Clarity for Casual Employment

This week saw changes to employment laws for casual employees.  We outline those changes below, to assist Practices to understand, comply, and utilise them.

There is a general view that engaging employees casually gives Practices flexibility to access staff as and when needed, to suit the Practice’s needs. This flexibility is generally not possible with permanent employees who are, subject to some exceptions, promised and paid for regular hours, regardless of any reduction in the need for work to be performed. As such, small and growing Practices, or those undergoing change or affected by events such as Covid-19, have favoured casual employment, which is usually administered by adding 25% to the Award rate for the role, and then avoiding the need to accrue and pay leave entitlements.

In the 2020 Federal Court case of Workpac v Rossato, the relationship of “casual employment” under the Fair Work Act was determined, leading to many casuals who work regular and ongoing hours, being entitled to paid leave (including back pay of it) in addition to their loaded hourly rates. This anomaly is widely referred to by employers as “double-dipping” and has been regarded as unfair. Despite the Government introducing rules to prevent employees from receiving a 25% loading and being entitled to back pay for leave, the position until now was – despite what a contract says and despite being paid a casual loading, if the employment relationship is not truly “casual” as clarified in Rossato, the employee is entitled to paid leave entitlements, including back pay of them.  In the area of employment law, this has proven a hot issue. The employer in Rossato, WorkPac (who was actually a labour-hire company in the first place) has lodged an appeal in the High Court to have the matter redetermined. In doing so, WorkPac has a lot of support from employers who estimate the financial consequences of back pay will be crippling to many industries, especially those already significantly impacted by Covid-19.

In the meantime, the Government has attempted on several occasions, to introduce new legislation to meet current pitfalls in the Fair Work Act, which came under the spotlight during Covid-19.  Importantly, after several attempts, a recent amendment to the Fair Work Act was finally passed on Monday and coming into effect from 27 March 2021, clarifying casual employment.

This is a welcome development for Practices as it provides greater certainty about:

  • who constitutes a casual employee
  • when a casual will be regarded as a permanent employee
  • the rights and obligations of Practices in respect of casual employees
There are four main changes to be aware of:

1. Defining a casual employee

This definition is based on the original offer (usually in the contract) made to the employee, without taking into account any subsequent conduct of the parties. A person will be considered a casual if employment is offered (and accepted), on the basis that there is no firm advance commitment to continuing and indefinite work according to an agreed pattern. In order to determine whether an employee is a casual (whether there is a firm advance commitment), the court will look at the relationship and ask:

  • 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
  • whether the person will be entitled to a casual loading or specific rate of pay for casual employees under the contract/applicable instrument
2. New casual conversion obligations

Employers will now be obligated to make an offer of permanent employment to eligible employees within 21 days of the employee’s first anniversary, unless an exception applies or the employer has reasonable grounds for not making an offer.

Eligible employees are those who:

  • have been employed for 12 months
  • during the last 6 months of that period, worked a regular pattern of hours on an ongoing basis, and could continue to work as a full or part-time worker without significant change to their hours
3. New Casual Employment Information Statement 

Employers must provide casual employees with a Casual Employment Information Statement; (prepared by the Fair Work Ombudsman) prior to, or as soon as practicable after starting work. This Statement will contain information about casual employment and casual conversion.

4. Right to offset casual loading against entitlements

Employers can now offset any casual loading paid to the employee against any claim for unpaid entitlements if an employee is found not to be a casual (preventing double-dipping).  Where an employer can show that the employee has been paid casual loading to compensate the employee for not having one or more relevant entitlements during a period, the Court must offset any amount paid in casual loading against the amount the employer may have otherwise been ordered to be paid. However, in order to rely on this provision, the employment contract must adequately identify the relevant entitlements the loading is being exchanged for.  Therefore the wording of the contract is very important.

Advice for Practices

  • Review casual contracts to ensure they correctly define the relationship and accurately engage the employee as a causal, including clearly specifying the rights and duties of the casual employee.
  • Review casual contracts of employment to ensure they are adequately drafted to prevent double dipping. That is, they adequately identify the relevant entitlements the loading is being exchanged for.
  • Identify any casuals who may be eligible for casual conversion (i.e. because they have been working a regular pattern of hours on an ongoing basis).
  • Provide a copy of the Casual Employment Information Statement (in addition to Fair Work Information Statement) to new casual employees before the employee starts employment, or to existing casuals as soon as possible.
A final word, we understand the above legislative changes may be subject to a separate High Court application based on whether or not they are constitutional (whether or not the Parliament is empowered under the Constitution to pass them). This means the position may change again.

ClinLegal members can immediately access and use our updated App for contracts and position descriptions for casuals through the member portal.

Co-authored by:

Alex MacIntyre
Workplace Relations Advisor, ClinLegal
[email protected]
(02) 8233 6187

Isabella Sia
Lawyer, Clinlegal
[email protected]
(03) 8676 0653

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