What the new rules for casual employees mean for employers: 3 changes to be aware of

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 introduced new laws on the engagement of casual employees.

Effective from 26 August 2024, these amendments include a revised definition of ‘casual employee’ which will make it harder for employers to know whether their casual employees are properly engaged as casual.

In this article we unpack the new definition of casual “employee” and go over steps employers can take to take to manage the changes.

 

The new definition of “casual employee”

Change 1: Focusing on the employment relationship instead of the employment contract

The first change is that the definition of “casual employee” will move from being focused on the employment contract to being focused on the employment relationship.

Here’s how the definition of “Casual employee” will change:

Current definition
New definition
  • The employer makes an offer of employment on the basis that there is no firm advance commitment to continuing or indefinite work according to an agreed pattern of work;
  • The person accepts the offer on that basis; and
  • The person becomes an employee as a result of that acceptance.
  • The employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
  • The employee is entitled to a casual loading or specific rate of pay for casual employees under an award, enterprise agreement or contract of employment.

The current focus on the offer of employment has meant that an employee’s contract is central to whether they are considered casual. If their contract is clear that there is no firm advance commitment to continuing or indefinite work according to an agreed pattern of work, you can be pretty certain that they will be considered causal.

Under the new definition, the overall employment relationship will now need to be considered, rather than just what is in the contract. This introduces a broader range of factors that will be relevant – and greater uncertainty – as to whether an employee is casual or not.

The aspect of the definition requiring no firm advance commitment according to an agreed pattern of work has also been removed. This opens up more situations where an employee could be considered to be something other than casual.

There is also now a requirement for an employee to receive a casual loading or specific casual rate of pay in order to be considered casual. Employers will particularly need to take this into account where an employee is not covered by an award or enterprise agreement and ensure that a casual loading is included in their contract.

Change 2: Finding the true nature of the employment relationship

When determining whether the employment relationship is casual, the reality of how the employee ends up working will now need to be taken into account.

Here’s how this will change:

How is being casual currently assessed?
How will it be assessed?
  • Assessed on the basis of the offer of employment and the acceptance of that offer, not on any subsequent conduct of the employer or employee.
  • To be assessed on the basis of the real substance, practical reality, and true nature of the employment relationship.
  • A firm advance commitment could be found in the contract of employment or a mutual understanding or expectation between the employer and employee.
  • This can be inferred from conduct of the employer and employee after entering into the contract of employment or from how it is performed.

This means that the contract will just be the starting point and the way an employee actually works will also need to be considered. How often do they actually work? Do they have set days and times of work? Can they choose whether to accept or reject casual engagements? These are the types of questions that will need to be asked to determine whether the employee meets the definition of “casual employee”.

Change 3: The factors to be taken into account

The current provisions and the new provisions both have a list of factors that need to be taken into account in determining whether someone is a casual employee. The current list is exhaustive, whereas the new list is not.

Here’s what will change:

What factors are currently relevant?
What factors will be relevant?
Regards must only be had 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 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, an award or enterprise agreement.
  • Whether there is an inability of the employer to elect to offer, or not offer, work or an inability of the employee to elect to accept or reject work (and whether this occurs in practice);
  • Whether, having regard to the nature of the employer’ enterprise. It is reasonably likely that there will be future availability of continuing work in that enterprise of the kind usually performed by the employee;
  • Whether there are full-time or part-time employees performing the same kind of work in the employer’s enterprise that is usually performed by the employee;
  • Whether there is a regular pattern of work for the employee.

All factors in the new list will need to be considered, but no single consideration will be determinative. Also, not all considerations need to be satisfied for an employee to be considered as other than a casual employee.

The new factors make for a much broader inquiry, including an assessment of the availability of continuing work in the employer’s enterprise and a comparison with any full-time and part-time employees performing the same type of work.

The final factor in the new list is whether there is a regular pattern of work for the employee. A pattern of work is to be considered regular even if it is not absolutely uniform and includes some fluctuation or variation over time. This includes fluctuations for reasonable absences such as for illness, injury or recreation.

The Act notes that a regular pattern of work does not of itself indicate a firm advance commitment to continuing or indefinite work. An employee who has a regular pattern of work may still be a casual employee if there is no firm advance commitment to continuing and indefinite work.

 

Casual employees will remain casual until converted

If an employee comes within the new definition of “casual employee” when they commence employment, they will remain casual until specific action is taken to convert them to full-time or part-time employment. That is, they can’t morph into a permanent employee over time.

This seems a little contradictory given that the subsequent conduct of the parties will now be relevant to determining whether the employee meets the definition of “casual employee”.

However, this assessment is focused on how the employee commenced employment. To determine whether they commenced employment as a casual, you can look at how the employee ended up working and infer whether or not there was a mutual understanding or expectation between the employer and employee that they would be engaged as a casual employee. If this results in a finding that they weren’t a casual employee at commencement, they would be considered to have been a full-time or part-time employee since that time. If it results in a finding that they were a casual employee at commencement, they will be considered a casual employee and will stay that way even if they later morph into a full-time or part-time employee.

 

Consequences of misclassifying employees

If an employee is classified as a casual employee when they do not meet the new definition, they could be able to bring a claim for entitlements they would have received if they were properly classified a full-time or part-time employee. This could include amounts like leave entitlements or redundancy payments.

However, employers can offset any casual loading that has been paid to an employee against claims for full-time or part-time entitlements. This right has been in the Act since 2021 and has not been changed by the new provisions.

There will be a new small claims procedure under which employees can seek a Court order declaring that they were a full-time or part-time employee on commencement.

There are also new civil remedy provisions that apply where an employer makes a statement that they know to be false in order to persuade or influence someone to enter into a contract for casual employment when they will not be a casual employee.

 

Academic or teaching staff in higher education

The Act specifically provides that members of the academic or teaching staff of a higher education institution are not casual employees if they are on a fixed or maximum term contract. This only applies if the employee is covered by either the Higher Education Industry-Academic Staff-Award 2020 or the Higher Education Industry-General Staff-Award 2020 and they are not a State public sector employee. It will not apply to contracts that were in place as of 25 August 2024.

 

Transitional arrangements for existing casual employees

The new definition of “casual employee” will apply in relation to employment relationships entered into before, on or after 26 August 2024.

For employment relationships entered into before 26 August 2024, conduct of the employer or employee that occurred before that date is to be disregarded for the purpose of determining whether the employment relationship is characterised by the absence of a firm advance commitment to continuing and indefinite work.

If an employee is a casual employee under the current definition of “casual employee” immediately before 26 August 2024, they will still be taken to be a casual employee after 26 August 2024.

 

What should employers do now?

It’s a good idea for employers to update their casual employment contract templates so they reflect the new requirements of being a casual employee. Of course, the contract will no longer be determinative, but it could help in some situations.

The new contracts should be implemented for new employees from 26 August 2024. Current casual employees can remain on their current contracts.

Employers should also review their hiring and onboarding processes to ensure that casual employment will only be used after 26 August 2024 when employees meet the new definition. They may also want to provide training to hiring managers to ensure this occurs.

 

Prefer to speak to someone? Reach out to our Legal team – we’re here to help.

 

 

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