It’s about to get a lot harder to employ casuals
The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 introduces a new definition of “casual employee” that departs from the simplicity of the current definition and has regard to the “real substance and practical reality” of the relationship, an amorphous concept that will be difficult to interpret and comply with in practice. Further, employers will breach new civil remedy provisions (modelled on current sham contracting provisions) if they represent an employment contract as a casual contract, where the employee will perform work other than as a casual.
Management liability and employment practices liability insurers should take note of the potential new claim avenue (including mandatory arbitration in the Fair Work Commission) and new statutory penalties to which their insured customers may be exposed.
New definition of casual employee
Under the proposed new definition of casual employee in section 15A of the Fair Work Act 2009 (Cth), an employee will be a casual employee of an employer only if the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work and the employee would be entitled to a casual loading or a specific rate of pay for a casual.
For the purposes of determining whether the employment relationship is characterised by an absence of a firm advance commitment to continuing in indefinite work regard is to be had to:
- the basis of the real substance, practical reality and true nature of the employment relationship;
- on the basis that a firm advance commitment can be in the form of a contract of employment or in the form of a mutual understanding with the employer; and
- having regard to, but not limited to, the following considerations (which indicate the presence, rather than an absence of such commitment):
- whether there is an inability of the employer to elect to offer work or an inability of the employee to accept or reject work;
- whether having regard to the nature of the employer’s 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 employees or part-time employees performing the same kind of work in the employer’s enterprise that is usually performed by the employee; and
- whether there is a regular pattern of work for the employee.
The current definition
The new provisions are in contrast to the current, more workable, definition of casual employee in section 15A, which focuses on the rights in the employment contract and provides a person is a casual employee if the offer of employment made by the employer is made on the basis the employer makes no firm advance commitment to continuing indefinite work according to an agreed pattern of work, and the person accepts the offer on that basis.
In determining whether, at the time the offer is made, the employer makes no firm advance commitment to continuing indefinite work, regard must 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; and
- whether the person is entitled to a casual loading or a specific rate of pay for a casual.
New rights to dispute nature of relationship
If an employee considers they no longer meet new requirements of the Fair Work Act regarding casual employment, they can notify the employer, provided if the employer is a small business employer, the employee has been employed by the employer for a period of at least 12 months. (If the employer is not a small business employer, the employee must have been employed for a period of at least 6 months.)
The employer must then give an employee a written response to the notice within 21 days. The response must be in writing and include a statement that the employer either accepts or does not accept the employee’s notice on certain grounds.
If the employer accepts the notice, the response must state whether the employee is changing to full-time employment or part-time employment, the employee’s new hours of work and the day the change will take place.
If the notice is not accepted, the response must (helpfully for employees) set out the employee’s rights to resolve the dispute, including by in making an application to the Fair Work Commission.
Before providing the response, the employer must also consult with the employee about it.
Grounds upon which the employee’s notice may not be accepted by the employer are:
- the employee still meets the requirements of the Act regarding casual employment;
- accepting the notification would be impractical because substantial changes to the employee’s terms and conditions would be reasonably necessary to ensure the employer does not contravene a term of a fair work instrument that applies to the employee as a full-time or part-time employee.
Disputes are to be resolved at the workplace level by discussion, if possible. Failing that, either party can refer the dispute to the Fair Work Commission, which has the power to arbitrate the dispute, if it cannot be resolved through conciliation.
New civil remedy provisions
New civil remedy provisions will also be created where a person that employs or proposes to employ an individual must not represent to the individual that the contract of employment under which they would be employed is a contract for casual employment, under which the individual would perform work, other than as a casual. However, a defence will be available if the employer proves that when the representation was made the employer reasonably believed the contract was a contract of employment as a casual.
Further, an employer that employs or has at any time employed an individual to perform work other than as a casual, must not make a statement that the employer knows is false in order to persuade the individual to enter into a contract for casual employment, under which the individual will perform substantially the same work.
Additionally, an employer that employs or has at any time employed an individual to perform particular work, other than as a casual, must not make a statement the employer knows is false in order to persuade the individual to enter into a contract for casual employment, under which the individual will perform work the same or substantially the same work.
In general terms, the new provisions will act as a disincentive for employers to employ casual employees. They will limit the ability of employers to employ casuals, without generating disputes about the nature of the relationship. They will result in less flexibility in workforces, as the circumstances in which employees can lawfully be employed as casuals will be much narrower than is currently the case.
The provisions may also not be well received by many casual (or aspiring) casual employees either, as many casual employees value being paid a casual loading and the flexibility provided by casual employment.
Employers will have to be very careful when employing casual employees when these provisions become law, ensuring that they only employ casuals within the parameters of the new definition of casual employee and associated laws. Otherwise, they will be exposed to disputes in the Fair Work Commission and to civil remedy proceedings.
Employment practices and management liability insurers may wish to consider whether existing policy wordings would respond to these new claim types and if so, their exposure to increased defence costs and civil penalties arising from the changes. Employment practices and management liability underwriters may also wish to consider whether they need to ask specific questions on proposal forms regarding engagement of casual employees.