The gutted IR bill has created the first ever legal definition of a casual employee
The Federal Government’s proposed Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill) has now passed both houses of Parliament in a revised and significantly reduced form.
Whilst key aspects of the Bill were jettisoned last week, the passing of the Bill remains a landmark development as it reforms a substantial and often problematic feature of the industrial relations system - casual employment.
The Bill introduces a definition of casual employment into the Fair Work Act 2009 (Cth) (FW Act) for the first time and confers a statutory right on long term casual employees to request conversion to permanent employment.
Casual employment defined
As a result of the Bill, under the FW Act, the person is a casual employee if they are:
- offered employment without a “firm advanced commitment to continuing and indefinite work”; and
- the person accepts that offer
The assessment of whether a person is a casual occurs on the basis of the offer of employment, not on the basis of any subsequent conduct of the parties.
When determining whether a firm advance commitment to continuing and indefinite work exists, the Bill requires a Court to have regard to only the following considerations:
- Whether the employer can elect to offer work and whether the person can elect to accept or reject work
- Whether the person will work as required according to the needs of the employer
- 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
Read more: Despite 36 errors in eight months, worker found unfairly dismissed
Right to casual conversion
The second key aspect of the Bill is the inclusion of a casual conversion mechanism.
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Employers must offer to convert a casual employee to permanent employment if the employee:
- Has been employed for 12 months and during the last 6 months, has worked a regular and systematic pattern of hours without significant adjustment
The offer must be 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 (where the casual has worked the equivalent of part-time hours).
However, employers are not obliged to make an offer if there are “reasonable business grounds” to not make the offer. Such grounds must be known or reasonably foreseeable at the time of declining to make the offer.
The Bill defines reasonable business grounds to include:
- Where the conversion would require a significant adjustment to the employee’s hours of work in order for the employee to be employed permanently
- Where the employee’s position will cease to exist in the 12 months after the conversion right arises
- Where the hours of work which the employee is required to perform will be significantly reduced in the 12 months after the conversion right arises
- If there will be a significant change in either the days or times on which the employee’s hours of work are required to be performed in the 12 months after the conversion right arises.
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.
Please note that these casual conversion provisions go further than the existing Award regime of provisions. This is because the existing Award regime entitles employees to request conversion. Under the amended Act, employers have an obligation to offer conversion regardless of any employee request. That is, there is a new proactive obligation on employers.
Read more: Employee defeats eight allegations of misconduct to win unfair dismissal suit
Casual conversion modified for small business employers
Following substantial contests and lobbying by business and unions last week, the Bill has been amended to confirm that the obligation to offer casual conversion does not apply to small business employers (that is, employers with a head count of less than 15 employees).
Rather, for these employees casuals can request to convert pursuant to the statutory scheme - with the request again subject to refusals on reasonable business grounds.
Conversion right can be lost temporarily
The Bill makes clear that, where an employee refuses an offer to convert, they lose the right to convert for the next 6 months
Equally, where an employer has determined that there a reasonable business grounds to not make an offer of casual conversion and notifies the employee in accordance with the provisions of the Bill, then the employees also cease to hold a right to request conversion for the next 6 months.
New Casual Employment Information Statement
The Bill requires the Fair Work Ombudsman to create a new Casual Employment Information Statement that is to be provided to each casual employee when they start employment with their employer.
It appears that this Statement must supplement the Fair Work Information Statement that employers already need to provide employees.
Casual loading offset created
Importantly, the Bill also deals with historical problems that have been created where employers misclassify employees as casuals and fail to accrue leave entitlements for these employees.
Where an employee is found to have been incorrectly engaged as a casual (that is, they are at law a permanent employee), the Bill creates an express right for employers to offset any leave entitlements owed to the employee against the casual loading that is often paid to the casual employees.
In order to have the benefit of this offset arrangement, the loading paid must have had components that can be identified as being paid to the employee instead of one or more leave entitlements.
What should employers do next
For most employers, it will be time to ‘clean the house’ in terms of the arrangements and instruments that you have in place governing casual employment.
Employers should be looking to:
- Introduce new casual contracts that align with the recent amendments
- Introduce processes for dealing with casual conversion that ensure the employer’s operational requirements are considered whilst simultaneously ensuring compliance with the FW Act
For some businesses, it might also be time to reassess your workforce mix and labour strategies to determine whether your existing arrangements can be optimised having regard to the changed regulatory landscape.
Luiz Izzo, managing director, ABLA