Many employers have long struggled with the task of drawing a clear distinction between casual and permanent employees – until now.
On 26 March 2021, the Fair Work Act 2009 (Cth) was amended to change the workplace rights and obligations for casual employees. In order to ensure your employees are receiving the correct entitlements, it is important that you are up-to-date with these developments.
The common law approach to employee classification
Prior to the amendments, the Fair Work Act did not provide a definition of casual employee. Instead, it was necessary to rely on court developed principles and make an assessment based on each employee’s individual working arrangements.
Two recent decisions heard by the Federal Court of Australia illustrate much of the uncertainty employers faced upon application of this approach.
In Workpac v Skene and Workpac v Rossato, it was acknowledged that a long-term casual employee engaged on a regular and systematic basis was likely to be considered a permanent employee.
The Court’s reasoning underlined the importance of considering the substance of an employee’s actual pattern of work, rather than just the label attached to their employment contract. The decisions have since had grave consequences for employers and opened the floodgates for thousands of workers seeking to claim accrued entitlements under the NES.
The new definition of casual employee
In response to the challenges presented by Skene and Rossato, the new definition of casual employee under the Fair Work Act aims to reduce the possibility of misunderstanding and conflict.
A person is now considered a casual employee if they accept a job from an employer knowing that there is no firm advance commitment to ongoing work with an agreed pattern of work. This definition draws on existing common law principles but differs from the old approach in a number of a ways.
Firstly, the new definition requires that an assessment of whether a person a casual employee must be based solely on the offer and acceptance of employment. Prior to this, the common law approach looked to the true substance of the working relationship, rather than just the mere form of the employment contract.
Secondly, the new definition outlines a set list of factors to consider when determining whether an offer meets the definition of casual employment. In the past, a court could refer to any number of factors it considered relevant. Following the legislative changes, the only four factors which must be taken into account are:
- you can elect to offer work and whether your employee can elect to accept or reject that work;
- the employee will only work as required;
- the employment is described as casual employment; and
- the employee is paid a casual loading (a higher pay rate for being a casual employee), or a specific pay rate for casual employees
Importantly, the new definition does not just apply to casuals who commence employment after the date the amendment became law. It has retrospective effect – which means it also applies to current or existing employees whose initial employment offer satisfies the definition of casual employee under the Act.
The employment relationship will continue on a casual basis until the employee becomes a permanent employee through “casual conversion” or ceases employment altogether.
What does all of this mean for me?
The legislative amendments have provided a fresh take on the nature of casual employment. It is now more important than ever to ensure you understand and abide by the law correctly to avoid any hefty financial penalties or legal disputes.
A good first step would be to review any existing contractual arrangements with ‘casual’ employees. To adhere to the new legal definition we recommend specifying whether an employee is casual, whether they can elect to accept or reject the hours and whether they are paid a casual loading.
RP Emery’s up to date Casual employment contract template contains all the terms and conditions required to comply with the Fair Work Act, along with comprehensive instructions. Click here for more information or get in touch with us if you have further questions.
Other Resources
What is Permanent Part Time employment?
What types of employees do you have? Are you meeting your obligations?
Casual Employment Agreement Template available for Immediate Download
By Kirra Griffin May 2021
Kirra Griffin is a final-year law student at Melbourne Law School. As our resident legal assistant, Kirra uses her specialised knowledge of the law to translate complex concepts into easily digestible information.