Elizabeth Aitken, Partner and National Head of Workplace Relations & Safety
Nilanka Goonetillake, Special Counsel
Who is a ‘casual’ employee?
On 27 March 2021, a legislated definition of ‘casual employee’ was introduced to the Fair Work Act 2009 (Cth).
From 27 September 2021, businesses with more than 15 employees must consider whether their existing casuals are eligible to be offered permanent employment and be compliant with casual conversion requirements or face penalties under the new legislation.
The newly-legislated definition means a casual employment relationship comes into existence if:
- an employer makes an offer of employment to an employee on the basis that there is “no firm advance commitment to continuing and indefinite work”;
- the employee accepts that offer; and
- that person is an employee because of the offer and the acceptance.
Why is this change significant?
The previous position adopted by the courts allowed the courts to consider subsequent post-contractual conduct of the parties to determine the existence of a casual employment relationship.
The new legislation expressly limits the matters that a court can take into consideration when determining whether a casual relationship exists. In accordance with the new legislation, in determining whether there was “no firm advance commitment to continuing and indefinite work”, a court is only permitted to consider the following factors:
- Whether or not the employer can elect to offer work;
- Whether the person being offered work able to elect to accept or reject the work;
- Whether the employee work as required by the needs of the employer;
- Whether the employment is described as “casual”; and
- Whether the person is entitled to a casual loading or a rate of pay available to casual employees.
How does the ‘casual loading’ work now?
Traditionally, casual workers received a 25% loading on top of their ordinary hourly rate to compensate for entitlements that a full-time or a part-time employee would have received, including compensation for the uncertainty of ongoing work.
However, WorkPac Pty Ltd v Skene (2018) 264 FCR 536 and WorkPac Pty Ltd v Rossato  FCAFC 84 determined that employees who were classified as casual, but later found to be ongoing employees, could be entitled to annual leave in addition to a casual loading amount.
The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 amends the Fair Work Act 2009 (Cth) seeks to limit the liability of employers to pay annual leave on top of the casual loading amount if a worker who is classified as a casual is later found to be an ongoing employee.
If there is an identifiable casual loading amount, the new legislation requires that a court must reduce (but not below nil) any amount payable by the employer for the relevant entitlements by an amount equal to the loading amount. However, this protection is only available if there is an identifiable loading amount.
The new legislation also exclusively defines “relevant entitlements” to include 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. This limits the capacity of a court to consider factors outside of the “relevant entitlements” (for example, the uncertainty of casual work) in reaching a decision as to appropriate compensation.
What are the new obligations for casual staff?
The new legislation also imposes additional obligations on employers.
An employer has an obligation to give all casual employees the Casual Employment Information Statement, which is now available through the Fair Work Commission website. This must be provided to an employee before, or as soon as practicable after, the employee commences employment.
An employer also has an obligation to make offers to eligible casual employees to convert to part-time or full-time employment. This obligation does not apply to small business employers who engage 15 or less staff.
An employee becomes eligible to receive an offer to convert if:
- the employee has been employed with the employer for a period of 12 months; and
- during at least the last 6 months of that 12-month period, the employee has worked a regular pattern of hours on an ongoing basis; and
- the employee could continue to work as a full-time employee or a part-time employee without significant adjustment.
An employer may not make an offer to convert if it has reasonable grounds not to do so. Reasonable grounds may include considerations as to whether:
- there is likely to be changes to hours and days of work; and
- the employee’s position is likely to cease to exist in the next 12 months.
If an employer decides not to make an offer, the employee must be notified in writing within 21 days of the employee becoming eligible to receive the offer.
If you employ casual workers, you should:
- audit your casual workforce to consider whether you are compliant with casual conversion requirements;
- process offers and requests for casual conversion in accordance with the Fair Work Act 2009;
- review your casual employment contracts to ensure that they are consistent with the new legislated definition. If they are not, you may remain exposed to underpayment claims by casual employees who argue they should be treated as permanent; and
- ensure that your casual contracts of employment clearly identify the loading amount.
If you are not a small business employer, you should also implement a process to offer conversion to eligible casual employees where no reasonable business grounds otherwise exist.
You are welcome to contact a member of our National Workplace Relations & Safety Team if you would like our assistance in managing casual conversion offers and requests, or for a complimentary review of your casual employment contracts.
National Head of Workplace Relations & Safety