Changes to Casual Employment
By Paolo Coniglio, 24.05.2021
The lack of definition of Casual Employment in the Fair Work Act has been a bone of contention for Australian Employment for many years.
The absence of clarity of Casual Employment has prompted Fair Work to make amendments to a number of Fair Work Awards. Unfortunately, these have led to little improvements to the correct employment of Casual Employees.
As well as sparking controversy and tension between Employers and Employees, in some instances, it also culminated in costly court cases that ended up damaging the Employer’s reputation and financial position.
On the 27th March 2021, the Fair Work Amendment (Supporting Australia’s Economic Recovery) Bill 2020 received Royal Assent and formally passed into law.
The legislation provides four key points:
- A Statutory Definition of Casual Employment as part of the Fair Work Act;
- The provision of a new Casual Employment Information Statement (CEIS) to all Casual Employees;
- The mandatory deduction of Casual Loading from any back payments of entitlements avoiding ‘Double Dipping’ of entitlement payments;
- The right for Casual Employment to convert to Permanent Employment.
Changes to Casual Employment
Definition of Casual Employment
The Casual Conversion Amendment to the Fair Work Act aims to better define Casual Employment and its entitlements and to provide better clarity of the rights and obligations Employers have towards Casual Employees. It also provides Casual Employees with a pathway to convert their Employment to Permanent when meeting certain conditions.
Section 15 of the Fair Work Act now provides a Statutory Definition of Casual Employment:
Casual Employment is an arrangement in which an offer of employment is made to a person on the basis that the Employer makes no firm advance commitment to continuing indefinite work according to an agreed pattern of work.
The person accepts the offer on that basis, and
The person is an employee as a result of that acceptance.
The Fair Work Act then proceeds by providing a number of factors that can determine both ‘An Advance Commitment’ and ‘A Regular Pattern of Work’. These are:
- whether the Employer can elect to offer work;
- whether the Employee can accept or reject the work offered;
- whether the Employment is defined as ‘Casual’ in the Employment Agreement;
- whether the Employee is entitled to Casual Loading or a Casual Rate of Pay.
The Casual Employment Information Statement
From the 27th March 2021, Employers are now required to provide all Casual Employees with a Casual Employment Information Statement (CEIS).
The CEIS provides key information about Casual Employment in Australia, including:
- the Statutory Definition of Casual Employment as per Section 15 of the Fair Work Act;
- Casual Employees’ entitlements and Casual Conversion entitlements;
- at what stage the Employer must offer a conversion to Permanent Employment;
- in what instances Employers are not required to offer Permanent Employment to Casual Employees;
- The role of the Fair Work Commission when dealing with disputes about Casual Entitlements and Casual Conversions.
The Casual Employment Information Statement must be provided to both existing and new Casual Employees. For new Employment contracts, the CEIS must be provided in addition to the Fair Work Information Statement.
Substantial Employers – have up to the 27th September 2021 to provide the CEIS to their existing Casual Employees.
Non-Substantial Employers – should give the CEIS to their Casual Employees as soon as possible.
The new Casual Statement can be handed over in person, sent by mail, or emailed (with Employee’s consent). Employers must retain evidence that they have provided the CEIS to their Employees in case of an audit.
Employers are only required to give the CEIS to Casual Employees once in a 12 months period (i.e. Seasonal Employees employed in different periods within the same 12 months).
Double Dipping Entitlements
The new Fair Work Amendment also reinforces a change in regulations towards back payments of entitlements that were first introduced into a number of Awards in December 2018.
This provision will allow courts, in the case of a dispute of rights and entitlements between a Casual Employee and their Employer, where, as a result of the dispute, the Employee is deemed to be Permanent, to deduct the amount of Casual Loading paid to the employee from the back payment of leave and entitlements.
This is providing that the Employer has clearly defined the following Casual Employment clauses in both the Employment Agreement and Payslip:
- The Employment Agreement expressly states the Employee was hired as Casual;
- The Amount of Casual Loading is clearly identifiable in both the Employment Agreement and Payslips;
- The Employment Agreement expressly states that the Casual Loading is paid in lieu of the standard Employment entitlements available to Permanent Employees.
The Right of Casual Employment to convert to Permanent
Following the changes in regulations applied to a number of Awards in October 2018, the new Casual Employment Amendment reinforces the right for Casual Employees to access entitlements of Permanent Employees.
From the 27th March 2021, all Substantial Employers (Businesses employing 15 or more staff) must provide written notification to their Casual Employees to either offer Permanent Employment or provide written justification why the offer of Permanent Employment cannot be made.
These Employers have up to the 27th September 2021 to make the necessary transitional arrangements to commence this process.
Non Substantial Employers are not required to offer Permanent Employment to their Employees. However, Employees are still entitled to request Permanent Employment after 12 months, if they meet the requirements.
