What employers need to know about the 2021 legislative changes

What has changed and who is impacted?

All businesses, of all sizes, in all industries who employ (or intend to employ) casuals will impacted by the significant changes to casual employment that were introduced into the Fair Work Act 2009 on 27 March 2021.

In summary, the changes include:

1. A Clear Definition of Casual Employment

   Believe it or not, there was no single, clear definition of what it meant to be casual before now!

   Under the new legislation, an individual is considered a casual employee when an offer of employment “is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work...”¹.

   The person must accept the offer on that basis and be an Employee as a result of acceptance. The assessment of the definition takes place at the offer and acceptance of employment stage and relies on what is noted in the employment contract.

2. New Casual Conversion Requirements & Entitlements

   That is, the entitlement for casuals to convert to permanent employment after 12 months of service, in some circumstances. These entitlements are now included in the National Employment Standards (NES).

   Depending on the business size, the employer may be required to proactively make an offer of permanent employment to the employee, or the employee may be entitled to request to convert to permanent employment.
   
   Note that there are several different aspects to this change depending on the business size and whether there are existing casual conversion clauses in the Modern Award or Registered Agreement applicable to the employee.

3. Casual Loading Offset

   Where a court determines that a casual Employee should have been permanent, any back payments or entitlements owing to them (for annual leave, public holidays and other paid entitlements associated with permanent employment), may be reduced (offset) by the 25% casual loading already paid to them. This means no more ‘double-dipping’ as has been described in previous case law.

   Note that this reduction must be requested and also relies on the employment contract containing a suitable set-off clause.

4. New Casual Employment Information Statement

The new information statement must be provided to all new and existing casual Employees in addition to the Fair Work Information Statement employers should already be providing. This is available on the Fair Work website – here.

What action should employers take?

The changes impose additional obligations on employers and rely heavily on the correct clauses being included in the employment contract (among other things). Edwards HR recommends that all businesses take action to ensure they are meeting their employer obligations and mitigating associated risks. Our suggestions include:

1. Update your current employment agreements to bring them in to alignment with the changes, and to ensure they provide the business with adequate commercial protection.

   For example, include the new definition of a “Casual Employee”, an appropriate setoff clause, and clearly itemise casual loading and associated inclusions.

2. Familiarise yourself with the new Casual Employment Information Statement and provide a copy to all new casual employees, as soon as possible, after they commence employment (along with the existing Fair Work Information Statement).

3. Investigate and understand your obligations and your teams’ entitlements with relation to casual conversion. Be sure to keep a record of all correspondence between you and your employees.

4. If applicable, update your payroll and HR processes to ensure you’re notified when a casual employee is close to reaching their 12 month anniversary.

5. Itemise casual loading on payslips.

6. Understand the actions employees can take by visiting the Fair Work Ombudsman website and reading about ‘Legal Action in the Small Claims Court’.  This will help you to understand why you should understand these changes and take action!

Please note that there are many intricacies to these changes that may require guidance or clarification – you should contact the team at Edwards HR for advice specific to your circumstances.

Other considerations

Some Modern Awards and Registered Agreements already contain casual conversion provisions which are different to the new NES provisions. If this is the case, then the provision that is more favourable to the employee will apply.

For example, the casual conversion clause in the Road Transport & Distribution Award provides employees the right to elect (request) that their employment convert to permanent after 12 months, in some circumstances. However, the new NES provision requires the employer to proactively make such an offer.

As the NES provision is more favourable for the employee, this is the entitlement that applies.

Remember that if more than one Modern Award or Enterprise Agreement applies to your team, different provisions may apply to different employees. You should check the casual conversion provisions of each to be sure you’re getting it right.

Also remember that Employers must not take any shortcuts to avoid offering or accepting requests for casual conversion.

For example, Employers cannot change hours of work or terminate a casual employee for the purpose of making the ineligible for casual conversion.

What if I don't currently employ casuals, but plan to in the future?

If you intend to employ casuals in future, these changes will also apply to you. Here are a few additional steps you can take in preparation for your recruitment adventure:

• Have an employment agreement professionally drafted to ensure it is compliant with the changes and provides adequate commercial protection for your business.
• Investigate and understand which Modern Award/s apply to your team.
• Investigate and understand your obligations regarding casual employment, and in particular, casual conversion.

Why do employers need to be aware of this?

We, the team at Edwards HR, are yet to speak with a client who understands, in full, these legislative changes and how they impact their business.

The changes impose additional obligations on employers and rely heavily on the correct clauses being included in the employment contract (among other things). By not understanding these changes or failing to take appropriate action (such as not updating employment contracts or not assessing casual conversion entitlements), businesses may be at risk of:

• Claims from employees for lost wages, retrospectively for up to 6 years (potentially $1000’s in wages, super, leave entitlements etc);
• Being unable to offset casual loading already paid to employees in lieu of the entitlements of permanent employment (possibly resulting in additional costs);
• Heavy penalties and reputational damage if found to be in breach of the casual conversion provisions (including taking shortcuts, such as reducing work hours in order to avoid obligations).