Who is a casual employee, and do I owe backpay for leave and other award benefits?

In the last 12 months there has been considerable debate and angst over the proper characterisation of casual employment, and entitlements owed to long term casual employees. This uncertainty arose as a result of f the Full Court of the Federal Court of Australia decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (“Rossato”), which followed the earlier decision of WorkPac Pty Ltd v Skene [2018] FCAFC (“Skene”) (refer to our previous articles on these two cases in 2020 and 2019). We have previously cautioned that as a result of these judicial decisions there was a real risk that employers owed significant backpayments to long term casual employees.

Given the level of concern among businesses in Australia, and the importance the union movement put on this issue in recent times, the decision above has been referred to the High Court. However, in the meantime and before the High Court has had an opportunity to determine the matter, the Federal government has addressed this issue by its recent reforms to the Fair Work Act 2009 (“the Act”), made by the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (“Amending Act”).

The primary change agitated by employers and industry groups in response to Skene and Rossato was for legislative change to override the current judicial precedent.  It appears that this has been delivered in substantial part through the provisions in the Amending Act. There was also significant impetus provided by community expectation around casuals having limited capacity to convert to permanent employment. This provided the Federal government a political imperative to provide for a new National Employment Standard requiring employers to offer permanent employment to casuals in order to make the range of amendments appear balanced.

The Salient Changes Made by the Amending Act

New Definition of Casual Employee

The Amending Act has inserted a new statutory definition of a “casual employee” into the Act, which provides that an employee is a casual if the following criteria are satisfied:

• 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 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 the acceptance.

In assessing whether the employer “makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person” the Amending Act stipulates that regard must be had only to the following considerations:

• 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; and
• 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.

The Amending Act also explicitly stipulates that a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work.

Importantly, the Amending Act also explicitly states that subsequent conduct of the parties is not to be assessed in determining whether an employee is a casual, only the initial offer of employment and the acceptance of that offer is to be assessed.

Application of New Definition of Casual Employment

The Amending Act stipulates that the definition of casual employment is to apply to offers of employment made before the commencement of the new definition of casual employment (aside from in some specified circumstances such as if a Court has already made a binding decision that the employee is not a casual or the employee has already converted their employment from casual employment).  There has been reported a potential constitutional challenge to the validity of this provision.

What This Means for Employers

This legislative change is significant as it is the first time the term “casual employment” has been defined and not left to the Court to interpret. More importantly, whether an employee is a casual or not will depend entirely on what classification is given to the employee at the commencement of the employment relationship and does not depend on what occurs later. As such, the contractual documentation between the parties when the employee commences employment becomes paramount in determining this issue, and therefore in determining whether there will exist a latent liability if the employee is incorrectly classified.

How Employers Should Respond to New Definition of Casual Employee

In general terms, we recommend that employers ought to check closely:

• That their casual employment contracts offered to casual employees:
  1. clearly and sufficiently define the employment relationship as a casual one; and
  2. provide a clear and unequivocal statement that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person;
• That materials accompanying the employment contract or provided to a prospective casual employee around the same time accord with the casual employment contract’s terms;
• That statements made to the prospective casual employee by the employer, or its agents, accord with the casual employment contract’s terms; and
• That any prospective casual employee in accepting the offer of employment has a clear understanding of the casual role which accords with the casual employment contract’s terms.

We can provide appropriate casual contracts of employment for modern award covered employees and those casual employees who are not award covered.

New Obligation on Employers to Offer Permanent Employment to Casuals

The Amending Act has now created a new National Employment Standard (“NES”), Division 4A – Offers and Requests for Casual Conversion.  As the casual conversion provision is an NES provision, failure to comply could result in a Court finding that an employer has contravened a provision of the NES, which carries with it, a civil penalty (in other words, a fine).

This new division creates a new NES obligation for employers to offer in writing, conversion to permanent part-time or full-time employment to casual employees who have 12 months service (beginning the day that the employment started), and who have had during the most recent 6 months of employment, worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee. The offer must be given to the employee within 21 days after the end of the 12 month period of service.

This obligation does not exist for “small business employers” who employee less than 15 employees.

The obligation also does not exist if the employer has reasonable grounds not to make the offer, and those reasonable grounds are based on facts that are known or reasonably foreseeable, at the time of deciding not to make the offer.

What constitutes reasonable grounds is not limited by the Amending Act, but there is an indicative list which includes:

1. the employee’s position will cease to exist in the period of 12 months after the time of deciding not to make the offer;
2. the hours of work which the employee is required to perform will be significantly reduced in that period;
3. there will be a significant change in either or both of the following in that period:
   1. the days on which the employee’s hours of work are required to be performed; or
   2. the times at which the employee’s hours of work are required to be performed,

which cannot be accommodated within the days or times the employee is available to work during that period; and

1. making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory.

If the employer relies upon reasonable grounds not to make the offer, then the employer is required to provide a written notice to the employee that the offer will not be made and include details of the reasons for not making the offer (including any grounds on which the employer has decided not to make the offer) (“Notice of Offer to Convert Not Made”).

