Changes to the Fair Work Act, Fair Work Commission review of Modern Awards and Rossato High Court appeal
Long awaited amendments to the Fair Work Act 2009 (Cth) (FW Act) came into effect on 27 March 2021, ending years of apparent uncertainty with respect to the engagement of casuals and feared “double dipping” by casual employees on their entitlements.
The amendments were passed into law following last year’s much publicised IR roundtables, which promised a range of amendments to the FW Act, including simplifying the process for employers and employees to agree to additional hours being worked by a part-time employee, changes to simplify the enterprise agreement approval process (including introducing a sunsetting provision for agreement based transitional instrument) and a strengthened compliance regime. Only the amendments for casual employees were ultimately passed with the remainder abandoned at the last minute.
Key amendments now in force
Definition of a casual employee
The meaning of casual employee is defined at s. 15A of the FW Act. The elements of a casual employee are:
- the offer of employment 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;
- the person accepts the offer on that basis; and
- the person is a casual employee as a result of that acceptance.
Further qualifications to the definition of casual employee are made at sub-section 2, however it is plain to see that the definition follows the recent decisions of Skene and Rossato (which we have covered in earlier posts as part of our casual employment series).
Statutory right to casual conversion
Another key amendment is the inclusion of a casual conversion mechanism.
Section 66B of the FW Act provides that employers must make an offer to convert a casual employee to a permanent employee if the employee:
- has been employed for 12 months; and
- during the last 6 months have worked a regular pattern of hours on an ongoing basis which the employee could continue to work as either a full-time or part-time employee.
Exemptions to making an offer for casual conversion are set out in s. 66C, namely:
- if there are reasonable grounds not to make the offer; and
- the reasonable grounds are based on facts that are known, or reasonably foreseeable, at the time of deciding not to make the offer (e.g. it is known that the position will cease to exist in 12 months).
The FW Act defines reasonable business grounds to include:
- the employee’s position will cease to exist within 12 months of making/not making the offer;
- the employee’s hours of work which the employee is required to perform will be significantly reduced within 12 months of making/not making the offer;
- there will be a significant change in either or both of the days or times at which the employee’s hours of work are required to be performed within 12 months of making/not making the offer which cannot be accommodated within the days or times the employee is available to work during that period; and
- making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory.
As a result of these amendments and a directive in the amending Act to do so, the Fair Work Commission has convened a 5 member Full Bench to review casual terms in Modern Awards to incorporate the updated legislation. The Full Bench met on 19 April 2021 and published a statement and directions and a discussion paper.
Casual Employment Information Statement
Section 125B of the FW Act requires employees to give each casual employee the Casual Employment Information Statement before, or as soon as practicable after, the employee starts employment as a casual employee.
There is no requirement that a hardcopy of the Casual Employment Information Statement be given. At a minimum, we recommend that employers ensure that employees are provided with an electronic version of the document as part of their onboarding.
A mechanism against double dipping – casual loading offset
Section 545A of the FW Act protects employers who have been paying casual loading to casual employees (who may not meet the newly introduced definition of a casual employee) from claims amounting to double dipping on entitlements where:
- a person is employed by an employer in circumstances where the employment is described as casual employment;
- the employer pays the person an identifiable amount as casual loading for not receiving the benefits of permanent employment (annual leave, personal leave etc.);
- during the employment period, the person was not a casual employee; and
- the person (or another person for the benefit of the person) makes a claim to be paid an amount for one or more of the relevant entitlements with respect to the employment period.
Therefore, provided that employees have been paid an identifiable amount as a casual loading (for example, referenced as a separate line item on the employee’s payslip or in the employment agreement), employers will have the benefit of this offset arrangement against casual employees who later claim for unpaid entitlements such as annual leave.
Where to from here?
Employers have a transition period of 6 months (until 27 September 2021), during which they are required to assess all casual employees to determine whether they are eligible to be offered permanent employment.
Following the transition period, employers will be required to offer permanent employment where appropriate and/or provide casual employees with the Casual Employment Information Statement.
We also note that:
- the Fair Work Ombudsman has published guidance on the changes to casual employment;
- the Fair Work Commission has published guidance on Casual Conversion Disputes; and
- next month the High Court of Australia will hear the highly anticipated appeal against the Full Federal Court’s decision in Rossato which may have a significant impact for employers in defending unpaid entitlements claims for employees that were (mis)classified as casual employees.
What actions should Employers take now?
Employers should be looking to review any instruments or arrangements that they currently have in place governing casual employees. Specifically:
- current casual employment contracts and templates should be reviewed to ensure that they align with the recent amendments;
- employers should review and/or implement their own internal processes to ensure that the new casual conversion provisions under the FW Act are complied with for any workers eligible for conversion; and
- employers should look to assess how they use and engage their current and planned engagement of casuals to ensure that their workforce strategy and mix can be optimised in light of the recent changes.
As always, please do contact the team if you wish to discuss any of the above developments or how the recent legislative changes impact your business.