BOLD CHANGES ADOPTED BY PARLIAMENT: A new possibility for casual employees to become permanent and a protection for employers to prevent double-dipping

Tags: Fair Work Amendment Act 2021, Casual Employment, COVID-19

By Viviane Ferraro, Contracts Officer, at Interpret Legal

Traditionally there has been a common understanding about what a casual employee is. However, with the recent changes in Federal legislation, it was legally defined for the first time.

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 defines a person as a casual employee if:

  • an offer of employment made by the employer to the person 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; and
  • the person accepts the offer on that basis; and
  • the person is an employee as a result of that acceptance.

To determine the nature of the casual employment, the legislation wisely determined the following criteria:

  1. whether the employer can elect to offer work and whether the person can elect to accept or reject work;
  2. whether the person will work as required according to the needs of the employer;
  3. whether the employment is described as casual employment;
  4. 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.

A new element was also introduced: a pathway for casual employees to move to a permanent employment if:

  • the employee has been employed by the employer for a period of 12 months beginning the day the employment started; and
  • during at least the last 6 months of that period, the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full‑time employee or a part‑time employee (as the case may be).

The changes were made to contain the side effects of COVID-19 on the national market and to boost Australia's long-term economy.

Casual workers were the most affected by the pandemic and the legislative measure to define what "casual work" is, and the possibility of conversion into permanent work is aimed to benefit employees and employers alike.

This step of casual conversion into permanent employment aims to protect employers against an employee "double dipping". This happens when a casual employee, although hired casually, is in fact a permanent employee, and is able to access not only the casual loading (usually 25%), but also the entitlements to receive annual leave, personal leave/caregiver, compassionate leave, holidays, etc coining the term “double dipping”.

Under the reforms, an employee did not waste all the loading paid if the loading amount can be identifiable to compensate the employee for not having one or more entitlements. This means that legislation makes it possible to offset these claims.

When making any orders in relation to the claim, a court must reduce (but not below nil) any amount payable by the employer to the person for the relevant entitlements (the claim amount) by an amount equal to the loading amount. This means that an employer must show that the 25% casual loading has been applied to the correct classification under the relevant award, or other enterprise agreement as applicable.

The updated legislation encourages employers to allow casual employees to have a firm job, so that they have confidence to enter the market and remain there.

A casual employee who has worked for an employer for at least 12 months and has, during at least the last 6 months of that time, worked a regular pattern of hours on an ongoing basis may be entitled to be offered, or request, conversion to full‑time employment or part‑time employment.

If such circumstances occur the employer shall in writing make an offer conversion to full time employment or part time employment, according to the equivalent hours the casual employee has worked in the last 6 months. The offer must be given to the employee within the period of 21 days after the end of the 12 month period.

The employee must give the employer a written response to the offer within 21 days after the offer is given to the employee, stating whether the employee accepts or declines the offer.

If the employee fails to give the employer a written response, the employee is taken to have declined the offer.

If the employee accepts the offer, the employer must, within 21 days after the day the acceptance is given to the employer, give written notice to the employee of the following:

  • whether the employee is converting to full‑time employment or part‑time employment;
  • the employee’s hours of work after the conversion takes effect;
  • the day the employee’s conversion to full‑time employment or part‑time employment takes effect.

However, an employer is not required to make an offer to a casual employee if there are reasonable grounds not to make the offer based on facts that are known, or reasonably foreseeable, at the time of deciding not to make the offer.

According with the legal text, “reasonable grounds” include the following situations:

  • 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 that period;
  • there will be a significant change in either or both of the following in that period:
    • the days on which the employee’s hours of work are required to be performed;
    • the times at which the employee’s hours of work are required to be performed;

                which cannot be accommodated within the days or times the employee is available to work during that period;

  • making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory.

If the employer uses this prerogative not to make an offer, the employer must communicate in writing the employee stating the reasons why the offer has not been made. If the employer fails to provide this notice, then the employee can officially submit a request to the employer to convert to permanent employment (provided that they are eligible to be considered for this).

The legislation provides an exemption to small businesses employers with less than 15 employees, who are not obligated to make offers of casual conversion under these provisions, although their casual employees are still entitled to make a request for casual conversion.

Under this changes to the Fair Work Act, a small business employer must give each casual employee a copy of the Casual Employment Information Statement to any new casual employee who was employed on or after 27 March 2021, as soon as practicable.

An employer who is not a small business (i.e. has more than 15 employees) has a transition time of six months to comply with this obligation and must give its existing casual employees a copy of the Casual Employment Information Statement as soon as possible after 27 September 2021. However, we would recommend doing this as soon as possible.

You can get the Statement by accessing the following link: (https://www.fairwork.gov.au/employee-entitlements/national-employment-standards/casual-employment-information-statement).

Based on Federal amendments, companies will need to take a series of measures to adapt to the new legislation such as:

  • Review their casual Agreement, including the new provisions and definitions of casual employee.
  • Give their casual employee the Casual Employment Information Statement.
  • Make an offer to their casual employees to become a permanent employee if they meet the criteria.
  • Formalize a letter with the reasons that an offer is not reasonable in their case.
  • Make sure the casual loading paid specifies the relevant entitlements the loading amount is compensating for and specifies the proportion of the loading amount attributable to each such entitlement.