The Fair Work Act Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) commenced operation on 27 March 2021.

The legislation amends the Fair Work Act 2009 (Cth) (FW Act) to do four key things:

1. Insert a statutory definition of casual employment

Under the definition, a person will be a casual if:

• an offer of employment is made by the employer to the person on the basis the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and
• the person accepts the offer on that basis and becomes an employee as a result of that acceptance.

In determining whether, at the time the offer is made, the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person, regard must be had only to whether:

• the employer can elect to offer work;
• the person can elect to accept or reject work;
• the person will work as required according to the needs of the employer;
• the employment is described as casual employment; and
• the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or an award or enterprise agreement.

Once the original offer meets that test and is accepted by the employee, the casual status of the employee is ‘locked in’ and cannot be affected (at least for the purposes of FW Act entitlements) by any subsequent conduct of the parties.

2. Create a National Employment Standard (NES) entitlement for casuals to request conversion to permanent employment

The NES now requires employers to offer eligible casual employees conversion to permanent employment after 12 months of service, unless there is a reasonable business justification not to do so.

To be eligible, the employee must have worked regularly and on an ongoing basis for at least 6 months of that period. The obligation to offer conversion will not be imposed on small business employers (although small business employers will still need to grant conversion requests from eligible casuals unless they have reasonable grounds for refusing the request).

The new legislation also amends the FW Act to clarify previous casual service (within the definition of casual employee) will not form part of length of service for determining NES annual leave, personal/carer’s leave, payment in lieu of notice and redundancy pay. Therefore, upon conversion to permanent employment, the previous period of service as a casual should not impact these entitlements.

The Fair Work Commission (FWC) has been granted authority to deal with small-claims style disputes about the new NES entitlement to casual conversion if discussions at the workplace level do not resolve the dispute.

3. Provide a mechanism for setting off casual loading against claims for paid NES entitlements

The new legislation allows courts to offset casual loading amounts paid to an employee against certain permanent employee entitlements, during a period when that employee was not a casual employee.

When making orders involving underpayment of entitlements, a court must now reduce any amounts payable to the employee for relevant minimum entitlements against any casual loading paid to that employee in lieu of those entitlements.

Employers should ensure that instruments used to engage casuals expressly link the payment of loadings with the absence of NES entitlements to paid leave, notice and redundancy pay. This is a prerequisite for the operation of this new statutory right to set off casual loading against claims for these entitlements.

4. Make provision for resolution of disputes, transitional arrangements and the issuing of a Casual Employee Information (CEI) Statement to casuals

The new legislation obliges employers to issue new casuals with a Casual Employment Information (CEI) Statement, to inform them of their entitlements to request casual conversion. The Fair Work Ombudsman will shortly publish this document.

Transitional provisions

The new amendments will have a significant impact on employers as well as current and future casual employees. Employers have been given until 27 September 2021 to assess all existing employees against the conversion criteria and offer conversion to permanent employment if the employee meets the eligibility requirements and there are reasonable grounds to do so.

During this period, the FWC is also required to review all modern awards to ensure they are consistent with the new statutory definition of casual employee and the new NES casual conversion provisions. The FWC will vary these awards to the extent of any inconsistency.

Any employment offers made before 27 March 2021 will fall within the meaning of casual employment under the FW Act if they satisfy the criteria in the new definition of casual employment. In this way, the new statutory definition of casual employee will apply to the engagement of a casual employee retrospectively.

Exceptions to the retrospective application apply where an employee:

• is found by a court not to be a casual employee before 27 March 2021; or
• has converted to an employment basis other than casual under the FW Act or a contract of employment.

The casual conversion entitlement and the offsetting provisions also apply retrospectively.

The retrospective application of the amendments to former employees impacts on their ability to pursue common law claims for misclassification or, alternatively, limits the compensation available for underpayments resulting from misclassification by retrospective application of the new statutory offsetting rule.