In Australia’s increasingly casualised workforce, driven in particular by the growth in the “gig economy”, it’s more important than ever to understand exactly what it means to be a “casual” employee.
This is something that was considered in detail by the Albanese government in the “Closing Loopholes” legislation late last year, with the result being that there is a new definition, and new rules, around casual employees. These rules take effect from 26 August.
What are the changes in the definition of a “Casual Employee”
The distinction is important; permanent employees are entitled to things like paid leave and redundancy, while casuals are entitled to loading in lieu of those entitlements. Getting it wrong can have a big impact on the employers’ liabilities!
Previously, the definition of a casual employee was largely based on the terms of the contract. If an offer of employment made no firm advance commitment to continuing and indefinite work, and the employee accepted that offer, they were deemed casual. This approach was very much focused on the terms when the employment first commenced.
However, the new legislation aims to focus more on the “real substance, practical reality and true nature of the employment relationship. This considers post contract conduct and the “mutual understanding or expectation between the employer and employee”, which may go beyond just the contract.
In other words, is there genuinely an expectation that there will be no commitment to continuing and indefinite work?
You would consider the nature of the employer’s enterprise (e.g. is the flow of work cyclical and unpredictable?), whether there are already permanent employees performing similar work as the new casual employee, and whether there is a regular pattern of work.
What if the nature of the Employment Changes?
If the employee is properly classified as casual at the start of their employment (regarding the definition above), then they do not automatically “morph” into a permanent employee just because their circumstances change.
However, casual employees will have a right to elect to convert to permanent if they believe it is appropriate.
This is different to the current legislation, where employers with over 15 employees are required to proactively offer casual employees’ conversion to permanent if they have been continuously employed for 12 months.
Under the new legislation, employees have a right to elect to convert to permanent:
- For a small business (<15 employees), after 12 months; and
- For a non-small business (15 employees), after 6 months
Employees must make this election in writing.
What Does an Employer Have to Do if the Receive a Request from an Employee to Convert From Casual to Permanent?
- Consult with employee about the notification;
- Respond in writing withing within 21 days of the notification, advising whether or not they accept the notification;
- If accepted, update the terms and conditions of the employee’s employment arrangement, e.g. status (full-time or part-time, revised standard hours, date of change); and
- If not accepted, state in writing why the request was not accepted.
What are fair and reasonable grounds for NOT accepting conversion from Casual to Permanent?
- Substantial changes would be required to the employer’s business to accommodate the change;
- There would be significant impacts on the employers enterprise; and
- Substantial changes to the employer’s terms and conditions would be necessary (e.g. the minimum shift for a casual worker is 1 hour, but for part-time employees is 3 hours).
Disputes can be referred to the Fair Work Commission.
Transition Rules
For casuals employed before 26 August 2024, there is still a requirement under the “old rules” to offer them permanent employment if they reach 12 months’ service either
- For a small business (<15 employees), before 26 August 2025; or
- For a non-small business (15 employees), before 26 February 2025.
Other Requirements
- Limits have been imposed on the use of fixed term contracts that last more than 2 years, or have been renewed more than once;
- There are new financial penalties for dismissing permanent employees and trying to re-hire them as casuals;
- There are new administrative requirements for informing casual employees of their rights, as follows:
| Non-Small Business (15+ employees) |
Small Business (< 15 employees) |
|
| On commencement | Provide a “Casual Employment Information Statement” | Provide a “Casual Employment Information Statement” |
| On 6-month anniversary of employment |
Provide another copy of the “Casual Employment Information Statement” | None |
| On 12-month anniversary of employment |
Provide another copy of the “Casual Employment Information Statement” | Provide another copy of the “Casual Employment Information Statement” |
| Every subsequent 12-month anniversary of employment | Provide another copy of the “Casual Employment Information Statement” | None |
Note the change from the current legislation; the Employer no longer must specifically OFFER the employee to change to permanent employment but has to INFORM them of their right to make an election to change to permanent.
By staying informed and compliant, employers can navigate these changes smoothly, ensuring both legal integrity and fair treatment of their workforce.
If you need assistance, contact us today – together, we can empower your success.