What businesses need to know about the new definition of 'Casual Employee'

Recent changes have been made to the Fair Work Act 2009 (Cth) (FW Act) which may impact on your casual employment and management strategy going forward.

In our Three Part Series of articles, we take a look at what you need to know in the short term and in the long term to effectively manage your casual workforce. Part 1 looks at the new definition of ‘casual employees’.

A new definition and test for ‘casual employees’

What has changed?

The FW Act amendments provide for a clear definition on when a person is a casual employee – importantly, this will apply to former, current and future/prospective employees.

A person will be a casual employee if:

  1. an offer of employment made by the employer to the person 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’ for the person; and

  2. the person accepts the offer on that basis; and

  3. the person is an employee as a result of that acceptance.

The key part of the definition is deciding whether the employer ‘makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work’ for the person, with the Court limited to considering whether this is the case:

  • at the time the offer is made; and

  • based on consideration of the following factors only:

  • 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;

  • whether 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 a fair work instrument (such as a Modern Award, enterprise agreement or a National Minimum Wage Order).

All of the factors may be relevant and none are determinative on their own. The Courts can also consider a combination of written contracts and verbal discussions to assess the ‘offer’.

Illustrative Example – Employment described as casual but existence of firm advance commitment to continuing and indefinite work (extract from the Explanatory Memorandum) Jaqueline owns and runs a dental practice. She hires Marie as a receptionist to work on the front desk. The position is described as casual in Marie’s written offer of employment. The offer provides that Jaqueline will pay Marie a casual loading on top of her hourly rate of pay. The offer says Marie’s employment can only be terminated by the employer or by Marie by two weeks’ notice in writing and that she will work from 9am to 5pm Monday to Friday with a one hour lunch break each day for the foreseeable future unless advised otherwise. At the time of providing the written offer, Jaqueline informs Marie that she will not be able to refuse shifts and will need to seek Jaqueline’s prior approval to take time off work.

Even though Marie is described as a casual and is entitled to a loading, she will not meet the definition of casual employee in new section 15A. This is because Marie’s fixed weekly hours, the indefinite nature of her engagement and the absence of a requirement to work only as required indicate that Jaqueline has made a firm advance commitment to continuing and indefinite work according to an agreed pattern of work. The new test means that if an employee’s employment satisfies all of the identified factors, the employee will be a ‘casual employee’, until their employment is either:

  • converted in accordance with the new casual conversion process (see Part 2 in our Three Part Series); or

  • at some later stage an offer of alternative employment is made for a permanent full-time or part-time position.

What does your business need to do about this?

For current casual employees:

  • Employers should consider undertaking a risk assessment of whether your current casual employees meet the new ‘casual employee’ test – taking into consideration available documents from the offer of employment for each employee (this may include the first contract of employment and offer letter, if any, the job advertisement, any file note of the interview or offer meeting, or emails exchange with regards to the offer).

  • If an employee does not meet the new ‘casual employee’ test, your business may have a residual and ongoing Rossato risk (in this case, a casual employee was found to be, in truth, a permanent employee and entitled to back payment of certain paid leave entitlements). You may also have to comply with ASIC reporting requirements relating to casual employees.

  • Review your document retention and destruction policy – in line with ordinary record keeping requirements, a lot of businesses have policies that provide for destruction of employment documents after 7 years. It would be a good idea to carve out documents relating to the initial offer and ongoing engagement of casual employees (including records like employment contracts, timesheets and rosters). These documents will be important evidence in the event of a claim.

For future/prospective casual employees:

  • Review your hours of work needs for future employees, to determine whether you need casual employees (with no firm commitment to hours and an ability to accept or reject work), or whether you need permanent part-time or full-time employees.

  • Consider a review of your casual employment contracts, to ensure they adequately reflect your offer of true casual employment.

If you are unsure how to best navigate these changes and the impacts on your business, IR Legal Solutions can provide your business with specific legal advice to assist you with these changes.

Otherwise keep an eye for Part 2 – which will explore the Casual Conversion process in more detail, and Part 3 – which will discuss Claims for Permanent Employment Entitlements.

This content is not be a substitute for legal advice and is for information only. Employers should obtain advice that is specific to their circumstances and business operations, and not rely on this publication as legal advice.