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The not-so-omnibus bill: what employers need to know about new changes to the Fair Work Act

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09 Apr 2021
Libby Pallot, Walter MacCallum, Anthony Massaro, Ben Tallboys, Abbey Burns, Caitlin Walsh, Meena Iskandar, Natasha Sim, Morgan Smithe & Connor Farrell

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (the Act) proposed a range of significant changes to Australia’s industrial relations system.  In late March, after facing resistance from the cross bench, the Government put forward a stripped back version of the Bill, with four of the five proposed schedules removed. The revised Bill has now passed the Senate and received royal assent.

This means that the Act now only makes changes relating to casual employment in the Fair Work Act 2009 (Cth) (the FW Act), which took effect from 27 March 2021.

The Government maintains that it intends to pass the schedules that were dropped at some stage in the future.

So, what will change?

The key changes are summarised below. Each change has implications for employers.

The change The likely effect

A new definition of “casual employee”

A new section 15A defines a person as a “casual employee” where:

  • there is an offer of employment made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work; and
  • the person accepts the offer on that basis; and
  • the person is an employee as a result of that acceptance.

In determining whether there is no such firm advance commitment, only the following can be considered:

  • whether the employer can elect to offer work and whether the person can elect to accept or reject work;
  • whether the person will work as required according to the needs of the employer;
  • whether the employment is described as casual employment; and
  • whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument.

Subsections 15A(3) and 15A(4) explain that:

  • a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work; and
  • the question of whether a person is a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party.

The definition of “casual employee” is crucial because it determines an employee’s statutory rights, particularly under the National Employment Standards (NES). Until now, a “casual employee” has been defined in case law to generally mean an employee that has “no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work”, according to WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene), [172]. This has been determined by reference to the actual conduct of the parties, rather than the employment contract.

The new definition moves away from the common law approach by prioritising the form of the employment relationship over its substance.  Moreover, a regular pattern of hours, which at common law is central to discerning whether casual employment exists, is no longer a telling factor.  This directly contradicts the recent findings in the cases of Skene and WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato).

Under the new FW Act, casual employees will remain as such until they are converted to full-time (see below) or the employer offers, and they accept, employment of a different classification.  This means that courts will not be able to determine the nature of the employment relationship as it varies from time to time.  If an employee works as a casual for a few weeks, then starts working a 38 hour week for the same employer without having signed a contract, they may still be considered to be a casual if the original contract says so.

These amendments place a lot more weight on the way employment contracts are drafted, and significantly limit the scope for employees to seek review of questionable casual employment arrangements.

Employers should review the drafting of their letters of offer and employment contracts to ensure that their contracts pick up the wording from the legislation.
The change   The likely effect

Casual conversion

A new Division 4A creates a legislated process for conversion for casual employees. Employers (other than small business employers) must make offers and employees can make requests for casual conversion in certain circumstances.

New section 66B(1) requires employers to make a casual conversion offer where:

  • the employee has been employed for a period of 12 months; and
  • during at least the last 6 six months of that period, the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee.

However, employers do not need to make such an offer where there are “reasonable grounds” not to make such an offer. I.e. it is known or foreseeable that:

  • the employee’s position will cease to exist within 12 months;
  • the hours of work which the employee is required to perform will be significantly reduced in that period;
  • there will be a significant change in the days or times of work (or both) which cannot be accommodated within the days or times the employee is available to work; or
  • 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.

Similarly, casual employees (including casuals of small businesses) have a right to request conversion where:

  • they have been employed for a period of 12 months; and
  • during at least the last 6 six months of that period, the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee.

However, the following conditions must also be met:

  • an employer offer has not already been made and rejected;
  • the employer has not notified the employee that a conversion offer would not be made on reasonable grounds; and
  • the employer has not already rejected a conversion request.

Employers cannot refuse such requests unless they have consulted the employee and there are “reasonable grounds” to do so. These are the same grounds as those stated for employer offers.

The Act also introduces rules relating to notice periods for making and responding to offers and requests for conversion.

These amendments make it easier for a broader range of casuals to convert to permanent employment.

The amendments shorten the period during which a casual employee must be engaged in a regular pattern of work from 12 months in most awards, to six months.

Employers need to consider the interaction between their obligations under Division 4A and any applicable award or enterprise agreement casual conversion terms. To the extent that award or enterprise agreement terms are more favourable to employees, those provisions may apply in addition to the new FW Act provisions.

