundancy payments.

Casual Employment Information Statement

The new Casual Employment Information Statement is now available on the Fair Work Ombudsman’s website linked here.

From 27 March 2021 onwards, all employers must provide a “Casual Employment Information Statement” before or as soon as practicable after a new casual employee starts employment.  This requirement will apply in addition to the current obligation on employers to issue “Fair Work Information Statements” to their employees. 

Small Business Employers need to provide the new Casual Employment Information Statement to all their casual employees as soon as practicable after 27 March 2021. 

Non-Small Business Employers must provide the new information statement to casual employees who were hired before 27 March 2021, as soon as practicable after 27 September 2021 (i.e. after the six-month transition period has ended – see our response to question 2 above for more details about the significance of this six-month transition period from 27 March to 26 September 2021 for Non-Small Business Employers). 

Next steps

In light of these changes, we recommend that:

  • Non-Small Business Employers use the period from now until 26 September 2021 effectively by identifying the longer-serving regular casuals and planning for the roll-out of the conversion communication to all casual employees.
  • All employers consider the business factors that will impact their ability to convert (or not convert) longer-serving regular casuals to permanent employment.
  • Employers consider developing processes to ensure that only top performing casuals can become eligible for conversion to permanent employment.
  • Employers amend casual employment contracts to ensure that their contracts are aligned with the new definition of “casual employee” under the amended FW Act.
  • Employers be ready to distribute the Casual Employment Information Statement to their existing casual workforce and to new casual employees.

How we can help

For more information on what this might mean for your organisation or how to apply these new provisions practically, please don’t hesitate to contact us.

[1] “Small Business Employer” is defined in section 23 of the FW Act.  A Small Business Employer is an employer with less than 15 employees.  Casual employees who are not employed on a regular basis are excluded from the count of 15 employees, whilst employees of associated entities are included within the count.
[2] “Longer-serving regular casuals” is a shorthand we use in this article and is not a defined term in the Amended FW Act.
[3] The Amended Fair Work Act refers to casual employees who were employed by Non-Small Business Employers immediately before the amendments came into effect on 27 March 2021 as “transitioning casual employees”.