The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) has been introduced into parliament and proposes to make extensive and significant changes to Australia’s industrial landscape, including the nature of casual employment.
The Bill’s casual employment reforms propose to remove the focus on the employment contract and revert to the former test, which requires an employer to continuously consider the true nature of the employment relationship, even when a clear casual employment contract has been entered into with the employee.
The casual employment reforms are intended to come into effect on 1 July 2024. The Bill contains some controversial changes which are already being opposed by certain representative groups. This might make it less likely that the Bill will be passed quickly, however we still anticipate that the Bill will become law by the end of this year, leaving employers with limited time to prepare.
The key changes to casual employment are set out below.
The meaning of casual employment
The Fair Work Act currently defines a casual employee by reference to the terms of the employment contract, without consideration of the employment relationship in practice.
This definition was introduced to the Fair Work Act in 2021 to provide certainty to employers when employing casuals. The Bill proposes to revert to the previous test for casual employment that preceded the 2021 legislative reform, which involves reviewing how the employment relationship unfolds in practice, rather than in the terms of the contract.
The proposed definition of casual employment in the Bill states an employee will be a casual employee if there is no firm advance commitment to continuing and indefinite work and the employee is entitled to a casual loading.
This is the first time that the casual loading (which is traditionally contained in an industrial instrument), will be recognised in the Fair Work Act.
Whether there is a firm advance commitment to continuing and indefinite work will be determined by reviewing the real substance, practical reality and true nature of the employment relationship, including an assessment of whether:
- the employee has a regular pattern of work (with allowance for reasonable absences for illness, injury and recreation);
- the employer can decide not to offer the employee work and the employee can choose to reject work that is offered;
- the employer has full-time and part-time employees performing the same kind of work; and
- the work the employee performs for the employer is reasonably likely to be ongoing.
The basis of a firm advance commitment can be in the form of a contract, or in the form of a mutual understanding or expectation between the employer and the employee, which may be inferred from the conduct of the employer and employee.
Employee notification of conversion
In addition to the existing casual conversion framework, casual employees will have the ability to give an employer written notification of their ‘choice’ to convert to full-time or part-time employment after 6 months of employment (or 12 months for small businesses), if the employee believes their employment no longer meets the definition of casual employment.
Employers will be required to consult with the employee about their written notification and provide a response within 21 days of receiving the written notification to convert.
The ability of an employer to not accept an employee’s written notification will be limited to where:
- the employer considers the employment still meets the definition of casual employment;
- the employer would have to make substantial changes to the employee’s terms and conditions of employment to convert the employment to part-time or full-time without contravening the relevant Award or Enterprise Agreement; or
- conversion would result in non-compliance with the employer’s recruitment obligations under law.
Fair Work Commission to deal with casual employment disputes
An employee can refer a dispute in relation to a written notification or casual conversion to the Fair Work Commission if the dispute has not resolved through discussion with the employer. The Fair Work Commission will be able to initially deal with a dispute as it deems appropriate, including by mediation, conciliation, making a recommendation or expressing an opinion, and can arbitrate disputes that remain unresolved after the initial dispute resolution process.
Where the Fair Work Commission arbitrates a dispute, the Commission can make an order for the employee to remain employed as a casual employee, or to convert to full-time or part-time employment.
Importantly, a Fair Work Commission order for an employee to convert to part-time or full-time employment cannot be retrospective and will take effect from the beginning of the employee’s first full pay period after the order is made, or a later date if specified.
This means employers will not be required to remediate an employee’s NES entitlements (such as annual leave and personal leave entitlements), that they would have accrued if they had been employed as a part-time or full-time employee for any period prior to the order taking effect.
Misrepresentation of casual employment (sham casual contracting)
While the Fair Work Commission’s powers to make orders in respect of a casual employment dispute are limited to prospective orders, an employee, or prospective employee, will be able to make a general protections claim if they believe an employer has misrepresented an employment contract as a contract for casual employment, which are subject to the civil penalty provisions of the Fair Work Act.
An employer will need to discharge the reverse onus of proof to defend such a claim by proving that the employer reasonably believed the contract was for casual employment. The Fair Work Commission will have a broad discretion in considering whether the employer’s belief was reasonable.
Casual Employment Information Statement
Employers will be required to give a casual employee a copy of the Casual Employment Information Statement:
- before, or as soon as practicable after, the casual employment commences; and
- as soon as practicable after the employee completes 12 months of employment.
Employers will also need to give existing (“continuing casuals”) a copy of the Information Statement within 3 months of commencement.
Please get in touch with us if you would like to discuss the proposed changes and what they mean for you in further detail.