Employers need to closely monitor when they are required to offer casual conversion and/or when they need to write to their casual employees to inform them that no offer will be made. Employers also need to be aware that this obligation now applies to all of their casual employees, not just those covered by awards and/or enterprise agreements. New clause 47 provides a six-month transition period so that employers (other than small business employers) have time to assess existing casual employees' entitlement to conversion and, if required, make offers of permanent employment.

Employers must not vary or reduce an employee’s employment to avoid an obligation to offer casual conversion.

Small claims procedure

New section 548(1B) allows disputes relating to the following to be heard as small claims proceedings:

  • whether or not an employer must offer casual conversion;
  • whether an employee can request casual conversion; and
  • whether an employer had reasonable grounds for deciding not to offer or to refuse casual conversion.

The Court may make orders directing employers to make offers of casual conversion, to consider casual conversion requests, or to not rely on certain grounds when deciding not to offer or refusing a request for casual conversion.

Due to the increase ease of contesting such decisions, employers should think carefully before refusing requests for, or not offering casual conversion.

Casual Employment Information Statement

New Division 12 obliges employers to provide the Casual Employment Information Statement (CEIS) to new casual employees before, or as soon as practicable after, the employee starts employment as a casual employee. This Statement has been published by the Fair Work Ombudsman and is accessible here.

While this is a relatively straightforward obligation for employers, they need to be aware of the change and establish relevant internal procedures.

Small business employers (with fewer than 15 employees) need to give the CEIS to their existing casual employees as soon as possible after 27 March 2021. All other employers have to give their existing casual employees (employed before 27 March 2021) a copy of the CEIS as soon as possible after 27 September 2021.

Dispute resolution process for casual conversion

New section 66M establishes a dispute resolution process in relation to casual conversion which can apply where there is no other dispute resolution process available in an applicable award, enterprise agreement or written agreement between the employer and employee.

Parties must first attempt to resolve the dispute themselves but can then refer the dispute to the Fair Work Commission (FWC). The FWC may deal with the dispute but only has arbitration powers over the dispute if both parties consent.

Similar dispute resolution provisions already exist in most awards and enterprise agreements. The consent requirement for arbitration is an important inclusion. Without the consent of employers during a dispute, the FWC may only deal with the dispute by mediation, conciliation, making a recommendation or expressing an opinion.

Casuals “double dipping”

New section 545A aims to prevent “double-dipping” in cases where employees who were employed as casuals are held by courts to be entitled to NES entitlements.

Section 545A applies in situations where:

  • an employee is employed as a casual employee and is paid an identifiable loading amount to compensate for not receiving one or more relevant entitlements during their employment period; and
  • the employee is subsequently found not to have been a casual employee during their employment period and makes a claim for their entitlements.

In such circumstances, the court must reduce the amount payable by the employer by the loading amount. However, the amount payable cannot be reduced below zero.

A court may be able to reduce the claimed amount by only a proportion of the loading amount by having regard only to:

  • the terms of any relevant fair work instrument or contract of employment that specify what proportion of the loading rate is being paid to compensate for which entitlements; or
  • if no such proportions are referenced but the relevant entitlements are, the court may determine an appropriate proportion; or
  • if there is no relevant term, all relevant entitlements and the proportion the court thinks appropriate.

This amendment can be seen as a direct response to the cases of Skene and Rossato which held that the payment of casual loading alone does not provide a basis for excluding employees who are later found to be part-time or full-time from claiming benefits under the NES.

These new amendments offer more protection to employers from so-called “double dipping”. However, to take advantage of this new protection, employers need to review the drafting of their enterprise agreements and employment contracts. These agreements should explicitly state what NES entitlements are being compensated for by any casual loading paid.

Transitional provisions

There are also a number of transitional provisions that mainly relate to the casual employee reforms.

Firstly, employers and employees can apply to the FWC for a determination to vary an enterprise agreement (entered into before the reforms) to resolve any uncertainty relating to the new definition of “casual employee” and the casual conversion process.

Secondly, existing employees that would have met the new definition of “casual employee” when offered employment will be considered casual employees both at the commencement of the Act and retrospectively. These employees will be prevented from making claims for entitlements that they could have otherwise made.

These provisions will create greater certainty for employers and will reduce the risk of claims for entitlements in cases where employers intended to employ an employee as a casual.

 

How we can help

If you need assistance to ensure your business is compliant with the new changes to the FW Act, and that your employment documents support such compliance, we recommend that you contact Russell Kennedy’s Workplace Relations, Employment and Safety Team. Our team has significant experience assisting employers to interpret and comply with their legal obligations in relation to casual employment and under the FW Act.

If you would like to keep in touch with Alerts and Insights from our expert Workplace Relations, Employment and Safety team, you can subscribe to our mailing list here.

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