On 22 March 2021, amendments to the Fair Work Act 2009 (Act) passed the House of Representatives introducing much needed change with respect to employment of casual employees.
This article identifies many of the amendments soon to commence relating to casual employees and some practical changes employers can implement now.
Current Position
The Act does not contain a definition of a casual employee leaving the issue for Court’s to determine, often with inconsistent results. Most recently, in the decision of Workpac v Skene the Full Court of the Federal Court of Australia held that a casual employee was in fact a permanent employee, and was entitled to:
- retain the 25% casual loading rate paid over a two year period
- permanent employee leave entitlements (i.e. annual leave, paid personal leave and notice to termination), and
- the employer could not set off the 25% casual loading rate to discharge some or all of its liability with the effect that the earlier amendments introduced by Parliament in 2018 intending to give employers a right to set off the 25% casual loading rate were ineffective.
In determining the issue of whether or not the employee was a causal employee, the Court held the issue to determine was whether or not there was a reciprocal ‘firm advance commitment’ of ongoing indefinite employment according to an agreed pattern of work. For this, the terms of the employment agreement are to be considered, as is (and more importantly) the way the employer and employee perform the employment relationship. Matters such as an inability of the employee to reject rostered hours and repetitive or patterns of rostered hours are all indications of the employee being permanent, not casual.
The decision had significant consequences not only for Workpac (who had a significant casual workforce), but for any other employer with a casual workforce. Those impacts were immediately felt with approximately 7 class actions being launched against employers and ASIC ‘recommending’ to public entities that they report on potential liability for casual employee entitlements.
What are the amendments?
New casual employee definition
The amendments to the Act have the effect that there will now be a definition of “casual employee” in the Act. In essence, a person will be a casual employee if:
- an offer of employment 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 for the person;
- the person accepts the offer on that basis; and
- the person is an employee as a result of that acceptance.
While the issue to be decided is whether or not there is a ‘firm advance commitment’, the amendments make clear that this issue is to be determined solely by reference to:
- the offer of employment and the acceptance of the offer;
- whether the person will work only as required;
- whether the employment is described as casual employment;
- 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 (e.g, a modern award or enterprise agreement).
New set off right
Where an employee is a casual employee and subsequently seeks to be paid an amount for one or more entitlement (e.g., annual leave) then the Courts will be required to set off any “identifiable amount” paid to compensate the person for not having one or more relevant entitlement during their employment.
This is an obvious response to the Workpac v Skene decision and avoids casual employees from ‘double dipping’ where they are already being paid (for example) the casual loading rate. It is important however that there be an “identifiable amount”, ideally identified in a monetary sum rather than by a percentage (e.g., “25%”).
Casual conversion
Under the new amendments, unless reasonable grounds exist, employers must offer a casual employee to convert to full time or part time employment if:
- the employee has been employed for a period of 12 months;
- the employee has in the last 6 month period, worked a regular pattern of hours on an ongoing basis which could continue to be worked on a full time or part time basis (without significant adjustment);
Reasonable grounds will include:
- the employee’s position will cease to exist in the period of 12 months after the time of deciding not to make the offer;
- the hours of work which the employee is required to perform will be significantly reduced in the next 12 month period (from the date the offer to convert is to be made);
- there will be a significant change in the next 12 month period (from the date the offer to convert is to be made) to either the days or hours required to be performed which cannot be accommodated within the days/times the employee is available to work
Similarly, casual employees can request to convert to full time or part time employment provided certain requirements are met.
What should employers do?
The commencement date of these amendments is yet to be identified but it is clear that they will apply to existing and future casual employee engagements. On that basis, employers should be reviewing their existing casual employment agreements and template agreements to take into account:
- the matters which will determine if there is a “firm advance commitment”; and
- the need to have an “identifiable amount” to be offset against potential future liability for employee entitlements.
Advice should be sought on the best way forward to implement any changes for existing employees and other practices that can be implemented to protect against a claim for entitlements and manage offers to convert to full time or part time employment.
ALHR regularly acts for employers and can provide advice with respect to casual employee relationships and employment agreements to suit your needs. Please book a free consultation to discuss your needs by clicking here.
