With new rules for engaging casual workers set to take effect in August, a legal expert outlines how HR can prepare.
The Fair Work Amendment (Closing Loopholes No 2) Bill was recently passed, introducing significant changes to the Fair Work Act 2009 (FW Act). Among these changes is a new definition of ‘casual employee,’ which will come into effect on 26 August 2024.
Previously, under section 15A of the FW Act, casual employment was defined as follows:
a) An offer of employment is made by the employer with no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.
b) The person accepts the offer.
c) The person becomes an employee as a result of accepting the offer.
The new definition of casual employment takes into account the practical reality of the relationship, rather than just the terms outlined in the employment contract. Broadly, the new definition includes an absence of a firm advance commitment to continuing and indefinite work, and situations where the employee is entitled to a casual loading or a specific casual pay rate under an industrial instrument.
To determine whether there is an absence of a firm advance commitment to continuing and indefinite work, several factors must be considered, including the real substance, practical reality, and true nature of the employment relationship, such as:
The employer's ability to offer work and the employee's ability to accept or reject work.
The reasonable likelihood of future availability of continuing work.
Whether full-time or part-time employees are performing the same kind of work.
Whether there is a regular pattern of work for the employee.
These amendments recognize that a firm advance commitment can take various forms, including those outlined in an employment contract, but importantly, also through mutual understanding or reasonable expectation.
New pathways for casual workers to convert to permanent employment
The changes also introduce a new pathway for employees to transition to permanent employment status, replacing the previous right to casual conversion.
Under the new pathway, employees who have been employed for six months (or 12 months in a small business) can opt to change their employment status to permanent. This transition must be marked by a specific event, and it is now the employee's responsibility to initiate the shift to permanent employment.
The advantage of this new system is that the burden is no longer on the employer to review and offer casual conversion.
“The new definition of casual employment considers the practical reality of the relationship, as opposed to merely the terms in the employment contract.”
Akin to requests for flexible work arrangements, casuals can write to their employer to notify them that they’d like to change their employment status, and employers are required to respond within 21 days.
An employer may refuse a notification on any one of the following grounds:
They believe the employee has been correctly classified as a casual employee, e.g. they aren’t working on a systematic basis.
There are fair and reasonable operational grounds for not accepting the notification, such as if substantial changes would be required to the way work in the business is organised to allow the employee to convert.
A change of employment status to full-time or part-time would not comply with a recruitment or selection process required by law, such as the Public Service Act 1999, which outlines that casuals cannot convert without a competitive selection process.
Avoidance penalties to be aware of
The changes will also introduce new anti-avoidance provisions to prevent employers from improperly engaging casual workers. This means employers must not:
Dismiss or threaten to dismiss an employee with the plan to then re-engage them as casual.
Make false statements to persuade an individual to enter a casual employment contract, such as telling them they will be financially better off.
Misrepresent employment as casual.
Breaching these provisions can attract civil penalties. The maximum payable under the FW Act increased by 500 per cent for both standard civil contraventions and serious contraventions from 27 February 2024. Companies can now face fines of $469,500, or $4,695,000 for serious contraventions.
Implications for employers engaging casual workers
Businesses should familiarise themselves with these changes and update their casual conversion processes and procedures to ensure a smooth transition and compliance with the new regulations.
Key factors to consider include:
a) Advance Commitment: While the absence of a firm advance commitment to ongoing work is a key factor in determining whether an employee is casual, employers must also consider their own conduct that might suggest otherwise. For instance, even if a contract states there is no commitment, actions such as sending a text promising a specific shift every week could indicate that the employee is not genuinely casual.
b) Casual Loading: Ensure that casual employees are paid the appropriate casual rate or casual loading as required by the relevant industrial instrument. This compensates for the lack of benefits such as paid leave.
c) Casual Conversion Requests: Be aware that casual employees now have the right to request conversion to permanent employment. Employers should consider the grounds on which they can reasonably reject such a request, such as the likelihood of the position continuing, the employee's performance, or the operational needs of the business.
By addressing these factors, HR professionals can better manage their casual workforce and ensure compliance with the new employment regime.
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