Finally, there is some good news for employers. The Federal Government last month passed the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill) which has resulted in significant changes to casual employment.
Casual employment has been a hot topic over the last two years with a number of Full Court and Fair Work Commission decisions significantly impacting on how casuals were categorized. These decisions resulted in employers being at risk for significant entitlement claims if they incorrectly categorized casual employees.
These latest changes to the Bill introduce a definition of casual employment into the Fair Work Act 2009 (Cth). A casual employee is now defined as a person who accepts a job offer knowing that there is no “firm advanced commitment to ongoing work with an agreed pattern of work”.
This is a significant and welcome change for employers. In stripped down terms this means that if a person is offered casual employment and accepts that offer then they are deemed to be a casual employee. Finally, common sense prevails. Employers no longer need to be concerned about casuals working regular or systematic hours and their employment type being retrospectively determined as permanent.
When disputes arise about employment classifications, Courts will now only consider:
- whether there is an offer of hours of work by the employer and the employee can choose to either accept or reject the offered work
- that hours of work are offered when the employer requires work to be performed
- that the employment is described as casual employment; and
- the employee is paid a casual loading or a specific rate of pay for casual employees that is higher than rates provided to permanent employees.
An employee employed as a casual employee will remain a casual employee until:
- they become a permanent employee through:
- casual conversion, or
- re offered and accept an offer of full-time or part-time employment, or
- stop being employed by the employer.
Casual loading offset
An important note here, is the mention of the casual loading. This loading has been a hot topic over the last 3 years and it is now a relief that it has been recognised and defined by the Bill. Again, common sense has prevailed here and it is now stated that if an employee is found to have been incorrectly categorized as a casual and they are in fact are a permanent employee at law, the Bill states that any casual loading paid to an employee can be used to offset any leave entitlements now deemed to be owing due to the new categorization as a permanent employee.
In order to claim this offset, it must be clear that a loading was paid and what entitlements the loading offsets ie personal and annual leave. Employers can meet this obligation by making this clear in their employment contracts.
Right to casual conversion
In a win for small business owners, the Bill now states that casual conversion rights do not apply to employees of small business employers, who have less than 15 employees.
For businesses with more than 15 employees, casual employees have retained their right to casual conversion. However, this right has now been streamlined and included in the National Employment Standards (NES). Now employers must offer to convert a casual employee to permanent employment if the employee:
- has been employed for 12 months
- has worked a regular pattern of hours for the last six months
- could continue working those hours as a permanent employee without significant adjustment.
The offer must be in writing and offer 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 for the last 6 months (where the casual has worked less than full time hours).
However, if there are “reasonable business grounds” to not make the offer then employers are not required to make the casual conversion offer. Reasonable business grounds are defined under the Bill to include:
in the next 12 months, it is reasonably foreseeable:
- that the employee’s position won’t exist
- that the employee’s hours of work will significantly reduce
- that there will be significant change in the days and / or times to the employee’s hours of work and these changes will not be able to be met by the employee
If making the conversion offer would require the employer to make significant adjustment to the employee’s hours of work in order for the employee to be employed either full or part time then this could also be considered as reasonable grounds in which not to offer the conversion.
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.
A key point for employers to note is that employers have an obligation to offer conversion regardless of whether your employee has requested it or not.
Losing the right to conversion
Employees must respond to the offer within 21 days of receiving it. If they do not accept or respond to the offer, then the Bill states that the right to convert to permanent employment has lapsed and the employee can’t request to convert at a later date.
Similarly, if an employer had reasonable business grounds to not make an offer of casual conversion (and notified the employee of those reasons in accordance with the provisions of the Bill), then the employees also cease to hold a right to request conversion at a later date.
New Casual Employment Information Statement
A new Casual Employment Information Statement has been created and this is to be provided to each casual employee when they start employment with their employer or as soon as reasonably practical for existing casual employees. This new statement will be in addition to the existing Fair Work Information Statement that employers already need to provide employees.
What should employers do next
Employers with casual employees should review their existing employment contracts and ensure:
- there is a clause detailing the casual loading and what entitlements it offsets
- that the right to casual conversion has been detailed and outlined
Additionally, employers should:
- provide all existing casual employees with the Casual Employment Information Statement and ensure this is integrated into their onboarding systems for new employees
- implement procedures to ensure the employer is complying with the new casual conversions time frames and obligation to offer to convert.
Overall, these changes have been a welcome relief to Employers. There may be some short term pain in relation to reviewing existing contracts and ensuring they’re compliant but overall and in the long term this will enable employers to better meet their business’s day to day operational requirements.
If you would like assistance with reviewing your casual employment contracts, then please reach out to Vanessa from HR Maximised on 0418 190 106 or firstname.lastname@example.org