Casual employment under the Closing the Loopholes legislation

Employment Law: 06 June 2024

Author: Stephen Curtain - Our People

The changes to casual employment in the Fair Work Legislation Amendment (Closing the Loopholes) Act will commence on 26 August 2024.

Casual employment under the Closing the Loopholes legislation

The changes include a new definition of casual employee, a new regime for conversion from casual to permanent employment and new penalties for non compliance.

Currently, whether a person is a casual employee depends essentially on the nature and terms of the employment contract and whether it describes the relationship as casual. Hence, an employee is a casual employee 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.

New definition of casual

From 26 August 2024 the terms of the employment offer and contract will no longer be the determinant of whether a casual employment relationship exists but rather whether:

• there is an absence of a firm advance commitment to continuing and indefinite work; and
• the employee is entitled to a casual loading or specific rate of pay for casuals (under an award or enterprise agreement).

Thus, a more objective assessment of the relationship will determine whether it is a casual one.  Furthermore, if the employment if for a fixed term even though determinable before its completion it will not be a casual employment contract.

In determining whether there is a firm advance commitment consideration must be given to:

• the “real substance, practical reality and true nature of the employment relationship”. The firm advance commitment may be in the form of a mutually agreed term in the employment contract or mutual understanding or expectation between employer and employee. Significantly, these can be determined from the conduct of the parties after entering into the contract and how the contract is performed. So, the terms of the contract are not as determinative as previously.
• The following factors:
• whether either the employer or employee is unable to elect to offer/reject work;
• whether it is reasonably likely that continuing work of the kind performed by the employee will be available in future, having regard to the nature of the business;
• whether there are full-time or part-time employees performing the same kind of work that is usually performed by the employee; and
• whether the employee engages in a regular pattern of work, even if it is not absolutely uniform and includes some fluctuations and variations over time.

Note, the legislation will not result in existing casual employees being considered as casuals. They will remain so until their employment is changed to permanent by agreement, pursuant to an award or enterprise agreement or by order of the Fair Work Commission or by the employee electing to convert the employment via the new employee choice casual conversion pathway set out below.

The Act limits the ability for employers to engage casual employees on a fixed or maximum-term contract except in circumstances where the period is identified by reference to a specified season or the completion of the shift of work to which the contract relates.

Employers will be required to provide casual employees with a new Casual Employees Information Statement, which will include their rights under the Bill, when they commence employment.

In summary, under the proposed amendments, in determining whether the employment is casual, the practical reality and true nature of the relationship must be considered including how the contract is performed rather than the terms of the employment contract.

Casual conversion by employees

Under the new regime, casual employees who have been employed for 6 months, or 12 months for small businesses, whose employment is ongoing and not casual, can give written notification to their employer that they would like to change their employment status from casual to permanent, full or part time provided:

• o the employee believes their employment no longer constitutes casual employment;
• o the employee is not currently in dispute with the employer regarding their status; and
• o 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 such a notification, the employer must consult with the employee and provide a response to the request within 21 days of the notification. In doing so they must comply with a range of form, content and notice requirements.  

Employee notices must be responded to in writing and with reasons and can be rejected if:

• the employment is still casual (see the new definition of casual employment above);
• there are fair and reasonable operational grounds for rejecting e.g. if substantial changes in the way the employer’s enterprise is operated would be required; or
• if accepting the change would result in the employer not complying with a recruitment or selection process required by law.

If the employer intends to accept the conversion it must consult with the employee about the notice and about specified matters such as whether the employment is to be full or part time, the hours of work and the commencement date.

Finally, under the new legislation:

• 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.

Referral of disputes to Fair Work Commission

If the employer rejects the employee choice notice or decides not to offer casual conversion under the existing legislation, it must now provide detailed reasons and a statement as to how the parties can attempt to resolve issue, including the right to apply to the FWC. The parties must first attempt to resolve the issue at the workplace level and if unsuccessful, either may refer the matter to the FWC which may facilitate conciliation or mediation, make a recommendation or express an opinion. If still not resolved, the FWC can resolve the matter by arbitration.

Penalties

Heavy penalties apply for contravening an FWC order; for misrepresenting employment as casual employment; for dismissing an employee to engage them as a casual; for making representations to engage someone as a casual; or for taking steps to avoid the conversion process such as changing a pattern of work or terminating the employee.

New civil remedy provisions apply to employers who change a pattern of employment or terminate an employee to avoid conversion to permanent; misrepresent employment as casual; dismiss employees to engage them as casuals. However, if the employer can show that it reasonably believed when the misrepresentation was made that the contract was for a casual position it will have a defence.

Further, an employer that employs or has at any time employed an individual to perform work other than as a casual, must not make a statement that it knows is false in order to persuade the individual to enter into a contract for casual employment, under which the individual will perform substantially the same work.

Furthermore, an employer that employs or has at any time employed an individual to perform particular work, other than as a casual, must not make a statement it knows is false in order to persuade the individual to enter into a contract for casual employment, where the work is the same or substantially the same.

Conclusion

The changes have implications for employers both in relation to the need to ensure that not only does the employment contract properly refer to the employment as casual, but also that it is conducted subsequently as a casual position having regard to the items in the dot points above.

Employers should also be mindful of casual employees’ rights to apply to convert their employment after 6 months, or 12 months for small businesses. The request can be denied if the role is still casual or the other two elements above exist, but the response with detailed reasons must be provided within 21 days and after consultation with the employee.

Employers should consider the current casual employment contracts and be ready to respond to any request that they be made permanent including not effectively discriminating against an employee who seeks to convert to permanent employment.