Goodbye double dipping; hello casual conversion: major reforms to casual employment under the Fair Work Amendment Act

On 26 March 2021, the Fair Work Amendment Act 2021 (the Act) commenced, introducing significant national reforms to casual employment and associated arrangements.

Key points under the Act:

• Introduction of a new definition of casual employment, which assesses offer and acceptance at the time of commencement of employment, as opposed to considering subsequent work patterns.
• The inclusion of the consideration of an employer's work needs in relation to the conversion of a casual employee to full-time or part-time employment. This aims to provide greater choice for employers when considering the employment of a casual workforce.
• Casual conversion provisions that clarify an employee's rights and an employer's duties to prevent the misuse of 'permanent casuals'.
• Clearer guidelines to prevent 'double-dipping' , including provisions that aim to offset casual loading paid to an employee against permanent employee benefits.

Slashed Act loses industrial relations steam

In a bid to pass the Industrial Relations Omnibus Bill, the Federal Government abandoned reform measures such as protections against wage theft.

Learn more about the 'longform' Industrial Relations Omnibus Bill here.

The Fair Work Amendment Act is now focussed solely on reforming casual employment with a view towards addressing 'casualisation' and the economic crisis caused by COVID-19.

Changes to casual employee arrangements

The Act introduces a statutory definition of 'casual employee' that focusses on "offer and acceptance of employment".

The new definition of casual employment is as follows:

• A person is a casual employee of an employer 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, and no agreed pattern of work for the person; and
  • the person accepts the offer on that basis.

The legislation provides that the employment relationship should be assessed based on the initially agreed upon terms of casual employment (i.e. only at the time of entering into an employment relationship, without considering any subsequent conduct of the parties) such as a 'firm advanced commitment'.

The Act also provides further clarity to the rights and obligations of employers and casual employees, including:

• employers must offer casual employees part-time or full-time roles after 12 months if the employee has worked a regular pattern of hours on an ongoing basis for the preceding six-month period. However, there are reasonable grounds for deciding not to make an offer, including any significant changes to the employee's days or hours of work;
• employers must provide a Casual Employment Information Statement (CEIS) to casual employees at the commencement of their employment; and
• the Fair Work Commission (FWC) may now deal with disputes between an employer and casual employee following the commencement of the Act. However, if employees are covered by an award, agreement or employment contract, any dispute resolution process contained in such instrument must be followed. Otherwise, parties should attempt to resolve a dispute within the workplace before the FWC may intervene. This also follows new guidance published by the Fair Work Ombudsman, which encourages workplace-level resolution. Learn more here: Changes to casual employment – industrial relations reforms – Fair Work Ombudsman.

Also included in the Act are provisions specifically for small business employers (with less than 15 employees). This includes the exemption of small business employers from the requirement to offer casual conversion.

Prevention of 'double dipping'

Importantly, the Fair Work Amendment Act intends to prevent the potential for 'double dipping' in the event an ongoing employee is misclassified as a casual employee, by offsetting casual loading against any entitlements or leave benefits. This is a legislative response to overturn the impact of the Full Federal Court decision in Workpac v Rossato [2020] FCAFC 84. In that decision, the Full Court held that a casual employee who was provided 'a firm advance commitment' to offer and accept work from his employer was a permanent employee entitled to casual loading of 25% and full-time entitlements (Learn more about the decision here).

Under the Act, if a casual employee (who is paid a loading amount) makes a claim for one or more relevant entitlements , then the scope of orders available to a court is now limited. 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 will apply to periods of employment starting before, on or after commencement of the Fair Work Amendment Act and regardless of whether a person is, or is not, an employee of an employer at the time a claim is made.

IR instruments to comply with changes to casual employment

The FWC may now make a determination varying an enterprise agreement in the event that it contradicts the new definition of casual employee. Similarly, if a modern award that governs the employment of casual employees does not meet the requirements of the Act, the FWC must make a determination varying the award to ensure it is consistent with the Act within six months of the agreement's commencement.

The Act also provides that the new definition of casual employee will be enforced retrospectively. This means that the definition applies to casual employees, past and present, unless a court has made a binding decision that the employee is a casual prior to the Act's commencement or the employee has already converted to permanent employment.

The Act provides for an initial transition period of up to six months to allow for employers to comply with requirements such as casual conversion offers. The transition rules are slightly different for small businesses - for example, they are required to provide the Casual Employment Information Statement as soon as practicable from now, rather than having the benefit of the initial 6-month transition period.

Practical next steps for employers

• Employers are strongly encouraged to review and revise current casual employment agreements as necessary to be consistent and comply with the Fair Work Amendment Act, including having a clause separately identifying any casual loading amount, and stating that it covers each of the relevant entitlements stated in the Act.
• Provide causal employees with the CEIS.
• Implement a procedure for reviewing casual employees' conversion to permanent employment to prevent administrative error or oversight that could lead to liability exposure. The offer should be made in writing for applicable casual employees prior to 27 September 2021, or within 21 days after twelve months of employment, whichever is later.
• Employee requests for conversion should be logged and responded to appropriately, depending on the business, as follows:

1. for small business employers, casual employees can request conversion at any time; and
2. for all other employers, casual employees can request conversion after their employer has decided not to make an offer.

• If any dispute about casual conversions arise, employers should consider whether there are any relevant dispute resolution provisions in the relevant modern awards or enterprise agreements that should be followed in the first instance.
• Casual engagement agreements should outline any casual loading amount and entitlement. This will help to prevent the ability for a casual employee to claim both casual loading and full-time entitlements under the NES.

Government promises future reform

The Coalition government has asserted that it remains committed to more sweeping industrial relations reforms despite passing a cut-down Act, promising to revisit the omitted agenda.

Developments should be closely monitored as updated legislation and parliamentary discussions continue around the areas of award simplification, wage theft and enterprise bargaining.

1 The relevant entitlements are:

• paid annual leave;
• paid personal/carer’s leave;
• paid compassionate leave;
• payment for absence on a public holiday;
• payment in lieu of notice of termination; and
• redundancy pay.