What businesses need to know about the new Fair Work amendments

Yesterday, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021 was passed by both Houses of Parliament and will shortly enter into law. Yet despite strong support from businesses and equally strong opposition from unions, the final version of the Bill removes much of what appealed to either group with one notable exception.

The previously included flexibilities for part-time employment, the criminalisation of ‘wage theft’ at a Federal level, the automatic termination of pre-Fair Work agreements and the ability for the Fair Work Commission to temporarily approve enterprise agreements that did not pass the better off overall test, all did not survive passage through the Senate.

That being said, there are still a number of changes that businesses will need to be across before the legislation comes into force.

Who do the changes affect?

The changes in some way affect every business who employs casual employees, regardless of the size of the business or number of employees. However, some of the new requirements around casual conversion do not apply to “small business employers” with fewer than 15 employees.

It is also not relevant whether your business has an enterprise agreement or pre-Fair Work agreement.

What are the most significant changes?

All of the changes relate to casual employment, including creating new rights and obligations for both businesses and casual employees.

There are a number of new rules that businesses must follow immediately upon commencement of the legislation so it is important to be across the new requirements early.

A summary of the key changes is listed below:

• inserting a definition for “casual employee” in the Fair Work Act 2009;
• requiring businesses (other than “small business employers”) to make offers of permanent employment to eligible casual employees after 12 months;
• expanding the ability to make a request for casual conversion to all national system employees;
• introducing a new Casual Employment Information Statement that must be given to all new and existing casual employees; and
• confirming that service as a casual employee does not count for the purposes of calculating notice or redundancy pay if the employee later converts to permanent employment.

How do I take advantage of the new definition for casual employment?

The most significant change for businesses is the inclusion of a definition for “casual employee” in the Fair Work Act 2009. Until now, the assessment of whether someone was a casual was a matter for interpretation by the courts and on at least two occasions had resulted in a “casual employee” being later assessed to be permanent and owed back payment for annual leave and public holidays.

The legislation provides that the assessment as to whether a person is a “casual employee” occurs at the time they are engaged regardless of what occurs at a later date. The changes also confine the relevant indicia of casual employment to:

• whether the employer can elect to offer work and whether the person can elect to accept or reject work;
• whether the person will work only as required;
• 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 (for example, a modern award).

It is essential that as many factors as possible can be relied on to support this assessment. At a minimum, there should be a written record that outlines the rights and obligations of a casual employee by reference to the above indicia.

Because this occurs when an employee is first engaged, employment contracts will play an important part in this exercise. For this reason, we recommend that all casual employment contracts are reviewed to ensure that businesses are able to take full advantage of this protection.

The legislation also creates a mechanism for casual loading paid in error to a permanent employee to be ‘set off’ against the non-payment of annual leave and public holidays if this occurs in the future. However, given that this change will have a retrospective impact, a major class action law firm has already signalled a possible High Court challenge to this part of the Bill.

What has changed with casual conversion?

While many businesses might already be familiar with the concept of responding to requests from employees for casual conversion made under modern awards, the amendments introduce an entirely new requirement for all businesses (other than “small business employers”) to proactively make offers of casual conversion to eligible employees.

A “small business employer” is a business that employs fewer than 15 employees, including across any associated entities of the business.

An offer of casual conversion must be made by an employer, other than a small business employer where:

• a casual employee has at least 12 months’ service;
• within the last 6 months, they have been working a “regular pattern of hours on an ongoing basis” which they could continue working without significant adjustment; and
• there are no reasonable grounds on which an offer should not be made.

The grounds on which a business may decline to make an offer are similar to those available when refusing a request for casual conversion, and include that there will be a significant change in an employee’s hours of work in the next 12 months.

Even if this is the case, the business must still notify the employee in writing within 21 days after the employee’s one-year anniversary stating the reasons that an offer was not made. Importantly, this assessment must be based on facts that are either in existence or are reasonably foreseeable. There is also a mechanism that prevents businesses from altering an employee’s hours of work if this has been done to avoid making an offer of casual conversion.

Because of the potential scale of this change, non-small business employers must implement processes to be able to identify those employees who have been working regular patterns of hours to identify to whom they must make an offer of casual conversion. It is not sufficient if a business believes a casual employee will not accept an offer or the employee has already verbally refused, the offer must still be made in writing if all of the above requirements are met.

For existing casual employees who were engaged before the commencement of the Bill, businesses will have 6 months from commencement of the new legislation in which to perform this assessment and notify eligible employees whether or not an offer will be made. This includes where a casual employee would not have yet attained 12 months service.

How does this interact with existing casual conversion provisions under the modern awards?

The new requirement for businesses to make offers of casual conversion applies in addition to any existing entitlement under modern awards or enterprise agreements.

This means that employees are able to continue making requests for casual conversion into the future if their circumstances change, even if they were advised by the business on their one-year anniversary that no offer will be made or the business is a “small business employer” and did not have to make an offer.

The amendments also expand the ability for casual employees to make requests for casual conversion and this is no longer limited to employees covered by a modern award or some enterprise agreements. Now, all national system employees (including employees of Pty Ltd companies) will have the benefit of being able to make a request for casual conversion at any time after they have completed 12 months’ service.

It should be noted that there are slightly different requirements under the modern award entitlement and the new entitlement for employees to make a request. If this occurs, businesses should seek independent legal advice as to which entitlement has been accessed in each occasion and the requirements in responding.

What do I need to document with casual conversion?

If any of your casual employees are covered by a modern award, you must continue to provide a copy of the casual conversion clause within the first 12 months of their engagement.

Both offers of casual conversion or notifications that no offer will be made must occur in writing. You should keep a copy of either of these and the employee’s response (if any) for the purposes of proving that you have complied with this requirement. If an employee makes a request for casual conversion at any time, you should keep both a copy of this request and your response.

If an employee agrees to convert to permanent employment, we recommend entering into a new employment contract to document the change in employment status. Some modern awards and enterprise agreements have particularly onerous obligations when it comes to part-time employees, so it is important to ensure that any new arrangement is compliant with the terms of any award or agreement.

When will the new Casual Employment Information Statement be available?

The last change with immediate effect is the introduction of a new Casual Employment Information Statement, which will operate similar to the existing Fair Work Information Statement. Like with the existing statement, the Fair Work Ombudsman will be responsible for preparing and publishing the Casual Employment Information Statement on its website.

A copy of the Casual Employment Information Statement must be provided to all new casual employees as soon as practicable after they commence employment. All existing casual employees must be provided with a copy of the statement as soon as practicable after the end of the “transition period” (that is, 6 months from the date the legislation commences).

As at the time of publication, a copy of the statement is not yet available and further information will be provided in due course.

When will the changes take effect?

If you require assistance with reviewing your existing practices to determine whether an offer of casual conversion is required to be made, updating employment contracts to reflect the new definition of “casual employee”, or have any questions about the amendments, contact NRA Legal for a confidential discussion on 1800 572 679.

By Calum Woods and Lindsay Carroll, NRA Legal