The key changes will commence the day after the Act receives Royal Assent. In order to secure cross-bench support in the upper house, the Government dropped the majority of its IR Reform package late last week. The reforms that have been passed centre on casual employees. Some of these changes dealing with offsetting casual loading against other entitlements for employees incorrectly treated as casuals may be subject to possible constitutional challenge, so watch this space.
What's off the agenda – at least for now?
The changes dropped by the Federal Government to secure passage of the legislation (summarised in our December Update) had these key aims:
- Award simplification - to improve flexibility in 12 named modern awards;
- Greenfields agreements - to increase the attractiveness of projects with eight-year, life-of-construction agreements;
- Enterprise agreements - to simplify the Better Off Overall Test (BOOT) and set a 21-day Fair Work Commission enterprise agreement approval deadline; and
- Compliance and Enforcement - to reduce wage theft through the introduction of criminal penalties.
It is not clear whether the Government will attempt to pass some or all of these changes when Parliament sits again in May 2021, or beyond. We will keep you updated.
What is the new law in relation to casuals?
New definition of 'casuals' enshrined in Fair Work Act
The Fair Work Act will now define a casual employee as an employee who accepts an offer of employment which makes 'no firm advance commitment to continuing and indefinite work according to an agreed pattern of work'.
To work out if there is a 'firm advance commitment' only the following factors can be considered:
- whether the employer can elect to offer work and whether the person can elect to accept or reject the work;
- whether the person will work only as required according to the needs of the employer;
- whether the employment is described as casual employment; and
- whether the person will be entitled to any casual loadings or a specific casual rate of pay under the offer of employment or a Fair Work instrument.
A regular pattern of hours does not of itself indicate a 'firm advance commitment'.
The question is to be assessed at the outset of the employment relationship – that is, at the time of the offer and acceptance of employment, and without regard to any party's subsequent conduct during the employment.
An employee will remain a casual employee unless they convert to full or part-time employment in accordance with the Fair Work Act, or accept an alternative offer of employment (that isn't casual employment such as employment for a specified time, task or season).
Employers will need to provide a copy of the Fair Work Ombudsman Casual Employment Information Statement (once published) to casual employees before, or as soon as practicable after, they start their casual employment.
Incorrect characterisation and offset provision
If a court finds that a current or former employee has been incorrectly characterised as a casual, the court will be able to offset any identifiable casual loading paid to the employee against claims for certain entitlements (such as for paid annual leave). Importantly, the employer must have properly attributed the loading as being paid for that purpose. Well drafted contracts of employment will – as they always have– play a key role here. For example, where a casual has been paid a flat rate of pay, and the employment contract is unclear on whether that rate includes a casual loading or not, or if it does but does not state what the loading compensates the casual employee for (e.g. paid annual leave), the offsetting provisions are unlikely to apply.
Significantly, the offsetting provisions also apply retrospectively:
- to entitlements that accrue, and casual loading paid, before the new provisions commence;
- to periods of employment starting before the new provisions commence (regardless of whether the employment period ended before the commencement); and
- regardless of whether a person making a claim for relevant entitlements is, or is not, an employee of the relevant employer at the time a claim is made.
For claims currently on foot, we will need to navigate complex transitional provisions and carefully consider on a case-by-case basis if an individual claim is impacted by the new provisions.
There have also been some murmurings about a constitutional challenge to these offsetting provisions, so there may be more developments to come.
Unless there are reasonable grounds not to do so, employers (other than small business employers as defined) will be required to offer to convert any casual employee to full-time or part-time employment if the employee:
- has been employed for at least 12 months; and
- for at least six of those 12 months, has worked a regular pattern of hours on an ongoing basis that, without significant adjustment, could continue to be worked as a part-time or full-time employee.
Casual employees will also have a residual right under the Fair Work Act to request conversion to full or part-time employment themselves. Employers can only refuse such requests on reasonable grounds (including for reasons set out in the Fair Work Act) and must respond in writing within specified timeframes. There is also an obligation to consult before refusing any request.
Employers will have a six month transition period to make offers of conversion to all existing eligible casuals, unless they have reasonable grounds not to.
What does this mean for employers?
Many of our clients have already been looking closely at their casual workforces, to consider contingent liabilities from possible incorrect categorisation of casual employees and how best to manage the demand for agile, flexible workforces.
Employers who have not yet done so will now need to carefully consider the composition of their workforce, bearing in mind their new obligations around casual conversion. Employers should also review their casual employment agreements to ensure that they are consistent with the new legislation.
While some employees have had a right to convert to part or full-time employment under awards and enterprise agreements for some time, an estimated 600,000 have not. The Senate Committee Inquiry into the Bill reported that some employees may not have taken up a right to request conversion for fear, for example, of losing work. Some may also have historically enjoyed (and indeed preferred) the benefits of casual employment.
Overall take up of casual conversion has to date been reported by some employer groups as relatively low where available. This may be something that changes.
Some of the new laws differ for employers who are small businesses. We recommend small businesses review the changes closely, to understand what new obligations will and won't apply to them.
Please let us know if we can assist you with understanding your obligations to make offers of casual conversion and responding to any requests, as well as strategic questions about the composition of your workforce to best meet your business' needs.