Changes to Casual Employment – Part 1: New Rules for Casual Employees

This is the first of our two-part series reviewing the significant industrial reforms affecting casual workers. In this article we outline:

• The new statutory definition of casual employees;
• The new protections against “double-dipping” when casuals are found to be permanent employees; and
• The new ‘Casual Employment Information Statement’,

and we will explain how these significant industrial reforms affect employers.

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (the Amendment Act) commenced on 27 March 2021. The Amendment Act was foreshadowed in 2020 by the Federal Government due to the economic effects of the pandemic and decisions of the Full Court of the Federal Court (FCFC). The Amendment Act introduces changes around casual employees in the Fair Work Act 2009 (Cth) (the Act) by:

• providing a statutory definition of a casual employee,
• reducing potential liability to businesses due to FCFC decisions, and
• providing mechanisms where an eligible casual employee can convert to permanent employment.

The first two of the changes will be addressed below. We explain casual conversion in our next article “Part 2: Casual Conversion”.

New Definition of a Casual Employee

 Section 15A to the Amendment Act provides, for the first time, a statutory definition of a casual employee. It states:

• A person is a casual employee of an employer if:
• an offer of employment made by the employer to the person 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 for the person; and
• the person accepts the offer on that basis; and
• the person is an employee as a result of that acceptance.

[our emphasis]

In determining whether an employer makes “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person”, the only considerations are outlined in section 15A(2), as follows:

• 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;
• 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.

Section 15A(3) also makes clear 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”.

As a result of this new statutory definition, it will not be open to courts to consider the overall nature of the employment relationship or factors which might be present at the end of the relationship (such as regular work).

The previous tests used by the courts in determining whether an employee’s employment was casual or permanent in nature involved assessing the conduct of the parties based on what occurred over the life of the employment relationship. This meant that a court looked at what the intentions of the parties were on the commencement of employment (such as the contract of employment or the terms of the offer of employment) but also the characteristics, which developed over time, such as if there were systemic and regular pattern of hours.

Section 15A(4) now makes clear that the only determinative factor is the conduct of the parties at the outset of the employment. The terms of the offer of employment or contract of employment will be critical in establishing whether an employee is casual or permanent.

The catalyst for this amendment was the 2018 FCFC decision of WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene) which was affirmed in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato) in 2020. The FCFC held that the casual employee was a permanent employee. In these decisions, the FCFC focused on the subsequent conduct of the parties and not the intent of the parties at the commencement of the employment, which meant that the employee was held to be permanent and not casual. The employees in these decisions were held to have a right to entitlements only afforded to permanent employees, notwithstanding that they had received casual rates and loadings.

Critically, these new provisions apply retrospectively and so they will apply to current casual employees with the only exceptions being employees that have already converted to permanent employees, or employees that have been found by a court to be permanent employees.

Offset of Employee Entitlements

As referred to earlier, the Amendment Act reduces the impact of the FCFC decision in Rossato. In Rossato, the Full Bench of the FCFC held that the ‘set-off’ provisions in the employment contracts for casual workers were not able to set-off the non-payment of any entitlements that the employee (when characterised as a permanent employee) may be due.

The employee in that case was employed as a casual and was paid casual loading on top of his base rate of pay. The employment contract provided that this loading was paid in lieu of any entitlements (such as sick-leave or annual leave). After deciding that the employee was in fact a permanent employee due to the ongoing nature of his work, the employee was held to be entitled to benefits such as annual leave. The Full Bench of the FCFC held that the offsetting of casual loading did not negate the employee’s right to entitlements under the Act and as a result, the employee was entitled to the entitlements preserved for permanent employees under the National Employment Standards as well as the causal loading he had already received.

This decision was heavily criticized by employer groups and the Federal Government, which described it as ‘double-dipping’.

Largely in response to criticism of the Skene and Rossato decisions, the Federal Government introduced provisions in the Amendment Act to set off any amount payable by the employer by the amount of any casual loading already paid to that employee.

Section 545A(2) of the Amendment Act states:

• When making any orders in relation to the claim, a court must reduce (but not below nil) any amount payable by the employer to the person for the relevant entitlements (the claim amount) by an amount equal to the loading amount.

It should be noted that at section 545(1) the off-set only applies if:

• a person is employed by an employer in circumstances where the employment is described as casual employment; and
• the employer pays the person an identifiable amount (the loading amount) paid to compensate the person for not having one or more relevant entitlements during a period (the employment period); and
• 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.

The effect of section 545(1) is to allow the casual loading amount (which had been paid to the employee) to off-set against any liability for statutory entitlements that the employee may be owed under the Act, an industrial instrument (such as a modern award), or an employment contract, by virtue of not being a casual employee.

Casual Employment Information Statement

The Fair Work Ombudsman has also published a “Casual Employment Information Statement”, which must be provided to new casual employees before, or as soon as practicable after, the employee starts employment as a casual employee. Ideally, this information statement should be provided with the contract of employment to the employee.

The statement can be viewed here.

Consequence for Employers

As these changes apply to both current and future casual employees, employers should:

• review their employment agreements and arrangements with current casual employees, as well as any pro-forma contract of employment for future casual employees;

• ensure that for casual employees, there are adequate provisions in place within the contracts to ensure that if there was ever a challenge to the status of the employee’s employment, the employee would be treated as a casual; and

• ensure that the contracts have clear provisions compliant with the Amendment Act confirming that any liabilities to that employee for entitlements under the Act or modern award are offset by the casual loading paid to that employee.

Further information and contact details

For more information contact Leonie Kyriacou on l.kyriacou@pigott.com.au or John Pegg on j.pegg@pigott.com.au.

This article is intended to provide general information in summary form on a legal topic, current at the time of publication.  The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.

 © Pigott Stinson 2021