Casual employment changes in 'Closing Loopholes' bill

In Brief: On 4 September 2023, the federal government introduced to parliament the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) which seeks to introduce a new definition of a casual employee and amend the casual conversion requirements under the Fair Work Act 2009 (Cth) (FW Act).

These changes, if passed, will have significant impacts on business and how they use casual staff in their workforce.

Proposed changes to the definition of casual employment

What is the current definition of casual employees under the FW Act?

Currently, under section 15A of the FW Act a worker is a casual employee if the employer has made an offer of employment on the basis that there is:

1. no firm advance commitment to continuing and indefinite work according to an agreed pattern; and 

2. the employee accepts the offer of employment on this basis. 

The FW Act currently defines the phrase 'no firm advanced commitment of work' by reference to the following: 

• whether the employer can elect to offer work and whether the employee can accept or reject work; 

• whether the employee works in accordance with the needs of the employer; 

• whether the employment is described as casual employment; and 

• whether the employee is entitled to casual loading or specific rate of pay for casual employees. 

What are the proposed amendments to the definition of casual employees?

The Bill proposes to scrap the current definition, and provide a new definition of casual employees. 

This proposed new definition provides that an employee is a casual employee on the basis that:

• the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and

• the employee would be entitled to a casual loading. 

The Bill proposes to define the phrase 'absence of a firm advance continuing and indefinite work' by reference to the following: 

• the real substance, practical reality and true nature of the employment relationship; 

• the contract of employment; 

• the mutual understanding or expectation between the employer and employee not rising to the level of a term of that contract, which may be inferred from the conduct of the employer and employee after entering into the contract of employment or from how the contract is performed; and

• having regard to the following considerations (but not limited to): 

  • an inability of the employer to elect to offer work or an inability of the employee to accept or reject work; 

  • the nature of the employer's enterprise; 

  • whether there are full-time and part-time employees performing the same work; or

  • whether there is a regular pattern of work for the employee.

The proposed changes in the Bill to the definition of casual employee are significant. The proposed definition for the parties to consider the nature of the employment relationship and the mutual understanding or expectation of the employer and employee is a shift away from the current decisions of CFMEU v Personnel Contracting and ZG operations Australia Pty Ltd v Jamsek, where 'contract is king' and also a rejection of the rationale underlying decisions such as Workpac v Skene and Workpac v Rosatto that brought the issue of the definition of casual employment to the attention of the Parliament a number of years ago. 

Instead, the Bill will require that not only the terms of the employment contract be considered but also the totality of the employment relationship when categorising employment. For example, the new test will invite a more detailed examination of a business' operations and rostering plans, not simply the discrete relationship that exists between the employer and the individual employee. The new test will also allow an examination of not simply the intention of the parties when they first enter into the employment relationship, but also after the fact and if the intention of the parties ever changed.

Proposed changes to the obligation to offer casual conversion

What is the current obligation to offer casual conversion? 

Currently, a casual employee who has worked at least 12 months with an employer is required to be offered the opportunity to convert their casual employment to permanent employment. The basis for the conversion is an assessment of the casual employees pattern of work in the preceding 6 month period (Assessment Period). Where the casual employee has worked a regular pattern of hours on an ongoing basis, the casual employee is entitled to be offered conversion of their employment to an ongoing position of equivalent hours or similar hours to the Assessment Period.

Where an employer cannot offer similar hours to the Assessment Period on reasonable business grounds to a casual employee, the employer is exempt from complying with the casual conversion obligation under the FW Act. In addition, small businesses also have some exemptions to the casual conversion obligation under the FW Act.

What are the proposed amendments to the obligation to offer casual conversion? 

The Bill proposes that employers are required to offer and employees can request their employment to be converted to full-time or part-time employment after 6 months instead of 12 months. However, this will exclude small businesses, where employees will be required to have worked 12 months before seeking casual conversion, whereas small businesses were previously exempt from the casual conversion obligation.

If an employee makes a request for casual conversion, the employer will continue to have an obligation to:

• respond to the request within 21 days of being notified of the request; and

• provide a written response to the request whether the request is accepted or rejected;

However, the employer must also consult with employees before making its decision to the request regardless if the employer chooses to accept or reject the employee's request. 

Employer acceptance

If the request is accepted, the employer will need to notify the employee in writing whether the employee is changing to full-time or part-time employment, the employee's new hours of work and the day the change will into effect. 

Employer rejection

If the request is rejected by the employer, the employer will need to notify the employee in writing the reasons why. The employer can rely on the following grounds: 

• the employment relationship is a casual employment within the parameters of the definition; 

• substantial changes to the employee’s terms and conditions would be required to be made to ensure the employer does not contravene a term of a fair work instrument; and/or 

• the change would result in the employer not complying with a selection criteria required under a law. This may include the public sector recruitment or selection process under the Public Service Act 1999, which provides a merit-based selection process. 

If the employee disputes the employer's decision, the employee will need to try and see if the dispute can first be resolved directly with the employer. If the dispute cannot be resolved, the employee will have an opportunity to go to the Fair Work Commission to dispute the employer's decision.

Are there any penalties for attempting to avoid an employer's casual conversion obligations?

Under the proposed changes in the Bill, employers will be penalised if they are found to have deliberately circumvented the proposed casual conversion obligations by reducing hours, changing patterns of work, or terminating an employee's employment. It will also be unlawful to misrepresent an employee's employment as casual employment and the employer may be subject to civil penalties if they have been found to have done so. 

What does this mean for businesses?

Accordingly, if the Bill is passed businesses will need to ensure that their employment contracts reflect the intended casual employment relationship, but also ensure that casual employees are treated as casual employees if it is intended for these employees to remain casual.

While it is still early, if the Bill is passed businesses should consider: 

• whether their employment contracts clearly set out the casual employment relationship;

• how they are rostering their casual employees; 

• the pattern of work for their casual employees; 

• whether there is a requirement for casual employees to agree to rostered shifts; and

• whether the casual employee is receiving a loading pay.