The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (the Act) came into operation on 26 March 2021. This new legislation contains significant changes to casual employment. What does that mean for employers?
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.
Recent court decisions have not helped employers to easily classify their workforce. In WorkPac Pty Ltd v Skene (Skene’s Case), the Court said there was no definite test for determining whether an employee is casual. Instead, the irregularity and unpredictability of the employee’s work, whether the work fluctuates with demand and whether shifts could be refused, were just some of the factors taken into account when making a determination about the true nature of someone’s employment.
In WorkPac Pty Ltd v Rossato (Rossato’s Case) the Court, rather than being satisfied with what the employment contract itself said about the employment relationship, looked at the subsequent nature of the work relationship between employer and employee to determine that an employee was a permanent employee and not a casual employee.
Further, in Rossato’s Case, the Court rejected the contention that the receipt of a 25% loading meant the employee had received payment in lieu of non-casual entitlements. This decision allowed the employee to ‘double dip’, (i.e. get paid the loading and get his annual leave payments).
Employers were understandably not very happy about this state of uncertainty.
Changes to casual employment
The new Act contains provisions to clarify the definition of casual employees and prevent double dipping but also creates employee conversion obligations for employers.
New statutory definition of ‘casual employee’
There is now a statutory definition of ‘casual employee’. A person is casual employee if:
- an offer of employment is made where the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person;
- the person accepts the offer on that basis; and
- the person is an employee as a result of that acceptance.
To avoid doubt, the question of whether a person is a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on any subsequent conduct of either party. This section expressly overturns the common law principles established in Rossato’s Case which requires courts to look at the way the parties have actually conducted themselves during the course of the employment relationship to determine whether it was of a casual nature.
Casual loading used to reduce claims for permanent entitlements
In Rossato’s Case, the court did not allow the employer to off-set a casual loading against permanent employee entitlements such as annual leave. However, the new legislation does allow employers to off-set any casual loading paid to an employee (whose employment does not fall within the statutory definition of ‘casual employee’), against any liability for accrued non-casual entitlements if:
- The engagement of the employee is specifically described as being casual employment; and
- The casual loading is identified as being paid to compensate the employee for not having one or more non-casual entitlements.
It is important to note that these provisions are intended to have a retrospective effect and will apply to employees who at the time of entering into their employment contracts fell within the statutory definition of ‘casual employees’.
Conversion provisions
Within the first 6 months after the introduction of this legislation, all employees will have to assess whether to offer their casual employees who have been employed for more than a year, a conversion to permanent employment.
Unless there are reasonable grounds not to do so, employers (other than small business employers) must make an offer of casual employee conversion to permanent employment if:
- An employee has been employed for at least 12 months;
- There has been a regular pattern of hours on an on-going basis during at least 6 months of that period; and
- The employee could continue to work those hours as a full-time or part-time employee.
If the employer fails to make the offer, the employee has the right to request to be converted.
What should employers do now?
This legislation impacts employers in a number of ways:
- It brings clarity to the classification of casual employees and sets out clear requirements for an offer of employment to be classified as casual;
- It ensures claims against the employer for unpaid entitlements can be off-set by the amount of casual loading paid to the employee; and
- It also creates an obligation for employers to make an offer of conversion to permanency once their casual employees have been employed for 12 months.
If you have casual employees, 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;
- Assessing whether there are any current employees that should be offered conversion in the next few months; and
- Developing new policies and procedures that will help your business manage its obligations to offer conversions to casual employees and any disputes arising out of the process.
Now is the time to reassess your workforce and optimise your employment arrangements in the new regulatory landscape.
