Abracadabra! Casual conversion clauses to be inserted into modern awards

What you need to know

• On 5 July 2017, a five member Full Bench of the Fair Work Commission decided to incorporate a model casual conversion clause into 85 modern awards, including in the retail, restaurant, banking, aged-care, agriculture, airline, mining, maritime and transport industries.  
• The proposed clause allows a casual employee after 12 months of regular service to request their employer to convert their employment to part-time or full-time employment.  An employer may refuse the request on reasonable grounds after there has been consultation with the employee.
• The model clause requires the employer to provide all casual employees a written copy of the conversion clause within the first 12 months of their first engagement to perform work. 
• The date for implementation of the model clause, and whether the clause will have retrospective effect, are yet to be determined.

What you need to do

This decision will particularly affect employers that engage casuals on regular and systematic work patterns who are covered by a modern award.  Employers in these circumstances should:  

• Consider making a submission to the FWC about the proposed model clause and its date for implementation.  
• Review labour engagement models taking into account the model clause, to ensure compliance. 
• Develop systems to identify casuals engaged on regular and systematic work patterns and to monitor their period of engagement.
• Develop systems to ensure that casual employees are provided written notice of the model clause after 12 months of engagement. 
• Reasonably consider and respond to any request by a casual employee to convert to permanent employment. 
• Consider implementing an audit system to ensure compliance with the clause. 
• Consider whether the clause will impact on future enterprise bargaining.

Why is a casual conversion clause necessary?

As part of the FWC's four yearly review of modern awards, various employer and union bodies made applications to vary provisions concerning casual employment and part-time employment in a number of modern awards.

In determining those applications, a Full Bench of the FWC in 4 yearly review of modern awards – Casual employment and Part-time employment [2017] FWCFB 3541 determined that it was necessary that modern awards contain a mechanism for casual employees to convert to permanent employment, in order to "ensure that the modern awards objective is met with respect to such persons".

The FWC considered that conversion of any casual employee to permanent employment would not affect the cost of the employee's employment in any discernible way.

What is the model casual conversion clause?

The FWC has prepared a model casual conversion clause, to be inserted into 85 modern awards. The primary features of the clause are: 

• The clause will apply to a "regular casual employee" who over a calendar period of 12 months worked a pattern of hours on an ongoing basis which, without significant adjustment, the employee could perform as a full-time or part-time employee under the relevant modern award.
• A regular casual employee may request in writing, after 12 months of casual employment, to convert their employment to full-time employment or part-time (based on whether they have worked, on average,  more than or less than 38 hours per week).
• The employer must consider any request and may only refuse the request for conversion on reasonable grounds and after there has been consultation with the employee.

Reasonable grounds for refusal include that: 

• it would require significant adjustment to the casual employee's hours of work to accommodate them in full-time or part-time employment under the applicable modern award;
• it is known or reasonably foreseeable that the casual employee's position will cease to exist within the next 12 months; 
• it is known or reasonably foreseeable that the employee's hours of work will be significantly reduced within the next 12 months; or 
• it is known or reasonably foreseeable that there will be a significant change in the days and/or times at which the employee's hours of work are required to be performed in the next 12 months which cannot be accommodated within the days and/or hours during which the employee is available to work.

The reasons for refusal must be provided in writing within 21 days of the request. If the employee does not accept the refusal, it may be dealt with as a dispute under the dispute resolution procedure of the modern award.

• Where it is agreed that the casual employee will have their employment converted to permanent, this will be recorded in writing and the employment commence on the next pay cycle.
• An employer is required to provide all casual employees (whether a regular casual employee or not) with a written copy of the model clause within 12 months of the employee's first engagement.

Will the clause have retrospective effect?

It is not clear whether engagement as a casual prior to the introduction of the clause will count towards the 12 month period of engagement for the purpose of the employee being able to make a request, or the obligation on the employer to provide the casual employee with a copy of the clause.

What are the implications for employers?

Employers should consider what impact the introduction of the casual conversion clause may have on their labour engagement strategy.

Impact on redundancy pay 

For employees who do convert under the clause, another issue that may arise is whether their period of engagement as a casual will count as service for certain service based entitlements, such as redundancy pay. A decision of a Full Bench in AMWU v Donau Pty Ltd [2016] FWCFB 3075 considered this issue and our Ashurst Employment Alert explains that decision.

Other casual and part-time changes

In addition to the conversion clause, there were a number of proposed amendments to specific awards relating to casual employment, which included:

• introducing a new two hour minimum engagement for casual employees into 34 modern awards. 
• introducing a three hour "minimum floor" engagement into the Manufacturing and Associated Industries and Occupations Award 2010, the Vehicle Manufacturing, Repair, Services and Retail Award 2010, Graphic Arts, Printing and Publishing Award 2010 and the Food, Beverage, and Tobacco Manufacturing Award 2010.

The FWC also dealt with applications for a number of modern awards to include overtime payments for casual employees who work a certain number of hours per day and also any hours worked in addition to 38 hours per week.  The Commission is seeking submissions on a number of these applications. 

When will the decision come into effect?

The FWC has not yet varied the 85 modern awards to insert the model casual conversion clause. 

The Full Bench has sought further submissions from interested parties on the proposed model casual conversion clause and the other proposed amendments. Submissions are due to be filed on 2 August 2017. Variation of modern awards will occur at some time after that when the Full Bench makes its determination. 

Employers should carefully monitor the progress of the matter in the FWC and the date of variation of any modern awards that apply to their business. Employers may wish to consider whether to make submissions about the model clause to the FWC.

Authors: Louise Ritchard, Lawyer; Trent Sebbens, Partner.