The Notice of Offer to Convert Not Made must be provided within 21 days after the end of the employee’s initial 12 months service.

Employees who receive an offer to convert to permanent must respond within 21 days, otherwise they will be taken to have declined the offer.

If an employee accepts the offer to convert, then the employer must within 21 days discuss with the employee and then provide the employee with written notice detailing whether the employee is converting to full-time employment or part-time, the hours of work after conversion and the day the conversion takes effect (“Permanent Employment Notice”).

With respect to the day the conversion takes effect, there is also a requirement that this day must be the first day of the first full pay period which starts after the day the Permanent Employment Notice is given.

Employees Right to Request Casual Conversion

The Amending Act also enshrines a residual right for an employee to request in writing conversion to permanent employment.  This residual right to request is not enlivened for an employee if:

• they have previously refused an offer to convert made by the employer;
• the employer has previously provided a Notice of Offer to Convert Not Made;
• the employer has not previously refused a request made under this same section; and
• if the employer is not a small business, the request is not made during the 21 days after the employee’s initial 12 months service.

While small business employers are not under an obligation to make an offer, their employees may be eliglble to make a request.

Employers who receive a written request to convert from an employee must respond in writing within 21 days, stating whether the employer grants or refuses the request.  If the employer refuses, they must include details of the reasons for the refusal.

Transitionary Obligations for Employers regarding Existing Casual Employees

The Amending Act also stipulates that the new NES entitlements for offers and requests to convert is to apply to periods of employment which started before the commencement of the new NES provisions.

Employers are required to make an assessment during the 6 month period after the new NES provisions commence as to whether they are required to make an offer of permanent employment, or, alternatively, provide a Notice of Offer to Convert Not Made.

All employers of existing casual employees, including small businesses must also provide the Casual Employment Information Statement as soon as practicable after the new provisions commence.

The Role of the Fair Work Commission and Court

The Fair Work Commission has been given jurisdiction to deal with disputes. However, arbitration can only occur with the consent of both parties.  The Federal Circuit Court of Australia and Local Courts may otherwise use small claims procedures to deal with these disputes.

How Should Employer’s Respond to the new Obligation to Offer Conversion and Respond to Requests for Conversion

Employers who are not small businesses must assess their current casual employees to see if they meet the criteria to be offered permanent full-time or part-time employment within 6 months of 27 March 2021.

Employers should also be mindful of newly engaged casual employees and save reminders at twelve months service to review the casual employee’s employment to ascertain if they meet the criteria to be offered permanent employment. If so, this offer must be made unless there is a reasonable basis not to as set out above.

We recommend that all employers audit their casual workforce to determine who needs to receive the appropriate correspondence and when. In addition, employers should carefully review the current contractual documentation it has with its casual employees to ensure it conforms to the current legislative requirements.

We can assist with any assessment that needs to be made in relation to whether or not an employee should be offered permanent employment, and whether or not the employer has any reasonable grounds to provide a notice that an offer will not be made, or to refuse a request.

A New Definition of “Regular Casual Employee”

There is a new definition of “regular casual employee” which replaces the definition of “long term casual employee” in the Act.  An employee is a regular casual employee if they are a casual employee (as defined in the new definition described above) and they are employed on a regular and systematic basis.

The definition of “small business employer” has also been amended to reflect that “regular casual employees” are counted for the purposes of determining whether an employer has less than 15 employees and is a small business employer.

The definition of regular casual employee is also now used in the NES entitlement to request flexible work arrangements. The qualification now being, that the casual employee “is, immediately before making the request, a regular casual employee of the employer who has been employed on that basis for a sequence of periods of employment during a period of at least 12 months.”

There is also provision which makes explicit that if an employee converts to permanent employment, then they will have their service as a regular casual taken to be continuous service, for the purposes of determining if they satisfy the 12 month qualification period for a permanent employee to be able to make a request for flexible work arrangements.

Similar amendments were made to the qualification criteria for accessing the NES entitlement to parental leave.

Casual Employment Information Statement

There is now an obligation for employers who engage casual employees to provide them with the Casual Employment Information Statement before or as soon as practicable after they commence employment.  The Fair Work Ombudsman has been tasked with preparing the Casual Employment Information Statement and should have it ready on their website shortly.  We recommend that it be given to every casual employee before they commence.

How Employers Should Respond to the Casual Employment Information Statement Requirements?

Employers should immediately provide the Casual Employment Information Statement to all their current casual employees and ensure that they provide it to any newly onboarded casual employees.

The Casual Employment Information Statement is available on the Fair Work Ombudsman website via the following link:

https://www.fairwork.gov.au/ArticleDocuments/724/casual-employment-information-statement.pdf.aspx

This article and the recommendations set out herein, is not intended to constitute, and should not be treated as, legal advice.

We regularly advise clients on all matters touching upon the employment relationship. Please contact us should you require any such advice or assistance.