Casual Employment changes from 26 August 2024

26 August 2024 brings about a number of changes in the employment space which have substantial implications for employers.  A  summary of the changes implemented under the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) can be found in our article ‘Closing the loopholes’ – more legislation passed’.

A key change relates to casual employment.  From 26 August 2024, there will be a change to the definition of “casual employee” under the Fair Work Act 2009 (Cth) (FW Act), as well as a change to the process which enable casual employees to change to permanent employment.  These changes are aimed at expanding access to secure work for employees engaged in a manner consistent with full-time and part-time employment, to ensure employees cannot be misclassified as casual simply because of the label attached to their contract of employment, and to ensure persons who are more appropriately classified as permanent employees receive their correct entitlements.

Employers who engage casual employees should prepare for these changes and ensure they have adequate documentation, systems and procedures in place to ensure compliance with the FW Act, and to mitigate risks of casual employees asserting that they are in fact permanent employees (and therefore entitled to permanent employee entitlements such as annual leave, etc).

Changes to the definition of “casual employee”

Currently, under the existing legal definition of “casual employee”, the terms of a person’s employment contract at the time of their acceptance of the offer of employment will be determinative of their status as a casual employee.  An employee will be a casual employee if their employer has not made a “firm advance commitment to continuing and indefinite work according to an agreed pattern of work” to the employee, and the employee has accepted the offer of employment on that basis.  

The advantage of the current definition is that it puts employers in a strong position to enshrine a person’s status as a casual employee in the drafting of the employment contract.  The question of whether a person is a casual employee is not to be assessed on the basis of any subsequent conduct of the employer and the employee. 

However, from 26 August 2024, a person will satisfy the casual employee definition where:

• the employment relationship is characterised by an absence of a ‘’firm advance commitment to continuing and indefinite work” (the FW Act will also set out matters which may be considered in determining whether this has occurred); and

• the person would be entitled to casual loading or a specific casual rate of pay under the terms of their employment contract, an enterprise agreement or a modern award.

Significantly, while the new casual employee definition will still be characterised by the absence of a ‘firm advance commitment to continuing and indefinite work’, this will now be based on an objective assessment of the totality of the employment relationship, assessed against ‘the real substance, practical reality and true nature of the employment relationship’, and not just the terms of the employment contract.  This means that the assessment can also include the subsequent conduct of the parties.

While it is still appropriate for employers to draft casual employment contracts to reflect that there will be no ‘firm advance commitment to continuing and indefinite work’, from 26 August 2024 employers can no longer solely rely on the terms of a casual employment contract and it is critical that employers assess the arrangements of its casual employees to ensure that they are correctly classified as casual employees under the new casual employee definition under the FW Act.

Changes to casuals’ pathway to permanent employment

The Closing Loopholes laws also introduces a new pathway under the FW Act for casual employees to change their employment status to permanent employment.

From 26 August 2024, a new “employee choice” pathway will be introduced which replaces the existing “casual conversion” provisions of the FW Act, and allows eligible casual employees who believe they are no longer a casual employee (within the meaning of the new casual employee definition) to notify their employer and to change their casual status to permanent status, subject to certain grounds in which an employer can elect not to accept a notification.  This shifts the onus from employers to employees, as the current ‘casual conversion’ rules practically require employers to continuously assess its casual working arrangements and make ‘offers’ to eligible casual employees.

A casual employee will only be eligible to initiate a change to permanent full-time or part-time employment if the casual employee:

• meets the minimum employment period (being 12 months for small business employers, and 6 months for all other employers);

• believes they are no longer a casual employee at the point in time when they make the notification to their employer;

• wants to change their employment status to full-time or part-time employment.

An employee would not be required to make a notification if they do not want to change to permanent employment.

There are also specified circumstances where a casual employee would not be eligible to issue a notification to their employer.  This includes where they have been in dispute with the employer regarding the status of their employment in the last 6 months, where their employer has refused a request in the last 6 months, or where the parties have resolved a dispute about casual conversion.

An employer can refuse an employee notification on certain specified grounds, including where the employer believes the employee is still correctly classified as a casual employee under the new definition, and where there are fair and reasonable operational grounds for not accepting the notification.

Where an employer receives a notification from the employee under the “employee choice pathway”, an employer would be required to respond in writing within 21 days of the notification being given to them, and there are specific matters which need to be included in its response.  Consultation obligations also apply.

Key Takeaways

Given the upcoming new definition of “casual employee” and the new “employee choice” pathway to permanent employment as outlined above, employers should:

• ensure that their casual workforce are appropriate classified as casual employees under the new definition under the FW Act.  This would involve assessing the ‘real substance, practical reality and true nature’ of the employment relationship;

• ensure their casual employment agreement templates reflect the new definition of casual employment; 

• be aware of obligations under the new ‘employee choice’ pathway, and ensure they have procedures in place to comply with obligations under the FW Act where it receives notifications from casual employees.