The other week we heard much ado about the right to disconnect and what it means for employers and employees alike. You can read more about the right to disconnect here. But in case you missed it, another new law affecting the relationship between employers and employees commenced last week – the new definition of a casual employee.
Effective 26 August 2024, changes to the Fair Work Act and around 140 modern awards commenced. These changes include a new definition of “casual employee” and revised processes for “casual conversion”.
Overview of changes
Casual Employment: The determination of an employee’s casual status will no longer rely solely on their employment contract. Instead, it will be based on the true nature of the employment relationship.
Casual Conversion: The process for converting casual employment to full-time or part-time status has been standardised:
- Employees may initiate the conversion after six months of work (12 months for small employers).
- The Fair Work Commission now has the authority to resolve disputes related to casual conversion.
These changes require employers to review and potentially update their employment contracts and letters of offer for casual employees to ensure they are compliant with the changes to the law.
New Definition of “Casual Employee”
In 2021 the Morrison Government made a change to the Fair Work Act , which defined a “casual employee” based on the terms of the employment contract. This definition aimed to protect employers from claims by long-serving casual employees who argued they were, in fact, permanent employees due to their regular work patterns.
Pursuant to the new definition of “casual employee”, an employee is will only be a casual employee in circumstances where:
- there is no guaranteed long-term or ongoing work; and
- the employee is entitled to extra pay or a special casual rate to make up for the fact that they don’t have guaranteed work.
Effect of the New Definition
The new definition emphasises the practical reality of the employment relationship over contractual terms. Key factors in determining whether or not an employee is a “casual employee” for the purposes of the new definition under the Fair Work Act include whether:
- The employer can choose to offer or not offer work.
- The employee can accept or reject work offers.
- Work is likely to continue based on the nature of the business.
- Similar roles are performed by part-time or full-time employees.
- The employee has a regular work pattern.
- The employee receives a casual loading or specific pay rate.
The new definition is critical for employers of casual workers and casual employees, as it changes how casual employment is assessed. There is now no single factor that is conclusive of whether an employee is a casual employee or not. It requires a holistic assessment. Employees will remain casual until they choose to convert via the new casual conversion process.
New “Casual Conversion” Provisions
The Federal Government has introduced a single, clear pathway for converting casual to permanent employment under the National Employment Standards, known as the “employee choice pathway.”
Transitional arrangements ensure that existing casual employees remain casual under the new provisions. The FWC is finalising the wording for modern awards to align with these changes.
Employees who have worked for six months (12 months in small businesses) can notify their employer if they believe they no longer meet the casual employee definition. Employers must respond within 21 days by either:
- converting the employee to full-time or part-time status, or
- providing written reasons for rejecting the request.
Employers may refuse conversion based on certain grounds, including if the employee still meets the casual definition or if there are operational reasons for refusal. The Fair Work Commission can resolve disputes and has the authority to make binding decisions on the employer.
Important Considerations
This change to the Fair Work Act is significant for many employers who may heavily rely on a casual workforce. It’s therefore important to be aware of the following factors when considering the nature and extent of the impact on the changes to the law on your business.
- Casual employment status will not change automatically.
- A change from casual to permanent status requires the employee’s consent.
- Employees who work like permanent employees can choose to convert and will receive permanent employee benefits instead of casual loading.
The existing casual conversion processes in the Act have been repealed, and employers are no longer required to offer conversion. The Fair Work Ombudsman (FWO) will update the Casual Employment Information Statement (CEIS), which must be provided to casual employees as soon as possible after starting work and at specified intervals.
Conclusion
The new definition of “casual employee” and the updated casual conversion process mark significant changes to Australia’s employment landscape. Employers must stay informed to ensure compliance and fully understand their new obligations.
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