It's not the time to be casual about casuals

Two developments concerning casual workers continue to have significant implications for employers who engage casuals with regular, predictable hours. 

What you need to know

• The uncertainty about whether casuals are entitled to "double dip" to claim entitlements under the National Employment Standard and/or relevant industrial instruments in addition to casual loadings continues following the Federal Court's decision in Workpac v Skene.
• A test case seeking to clarify the position has been filed and pressure continues to mount on the Commonwealth government to legislate.
• The casual conversion clause which allows long term casual employees covered by modern awards to request conversion to permanent status took effect on 1 October 2018.
• By 1 January 2019, a copy of the model casual conversion clause must be provided to casual employees who have been employed since 1 October 2018 or before. All other casuals must be given a copy within 12 months of their initial engagement.
• A universal right of casual conversion is ACTU policy and may be adopted by future Labor governments.

What you need to do

• Review your contracts and engagements with casuals. When operationally available, consider converting long term casual employees who work regular predictable hours to permanent full time or part time employees.
• When engaging casuals, do not make a firm advance commitment to provide ongoing work and ensure this is reflected in the arrangements that are offered.
• Separately identify casual loadings rather than using all up rates in contracts.
• If they do not already do so, contracts engaging casual employees should be amended to expressly provide a right to set off a casual loading against NES or other industrial instrument (such as relevant Enterprise Agreements or Awards) entitlements.
• Ensure that you have processes in place to monitor the length of casual engagements and to comply with the requirement to provide casual employees with a copy of the model conversion clause.

The aftermath of Workpac v Skene

In August 2018, a Full Court of the Federal Court found that the industrial meaning of the term "casual employee" has not been incorporated into the Fair Work Act 2009 (Cth) for the purposes of the NES. Our Ashurst Employment Alert explains the decision.

The decision means that casual employees with regular predictable hours may be entitled to the same statutory entitlements under the NES as permanent employees going back up to six years. Some estimates indicate that as many as 61% of Australia's 2.6 million casuals are working on a regular and ongoing basis which would put the contingent liability of employers for annual leave alone at an estimated $8 billion. This could have significant implications for the economy and for employers who could face class actions for back pay and penalties.

Workpac has asked the Federal Court to hear and expedite its determination of a separate test case. Industry groups and employers are calling for legislative intervention. It is unclear when employers will have certainty from either of these processes or what the position in relation to the characterisation of casuals will ultimately be.

What are the implications for employers?

Until the issue is resolved, if you employ casuals, you should:

• Assess their engagements and whether they could be considered to be permanent. If so, the new casual conversion clause in modern awards could assist.
• Ensure that you do not provide a firm advance commitment to provide ongoing work to casuals in your contracts or by oral representations. For example, endeavour not to provide regular and consistent hours of work or to set rosters far in advance.
• Review casual contracts to ensure that casual loadings are allocated a clearly identifiable amount and able to be set off against entitlements that would otherwise accrue.
• Continue to closely monitor developments in this area including the outcome of any test case or legislative changes.

Notification of right of casual conversion by 1 January 2019 or within 12 months

Since 1 October 2018, the majority of modern awards have included a casual conversion clause as a result of a Fair Work Commission decision as part of the modern award review. Our Ashurst Employment Alert explains that decision. Minor changes to the model clause have been made since the Alert.

The model 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 consultation with the employee.

By 1 January 2019, the casual conversion clause requires employers to notify all casual employees who were employed on or from 1 October 2018 of their right to request to convert their employment by providing them with a copy of the clause. For employees engaged after 1 October 2018, a copy of the clause must be provided within 12 months of the employee's first engagement.

While these requirements apply in respect of most casual employees as a result of the model clause being included in 85 modern awards, employers should check the modern award which applies to their workforce to determine the arrangements that apply in relation to casual conversion including notification requirements.

Employers should also be aware that the ACTU's policy provides casuals with a right of conversion after six months. This may be picked up by future Labor governments.

What are the implications for employers?

You should:

• Monitor the period of engagement of casuals and ensure there are processes in place to provide a copy of the casual conversion clause by 1 January 2019 or for employees engaged after 1 October 2018, within the first 12 months after the initial engagement.
• Be prepared for an increase in requests by casuals to convert to permanent employment and develop processes to deal with those requests.
• Continue to receive, reasonably consider and respond to applications for conversion from casual to permanent employment. Remember that requests for conversion can only be refused after consultation and on reasonable business grounds.

Authors:  Ian Humphreys, Partner; Geoff Giudice, Consultant; Jacqui Young, Senior Associate; and Ellen Mayr, Senior Associate.