By Adrian Wong, Director, Jhansi Seccull, Associate Director and Katherine Southwell, Senior Consultant, Workplace and Employment Law, KPMG Australia
These amendments are relevant to all employers who employ casual employees under the Fair Work Act.
The Federal Government passed legislation on 22 March 2021, amending the Fair Work Act 2009 specifically in relation to casual employment.
The original legislation was introduced into the Parliament on 9 December 2020.
However, due to a lack of support in the Senate, the legislation was significantly amended on 18 March 2021 (the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (the Act)). The Act commenced operation on 27 March 2021.
The only parts of the original legislation that have been retained in the Act relate to casual employment, including:
- a statutory definition of ‘casual employee’;
- conversion from casual employment to permanent employment; and
- no ‘double-dipping’ for permanent entitlements.
Introducing a statutory definition
The Act includes a definition of a ‘casual employee’ in the Fair Work Act for the first time, consisting of the following factors:
- an offer of employment where the employer makes no ‘firm advance commitment’ to continuing and indefinite work according to an agreed pattern of work for the person;
- the person accepts the offer on that basis; and
- the person is an employee as a result of that acceptance.
For the purposes of this definition, whether an employer makes no ‘firm advance commitment’ depends on the following (exhaustive) factors (which were amended in the Act):
- whether the employer can elect to offer work and whether the person can elect to accept or reject work;
- whether the person will work as required according to the needs of the employer;
- whether the employment is described as casual employment;
- 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.
Whether an employee meets this definition is determined on the terms of the contract, and not by the parties’ subsequent conduct or the employee’s actual pattern of work.
Existing casual employment relationships
In most cases, the statutory definition also applies in relation to an offer of employment made before the commencement of the legislation.
This means that existing casual employees in employment relationships that would have met the statutory definition at the time of the offer of employment, will be casual employees for the purposes of this provision on commencement.
However, there is some uncertainty as to the legal effectiveness of this retrospective approach.
To determine whether an existing casual employee meets the statutory definition will require looking back to the terms of the initial offer and acceptance of employment.
Right to convert to permanent employment
All casual employees (other than those of small business employers) will have the right to convert to permanent employment after 12 months employment, if during the last six months, the employee has had a ‘regular pattern of hours on an ongoing basis’.
An employer is not required to make such an offer if there are reasonable business grounds not to do so (both known at the time or reasonably foreseeable), however the employer must provide written notice to the employee within 21 days if it decides not to make an offer, including the reasons for not doing so.
In addition, eligible casual employees (including those of small business employers) also have a ‘residual’ and ongoing right to request to convert to permanent employment in certain circumstances.
This right to casual conversion forms part of the National Employment Standards, which means that any breach of these provisions may result in a civil penalty.
Certain modified rules apply in relation to ‘casual’ employees who were employed before the commencement of the Act.
The transitional provisions of the Act provide employers with a six-month transition period following commencement (until 27 September 2021), during which employers are required to assess all casual employees to determine whether they are eligible to be offered permanent employment.
Further, existing casual employees cannot request conversion to permanent employment during the six-month transition period.
No ‘double-dipping’ for permanent entitlements
The Full Federal Court decision in Workpac v Rossato adopted a narrow view as to an employer’s right to offset a casual loading against non-casual entitlements such as annual leave.
However, the Act provides a clear statutory right for employers to seek that a Court offset any identifiable casual loading paid to an employee (whose employment is described as casual employment, but who does not meet the statutory definition), against any liability for accrued ‘relevant entitlements’.
This amendment therefore provides a safeguard where ‘casual’ employees do not meet the statutory definition.
Courts have the power to reduce certain claimed amounts by an amount equivalent to any identifiable casual loading paid.
Importantly, these provisions have retrospective effect and apply to periods of employment before the Act’s commencement, though there is some uncertainty as to the legal effectiveness of this approach.
Implications for employers
Based on the Act, employers should review the existing contractual terms with ‘casual’ employees, to determine whether they meet the statutory criteria of casual employment.
This is particularly important given the Act contemplates that whether an employee meets the statutory definition of a casual employee will only be determined on the contractual terms.
Separately, employers should also commence assessing their casual workforce to determine which casual employees should be made conversion offers to permanent employment during the six-month transition period ending 27 September 2021.
Employers should also ensure that all new casual employees are provided with the Casual Employment Information Statement published by the Fair Work Ombudsman as soon as practicable after 27 March 2021.
Existing casual employees (other than of small business employers) must be provided with the Casual Employment Information Statement as soon as practicable after 27 September 2021.
This article was originally published on KPMG Tax Now, KPMG Australia’s subscription tax news service for clients.