The legislated changes to casual employment made in the Fair Work Legislation Amendment (Closing Loopholes No 2) Act 2023 (Cth) start from 26 August 2024. If you’ve read the amendments, you may notice that they are not straightforward. Getting to the effect of what is changing involves reading multiple subsections, each referring to each other. To top it off, there are transitional provisions, all making it somewhat difficult to know just what you have to do as a business. This EMA Note summarises the amendments, so you know what’s changing and how to prepare for it.
The New Definition of Casual Employment
What’s changing?
As a brief recap, following two significant Federal Court cases finding that the nature of the employment relationship is determined by reference to how it works in practice, the High Court in Workpac Pty Ltd v Rossato overturned and clarified the correct test,[1] and parliament amended the Fair Work Act 2009 (Cth) to codify the test. Effectively, the nature of the relationship is primarily determined by the contract.
However, from 26 August 2024, the test will be changed back to reflect the original two Federal Court decisions—the question will effectively be ‘what is the practical nature of the relationship’. Can the employer choose to offer work, and can the employee choose to accept or reject the offers for work? Will that work likely continue to be available in that enterprise in the future? Do part-time and full-time employees do the same time of work being performed by casual employees in that enterprise? Does the employee work a regular pattern of hours? These will all be key variables in determining the true nature of the relationship.
Unfortunately, there is considerably less certainty now. There may well be situations from 26 August 2024 where it is going to be unclear whether an employee is a permanent or casual employee until determined by the Fair Work Commission (such as where a casual employee uses the new casual conversion provisions described below) or a court.
What should we be doing about this?
The overall intention of the amendments is to stop situations where employees are employed having all the characteristics of full- or part-time employment but are labelled ‘casual employees’ and are paid a casual loading instead of getting the various benefits of permanent employment (such as annual leave, personal/carer’s leave, or payment for absence on a public holiday).
For the most part, employers should endeavour to use casual employees as what is often called ‘true casual employees’—for random and sporadic work. In some industries, engaging seasonal casuals can continue unchanged. Otherwise, you can continue to use casual employees as you have been using them, but you must be aware of the new casual conversion provisions. Basically, if you engage casual employees similarly to permanent employees, you’re creating additional risk.
The New Pathway to Casual Conversion
What’s changing?
The current obligation to offer casual conversion and residual right to casual conversion are being replaced with a single pathway for casual employees to convert to permanent employment.
Casual employees who have been employed for at least 6 months (12 months for small businesses)—and who have not already received a response in relation to casual conversion in the previous 6 months—can notify their employer if they believe that the relationship has changed so that it no longer meets the legal definition of casual employment.
The employer must consult with the employee and reply in writing within 21 days of the notification. If the employer accepts the notification, it must advise the employee whether they will convert to full-time employment or part-time employment, their ordinary hours of work, and the day from which the change will take effect.
The employer may reject the notification either: if it believes the employee still meets the definition for casual employment; if there are ‘fair and reasonable operational grounds’ for not accepting the notification; or if accepting the notification would result in the employer not complying with a recruitment process required by an applicable law.
Fair and reasonable operational grounds include will include:
- substantial changes would be required to the way in which work in the employer’s enterprise is organised;
- there would be significant impacts on the operation of the employer’s enterprise;
- substantive changes to the employee’s terms and conditions would be reasonably necessary to ensure the employer does not contravene a term of an award/enterprise agreement that would apply to the employee if they were full-time or part-time.
How does this affect existing casual employees?
For casual employees employed before 26 August 2024, the current casual conversion provisions will continue to apply as follows:
- for businesses other than small businesses the obligation to offer conversion—and the residual right to request casual conversion—continue for 6 months; and
- for small businesses, the residual right to request casual conversion continues for 12 months.
What should we be doing about this?
If you have any internal policies or procedures dealing with casual conversion, you will need to update those to reflect the new pathway for conversion. If you have an enterprise agreement which prescribes a method of casual conversion which is inconsistent with the new pathway, you may seek a variation to your enterprise agreement by applying to the Fair Work Commission.
Casual Employment Information Statement
What’s changing?
Businesses will now be required to give all casual employees a copy of the casual employment information statement at set intervals, rather than once at the beginning of employment. The employer will need to give casual employees the information as soon as practicable after the following intervals:
- before employment starts (or on commencement of employment);
- once the employee has been employed for 6 months;
- once the employee has been employed for 12 months; and
- every 12 months thereafter.
For small businesses, the obligation is only to give the information statement on commencement and once after 12 months of employment.
What should we be doing about this?
Any internal systems set up in relation to giving casual employees the casual information statement will need to be updated to reflect these intervals. If you have a system which can automatically notify you when an information statement is due (or alternatively automatically send the information statement out at the correct intervals), this would be a good practical option.
The Future of Casual Employment
If there is a change in government at the next federal election, the Coalition has indicated that it would revert the definition of casual employment again (back to one based on how the contract describes the relationship).[2]
Regardless of any possible change and counter-change, businesses should still endeavour only to engage casual employees—both now and in the future—on a truly casual basis. This will help ensure that future changes to the definitions or tests for casual employment will have minimal impact on operations.
How can we help?
If you need any assistance with drafting or reviewing contracts or policies, or assessing whether your casual employees will likely meet the new definition of casual employment—or have any other questions—you can get in touch with one of our consultants who will be happy to assist.
[1] [2021] HCA 23.
[2] Sen Michaelia Cash, ‘Coalition will simplify definition of casual employee’ (Media release, 16 May 2024). See also Peter Dutton, ‘Leader of the Opposition’s Budget Address in Reply’ (Speech, Parliament, 16 May 2024).
Require further information/assistance?
This EMA Note is not comprehensive advice about your situation and does not cover all your obligations. If you require further information or advice, please contact your Consultant.
EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMAC on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.