IR Omnibus Bill - The changes to casual employment

On 18 March 2021, the Senate passed a ‘stripped down’ version of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021, otherwise referred to as the ‘IR Omnibus Bill’. The Government dropped all other Schedules from the IR Omnibus Bill, with only Schedule 1 remaining, which addresses changes to casual employment.

These changes will have a significant impact on the legal status of casual employees in the national system. 

Changes to Casual Employment
The IR Omnibus Bill made four key amendments to the Fair Work Act 2009 (Cth) (the FW Act):

  1. The inclusion of a definition for a ‘casual employee’.
  2. In circumstances where an employee has been incorrectly classified as a casual, rather than as a full-time or part-time employee, employers will be able to offset any entitlements retrospectively claimed by the employee against the 25% casual loading that they have already paid to the employee.
  3. Casual employees will now have extended rights in relation to conversion from casual employment to permanent conversion after 12 months of employment. This now applies to all National System Employees, not just those employees who are covered by a Modern Award.
  4. Employers are required to provide their casual employees with a Casual Employment Information Statement, which will be prepared by the Fair Work Ombudsman.

Definition of Casual Employee
The meaning of ‘casual employee’ will now be defined under section 15A of the FW Act. A person is considered a casual employee if:

  1. ‘an 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; and
  2. the person accepts the offer on that basis; and
  3. the person is an employee as a result of that acceptance.’

The general effect of the definition is that an employee will be considered a casual employee if there was no advance commitment to continuous work for an indefinite period of time. Further, a regular pattern of hours does not in itself dictate a firm advance commitment to continuing and indefinite work.

The only factors that can be considered when determining whether there is ‘no firm advance commitment to continuing and indefinite work according to an agreed pattern of work’ are:

  • whether an employer can elect to offer work
  • whether the person can accept or reject work
  • whether the employment is described as casual employment; and
  • whether an employee will be entitled to casual loading (or a prescribed casual rate of pay).

Basically, whether an employee is considered to be a casual employee will be based on the offer and acceptance of employment and not based on any subsequent conduct of the parties. A casual employee will therefore remain a casual employee until they are either converted to a permanent role, or they accept an alternative employment offer that is not for casual employment.

Offset of entitlements against casual loading
Employers will now be able to offset against casual loading.

The IR Omnibus Bill provides that if:

  1. an employee has been incorrectly described as a casual employee; and
  2. they have been paid an identifiable amount to compensate them for not having one or more entitlements during their employment period (usually the 25% casual loading amount); and
  3. this employee makes a claim to be paid an amount for one or more of the relevant entitlements for the employment period.

A court must reduce any amount payable for the entitlements (the claim amount) by an amount equal to the loading amount and a court may reduce the claim amount by an amount equal to a proportion of the loading amount that the court considers appropriate.

A ‘relevant entitlement’ is an entitlement to any of the following:

  • Annual leave.
  • Personal/ carers leave.
  • Compassionate leave.
  • Payment for absence on a public holiday.
  • Payment in lieu of notice of termination.
  • Redundancy pay.

Extended rights around casual conversion
An employer must now offer a casual employee conversion to a full-time or part-time role (depending on the hours they have worked) if:

  1. they have been employed for a 12 month period; and
  2. in the last 6 months of that employment, they have worked:
    1. a regular pattern of hours on an ongoing basis; and
    2. the employee could continue to work this pattern of hours as a part-time or full-time employee, without significant adjustment. 

An employer must not reduce or vary an employee’s hours, or terminate them, in order to avoid any right or obligation to casual conversion. Further, the right to casual conversion is considered a workplace right under the general protection provisions of the FW Act. These extended rights now apply to all National System Employees, not just those employees who are covered by a Modern Award.

Small businesses, being businesses with 15 or fewer employees, will be exempt from having to offer conversion after 12 months. However, their employees can still make a request for casual conversion.

When the employer is not required to make an offer
An employer is not required to make an offer for casual conversion if:

  1. there are reasonable business grounds not to make that offer; and
  2. ‘reasonable grounds’ are based on facts that are known or reasonably foreseeable.

'Reasonable Grounds' for deciding not to make an offer include

  1. whether the employee’s position will cease to exist in the following 12-month period;
  2. the hours of work which the employee is required to work will be significantly reduced;
  3. there will be a significant change in the days or times that the employee hours of work are required and the employee cannot make themselves available to work these days / times; and
  4. making an offer would not comply with a recruitment or selection process required under State or Commonwealth Law.

How to make the offer
The offer of conversion must be made, in writing, to the employee within the 21 days following their 12 months of employment and must reflect the hours that they have worked.

A casual employee then has 21 days to accept or reject the offer. An employee’s failure to respond within 21 days is taken to mean that they have rejected the offer.

If an employer is not required to make an offer for conversion, for the reasons explained above or because the employee has not worked a regular pattern of hours for the past six months, they must still notify the employee, in writing and within 21 days, of the reasons why they are not being offered, or are not entitled to, conversion.

An employee’s right to request casual conversion
In addition to an employer’s obligation to offer casual conversion, an employee will have a right to request, in writing, casual conversion if they satisfy the eligibility discussed above and:

  1. have not refused an employer’s offer for casual conversion in the past 6 months; and
  2. the employer has not given them notice that they have decided not to order conversion based on reasonable business grounds; and
  3. the employer has not refused a previous request; and
  4. the request has not been made within the 21 days after the employer has made an offer pursuant to the 12-month-offer requirement.

An employer will have 21 days to provide a written response either accepting or declining the request. When accepting or rejecting an employee’s request, an employer is required to make the same considerations that they must make when determining whether they can offer casual conversion.

Requirement for Casual Employment Information Statement
Employers will be required to provide casual employees with a ‘casual employment information statement’ either before, or as soon as practicable after they commence employment. The information statement will include information on the meaning of casual employment and the right to casual conversion and will be prepared by the Fair Work Ombudsman.

The Takeaway
These amendments are a major win for employers. Employers can now have peace of mind knowing that casual employment is determined by reference to the offer of employment and not the subsequent conduct of the parties, so their casual employees will remain casual employees until conversion is made.

This will avoid situations such as those in the Rossato1 and Skene2 cases, where employees who were classified as casuals were found to be permanent employees after the court considered the conduct of the parties and not just the employment contract. The employers in these cases were ordered to back pay the employees their entitlements. These decisions were anticipated to cost employers between $18 and $39 billion in potential back pay liabilities, if those rulings were applied across the majority of casual employees in Australia. Further, in situations where back pay liabilities do arise, employers will now be able to offset any amount claimed by their employees against the casual loading amount already paid to them. The robust casual conversion provisions will also provide additional certainty to employers and employees in relation to the status of casual employment.

Employers should consider their contracts of employment to ensure that the benefit of these changes can be utilised. Employers should begin assessing the pattern of hours worked by their casual employees to identify their eligibility for casual conversion and therefore ensure that they are able to make offers for casual conversion to those who are entitled to it within the prescribed timeframes. Further, employers should put systems in place that ensure their ability to satisfy the casual conversion requirements.

The IR Omnibus Bill will now go back to the House of Representatives for approval. We will provide you with further updates regarding the Bill and it’s expected commencement as more information becomes available.

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1 WorkPac Pty Ltd v Rossato [2020] FCAFC 84
2 WorkPac Pty Ltd v Skene [2018] FCAFC 131