Casual Conversion and Transitional Arrangements
Casual Conversion – Employers’ Rights and Obligations
Substantial Employers are now required to offer all their Casual Employees the opportunity to become Permanent (Full-Time or Part-Time) Employees when these employees:
- have worked for 12 months;
- have worked a regular pattern of work for at least 6 months and on an ongoing basis;
- the employee could continue working regular hours without significant adjustments.
Employers must assess prior to the 27th September 2021 which Casual Employees fulfil the above criteria and which don’t.
To Employees fulfilling the above criteria, the Employer must make an Offer to Permanent Employment in writing within 21 days from the Assessment being made.
To Employees not fulfilling the above criteria, the Employer must provide a written notice detailing the reason for not making the offer to Permanent Employment within 21 days.
Employers can also decide not to make an offer to some Casual Employees to become Permanent if they have Reasonable Grounds not to. However, they must notify these Employees within 21 days of making such determination, detailing the reason why the offer to Permanent Employment will not be made.
Moving forward, after the 27th September 2021, Employers will need to comply with the same obligations and provide notice to their Casual Employees on their Anniversary.
Fair Work has listed a number of reasons why an Employer may decide not to offer Permanent Employment to a Casual Employee working regular hours. These are:
- The Employee’s position will cease to exist within 12 months from making the assessment;
- The hours of work performed by the Employee will be significantly reduced over the same 12 months period;
- There will be a significant change of days and times the Employee will be required to work within the following 12 months;
- The offer does not comply with the recruitment or selection process required by or under a law of the Commonwealth or State Territory.
Note: this last criterion applies exclusively to Government Employees.
Casual Conversion – Employees’ Rights and Obligations
Upon receiving an offer, Employees have 21 days to accept or decline the offer to Permanent Employment. Notification must be submitted in writing to their Employer.
If they accept, the new Permanent Employment conditions must commence from the first day of the full Pay Period following the acceptance of the offer, unless otherwise agreed by the two parties.
Employees can refuse the offer, and continue their Employment as Casual Employees.
All Casual Employees (employed by both Substantial and Non-Substantial Employers) can still request their Employment to be converted to Permanent after 12 months of Employment (if they have worked a regular pattern of hours). Employers have 21 days to consider the offer and must accept or refuse in writing. An Employer can only refuse a request on the same reasonable grounds set out in the Fair Work Act.
However, Employees cannot make a request of Permanent Employment in the following instances:
- Within 6 months of them declining the offer made by their Employer;
- Within 6 months of the Employer notifying them their Permanent Employment offer was not made due to reasonable grounds;
- Within 6 months of them requesting an offer of Permanent Employment declined by the Employer due to reasonable grounds;
Casual Conversion – Fair Work Commissions
The Casual Conversion Amendment also provides additional rights to the Fair Work Commission to resolve disputes of Casual Employment directly during the process of mediation avoiding possible escalations to Court proceedings.
The Commission will also be assessing the current Amendment against the various regulations of Casual Employment currently set out in different Awards to identify any conflicts and when required take action to remove such conflicts. This Assessment is expected to be completed by the 27th September 2021.
Action Steps – All Employers
Employers should take this opportunity to review how their Employees are engaged and to assess the nature of their Employment. Care must be taken to ensure Employees are properly classified at the time of Employment to avoid future issues and back payments of entitlements.
Businesses should also review their current Employment Agreement for Casual Employees and ensure it includes the following conditions:
- it stipulates the employee is engaged as a Casual Employee;
- it clearly identifies the 25% Casual Loading;
- it expressively sets out the Casual Loading is paid in lieu of entitlements normally offered to Permanent Employees;
- it includes a list of entitlements for Casual Employees compared to Permanent Employees;
- it does not include any advance commitment to work specific days or hours;
- it includes the New Casual Employment Information Statement (CEIS)
Employers should also review their payslips to ensure the Casual Loading is clearly identifiable.
Finally, Business should provide the Casual Employment Information Statement to all their current Casual Employees and keep a record of the distribution of this Statement.
Action Steps – Substantial Employers
Substantial Employers have the additional responsibility to assess their Casual Employees and determine whether or not an offer of Permanent Employment must be made. To ensure they maintain compliance within this new Amendment they should set out:
- processes which allow them to track Employees’ Anniversary dates;
- assess regular patterns of work by generating reports that will show the number of shifts and hours worked each pay period;
- create templates to effectively manage this new ruling, including:
- A set agenda to discuss with Casual Employees about their Employment;
- A letter of offer of conversion from Casual to Permanent Employment;
- A letter of notification detailing the reasons why this offer has not been made;
- A letter of refusal of Permanent work detailing the reasonable grounds why Permanent Employment was declined.
This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.