Background
For an employer, being able to correctly identify an employee as a casual employee or a permanent part-time employee is important because permanent employees have a right to leave entitlements and access to unfair dismissal laws and redundancy payments. By contrast, in return for ‘casual’ status, casual employees are entitled to a 25% loading on top of their minimum hourly rate. This loading is designed to compensate the employee for not receiving leave entitlements (such as annual leave and personal and carer’s leave) and not having the benefit of a predictable and stable income.
What qualifies as ‘casual employment’ has changed over the years, with Workpac v Rossato [2021] providing the most recent guidance on how casual employment is to be defined. Legislative changes now mean that how an employee can be classified as casual will change again on August 26, 2024, as part of the Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2024 (the Act). So, what are the changes?
Changes to casual employment
The new Act contains provisions to clarify the definition of casual employees but also changes the casual conversion process.
New statutory definition of ‘casual employee’
There is now a new statutory definition of ‘casual employee’. A person is a casual employee if:
- the employment relationship has no firm advance commitment to continuing and indefinite work; and
- the person is entitled to a casual loading or specific casual pay rate under an award, registered agreement or employment contract.
What does a ‘firm advance commitment’ mean?
In assessing whether a firm advance commitment exists, the law now emphasises the real substance, practical reality and true nature of the employment relationship. In determining what that true nature of the employment relationship is, factors that will be considered are whether:
- the employer can offer or not offer work to the employee (and whether this is happening)
- the employee can accept or reject work (and whether this is happening)
- it’s reasonably likely there will be future work available of the kind the employee usually performs in the employer’s business, based on the nature of the business
- there are full-time or part-time employees performing the same kind of work in the employer’s business as the work the employee usually performs
- the employee has a regular pattern of work even if it changes over time due to, for example, reasonable absences because of illness, injury or other leave.
When assessing whether a firm advance commitment exists, you can consider the contract of employment, or the contract as well as any mutual understanding or expectation between the employer and employee that isn’t part of the contract. Keep in mind it is important to consider how the contract is performed and how the employer and employee act after entering into the contract when working out the mutual understanding or expectation.
Conversion provisions
The Act introduces a new pathway to full-time or part-time employment through allowing casuals to notify their employer in writing of their intention to change to permanent employment. The new employee choice pathway replaces old casual conversion rules and comes with criteria that make an employee eligible to request for their employment to be converted.
In order to provide written notice requesting to change their employment to permanent, a casual employee must:
- have been employed for at least 6 months (12 months is employed by a small business)
- believe they no longer meet the requirements of the casual employee definition
After notice has been provided, an employer will then be obliged to respond to the notice in writing within 21 days. In their response, an employer must either accept the change, or not accept the change.
What reasons are there for an employer not accepting the change?
If an employer does not accept the change as requested by the employee, the written response is required to contain reasons for the decision.
These reasons can only be any of the following:
- the employee still meets the definition of a casual employee
- there are fair and reasonable operational grounds for not accepting the notification, such as:
- substantial changes would be required to the way work in the employer’s business is organised
- there would be significant impacts on the operation of the employer’s business, or
- substantial changes to the employee’s employment conditions would be necessary to ensure the employer doesn’t break rules (such as in an award or agreement) that apply to the employee.
- accepting the change would mean the employer won’t comply with a recruitment or selection process required by law.
The Casual Employment Information Statement
The Casual Employment Information Statement (CEIS) is a document containing information about employment conditions that an employer is obliged to provide to all casual employees. Employers must provide employees with this statement either before, or as early as possible after, a new casual employee commences employment.
A CEIS must also now be provided at these times:
- After 12 months of employment for small businesses
- After 6 and 12 months of employment, and every 12 months after that
What should employers do now?
If you are an employer, you should be:
- Reviewing the terms on which you engage casual employees to ensure compliance with the new legislation and to ensure their casual status will be recognised;
- Ensuring you have adequate policies and procedures in place that manage disputes and compliance issues arising from the new conversion process.
Now is the time to reassess your workforce and optimise your employment arrangements in the new regulatory landscape. For further information visit the Fair Work Website. If you need help preparing suitable employment contracts, making assessments about your workforce, need policies and procedures or have a dispute on your hands, call JFM Law on (02) 9199 8597 or email us.
The information contained in this post is current at the date of editing – 2 September 2024.