On March 27, the law surrounding casual workers in Australia changed as amendments to the Fair Work Act (the Act) were passed.

The changes affect both employers and workers – especially where the latter wish to have their employment converted from casual to permanent (full time or part time).

The amendments are a response to two Federal Court decisions (Rossato and Skene) in which the court ruled that these particular workers were entitled to rights of permanent staff such as annual leave, sick pay and other types of leave pay despite also having received a casual loading of around 25 percent in their remuneration.

These cases potentially left businesses exposed to millions of dollars’ worth of back pay in entitlements in respect of long-term casuals who were understood to be casuals and were paid as such but in fact are deemed to be permanent employees under the Act.

Following the amendments, the Act has changed in several ways.

First, there is now a specific definition of a casual worker.

This is important as previously, there had been no such definition. This had created uncertainty over the employment status of many longer-serving casuals who had worked regular and systematic hours and been employed for twelve months or longer.

Now, employees are considered to be casuals where they accept an offer of employment in cases where the employer has not made a firm commitment to an agreed pattern of ongoing or indefinite work.

This applies to past, present and future staff.

In addition, the law now provides a mechanism through which casual workers may be able to have their employment converted to permanent should they wish for this to happen.

Here, the rules differ slightly according to whether or not the employer is a small business (fewer than fifteen workers).

Where employers are not small businesses, they may need to make an offer to their workers to convert to permanent employment after twelve months.

The offer will need to be made where the employee has:

(a) worked with the employer for twelve months; and

(b) worked a regular pattern of hours on an ongoing basis for the past six months which they could continue to work as either a full-time or part-time employee without significant changes.

Employers are not required to make such an offer, however, where they have reasonable grounds for not doing so.

In cases where offers need to be made, employers must do this in writing within 21 days of the employee’s twelve-month anniversary.

For existing casuals who commenced work before the changes came into effect on March 27, the offer needs to be made either on or before September 27.

Employers who do not make an offer will need to write to their workers outlining their reasons for not doing so. This must be done within the above timeframe.

Employees, meanwhile, can make a request to convert to permanent employment where they meet the criteria above.

To do this, they must wait until at least 21 days after their twelve-month anniversary.

Employers who receive such a request must advise their workers within 21 days whether or not their request has been accepted.

Employers who refuse such a request must have reasonable grounds for doing so.

Where the employer is a small business, they do not have to make an offer of conversion to their workers.

However, employees of such businesses can make requests for conversion once twenty-one days after their twelve-month anniversary has passed.

This can only be done where the employee meets the criteria outlined above.

As per above, the employer can only refuse the request where they have reasonable grounds to do so.

(It should be noted that unless the relationship is converted to permanent employment under the new provisions, any employment relationship which has started off as casual now remains as such irrespective of what the parties call the relationship later in time.)

A third change is that employers must now provide all casual staff with a casual employee information statement (CEIS). This outlines their legal rights and entitlements as casual workers. (Currently there is a FWIS equivalent statement which all new full-time employee must be given when they commence the employment.)

This must be given to all new casuals when they commence employment. It must also be provided to existing casual staff at any stage on or before September 27 this year.

Employers who do not provide such statements commit an offence under the Act.

Finally, the Act deals with historical problems that have been created where employers have misclassified workers as casuals and have thus failed to accrue leave entitlements.

Where this happens, new provisions create an express right for employers to offset any leave entitlements owed to employees against the casual loading which has been paid to the workers concerned.

It should be noted that these offset provisions can really only be used now for casual employees where the new provisions (which are quite detailed) are complied with in the ways described here.

Following the changes, employers should do three things.

First, contracts of any existing casual staff should be reviewed to ensure that these reflect and accord with the new definition of a casual worker.

Toward this end, contracts should:

• Clearly specify that there is no firm advance commitment to ongoing and indefinite work;
• Clearly specify that either party can elect to accept or decline work;
• Set out a breakdown of the casual loading rate; and
• Clearly specify exactly which payments are being ‘traded off’ in exchange for the worker receiving casual loading (these can include annual leave, sick or personal leave, compassionate leave, public holiday payments, and payments in lieu of notice and redundancy pay).

Once their casuals have been employed for twelve months, employers need to consider whether or not casual conversion should be offered.

Where they fail to do this, employers leave themselves exposed to potential back pay in cases where employees whom they consider to be casual are in fact deemed to be permanent staff under the Fair Work Act.

Finally, at least until the changes become well known and familiar, employers should seek legal advice.