Changes to casual employment arrangements

CLOSING LOOPHOLES – Changes to Casual Employment Arrangements

On 12 February 2024, the Federal Government passed the second part of its two-part 'Closing Loopholes' legislation. This legislation introduced a considerable number of substantive changes to the Fair Work Act 2009 (FW Act) and represents the largest set of reforms to national workplace laws since the FW Act was introduced in 2009.

Amongst other reforms, the Closing Loopholes legislation introduces several significant changes to the laws and obligations relating to casual employment arrangements, including:

• changes to the definition of casual employment;
• new rules relating to the Casual Employment Information Statement; and
• a new 'employee choice' conversion pathway for casual employees.

As each of these changes to casual employment arrangements come into force on 26 August 2024, employers that engage casual employees in their workforce MUST take immediate steps to both understand the changes and ensure their businesses are ready for these changes.

The CURRENT Definition of Casual Employment

Under the current definition in the FW Act, a person is a casual employee of an employer if:

• 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; and
• the person accepts the offer on that basis; and
• the person becomes an employee of the employer as a result of that acceptance.

In other words, under the current definition, whether or not a person is a casual employee of an employer will be construed narrowly based upon the nature and terms of the contract of employment offered to the employee and, specifically, whether the contract of employment describes the relationship as casual.

The NEW Definition of Casual Employment

By contrast, the new definition of casual employment introduced by the Closing Loopholes reforms provides that a person is a casual employee of an employer only if:

• the employment relationship is 'characterised by an absence of a firm advance commitment to continuing and indefinite work'; and
• the person would be entitled to a casual loading or a specific rate of pay for casual employees under the terms of a Fair Work Instrument or a contract of employment.

In other words, an assessment of casual employment will no longer be primarily dependent upon the existence and terms of the offer of employment or employment contract, but will instead require an objective assessment of the employment relationship as a whole.

In support of the new definition, the Closing Loopholes reforms provide that in order to determine whether the employment relationship is 'characterised by an absence of a firm advance commitment to continuing/indefinite work', it will be necessary to assess:

• the 'real substance, practical reality and true nature of the relationship' (whether this is documented in a contract of employment, or evident from an express or inferred mutual understanding between the employer and employee); and
• other relevant factors, including:
  • whether there is a regular pattern of work for the employee;
  • whether the employer can offer or not offer work to the employee, or whether the employee can accept or reject work offered by the employer;
  • whether it is reasonably likely that there will be future availability of continuing work in the employer's enterprise of the kind usually performed by the employee; and
  • whether there are full-time or part-time employees performing the same kind of work in the employer's enterprise as that work usually performed by the employee.

The definition further clarifies that a person will not be a casual employee of an employer if the employee is subject to a fixed or specified term contract of employment (even if the contract of employment permits a party to terminate it prior to the completion of the term).

No Automatic Changes for Existing Casual Employees

Fortunately for employers, the new definition of casual employment will not result in existing employees being automatically converted to permanent employees. This is because the new casual employment provisions specify that:

• employees who were casual employees prior to the introduction of the new definition are deemed to be casual employees on and after commencement of the changes – i.e. there is no automatic conversion from casual to permanent employment; and
• employees who commence employment as a casual (or are deemed casual after the introduction of the new definition) will remain casual employees until one of the following 'specified events' occur:
  • the employee's status is changed to permanent employment pursuant to the terms of a modern award or enterprise agreement, or as a result of an order of the FWC; or
  • the employee accepts an offer of permanent employment and commences in the role; or
  • the employee elects to convert to permanent employment via the new 'employee choice' conversion pathway (described below).

NEW REQUIREMENTS – Casual Employment Information Statement

Currently under the FW Act, an employer that employs a casual employee is required to issue that employee with the Casual Employment Information Statement before or as soon as practicable after the commencement of that employment.

However, the new Closing Loopholes reforms require that the Casual Employment Information Statement be issued to a casual employee:

• in the case of a small business employer – upon the commencement of employment and 6 months after the commencement of employment; or
• in the case of all other employers – upon the commencement of employment, 6 months after the commencement of employment, 12 months after the commencement of employment, and upon each 12 month anniversary thereafter.

NEW – 'Employee Choice' Conversion Pathway

The Closing Loopholes reforms also introduce a new 'employee choice' conversion pathway for casual employees to convert to permanent employment after a specified period of time. This pathway replaces the existing casual conversion provisions in the FW Act and modern awards, and shifts the responsibility for initiating a conversion from the employer to the employee.

In essence, under the new 'employee choice' conversion pathway:

• a casual employee may issue a written notification to the employer in which they request a change of their employment status from casual to either part-time or full-time employment, in circumstances where:
• the employee believes their employment no longer constitutes casual employment;
• the employee has been employed for at least 6 months (or 12 months in the case of an employee of a small business employer);
• the employee is not currently in dispute with the employer regarding their status; and
• in the 6-month period before the notification date, the employee has not had a previous notification refused by the employer and/or has not been in dispute with the employer about casual conversion.

Where a casual employee has issued a notification to the employer, the employer MUST:

• consult with the employee about the notification; and
• provide a response in writing to the employee's notification within 21 days.

If the employer does not accept the notification, it must provide written reasons for the non-acceptance based upon 'fair and reasonable operational grounds'. Examples of fair and reasonable operational grounds include where:

• 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; or
• substantial changes to the employee's terms and conditions would be reasonably necessary to ensure the employer does not contravene a term of a Fair Work Instrument that would apply to the employee as a full-time or part-time employee.

Otherwise, if the employer does accept the notification, it must include in the written response its conditions of acceptance including, for example, whether the employee will change their status to part-time or full-time employment and the date that the change will take effect.

Finally, the Closing Loopholes reforms confirm that:

• employers must not reduce or vary an employee's hours of work or terminate an employee's employment in order to avoid its obligations under the 'employee choice' conversion pathway; and
• the right of an employee to issue a notification to their employer under the 'employee choice' conversion pathway constitutes the exercise of a 'workplace right' for the purposes of the General Protections in Part 3-1 of the FW Act.

Preparing for the Changes

Employers should be aware that compliance with these new changes is mandatory, and that non- compliance will give rise to contraventions of the FW Act and, potentially, an applicable modern award. In such cases, employers and those involved in the contravention (such as directors and managers) may be exposed to underpayment claims and significant financial penalties (as well as substantial legal costs associated with defending these claims).

Accordingly, in order to ensure compliance with these new changes commencing on 26 August 2024, employers MUST:

• assess whether any casual roles within the organisation are likely to be treated as permanent roles if filled on or after 26 August 2024;
• thoroughly review and update their contracts of employment and workplace policies as appropriate;
• obtain the most recent version of the Casual Employment Information Statement and ensure it is issued to all casual employees upon the commencement of their engagement and whenever required;
• provide training and guidance to managers and HR personnel about the new casual obligations;
• take care to ensure that any employees who request casual conversion pursuant to the new 'employee choice' conversion pathway are not subject to adverse action in response to the request; and
• promptly seek professional legal advice if any of their obligations remain unclear or further advice or assistance is required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.