‘Good for employees; more onerous for employers’: Government redefines casual employment

Federal Parliament has been debating over a Labor bill with the potential to be “one of the most dramatic shake-ups” of the industrial relations landscape in Australia since the introduction of the Fair Work Act 2009.

So, we’re asking what kind of changes are being asked for in the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (“the bill”) and whose interests are being best served.

1. A new definition of casual employment

Among the most significant changes is a proposed redefinition of casual employment that’s had commentators asking whether small businesses will be unfairly burdened.

“The government’s view is that casual employment shouldn’t be determined predominantly and solely on what the contract says but also the surrounding circumstances,” said Adam Foster, a partner in Colin, Biggers & Paisley’s employment and safety team.

The proposed definition would allow judges to consider factors beyond just the terms of the contract in construing the nature of an employment agreement. Factors such as the nature of the work being offered, as well as the consistency and duration of the engagement, would be on the table.

Before the former government passed a narrower statutory definition of casual employment, it was up to the courts to decide what fell under the definition.

“The proposed changes take us back to that time ... it’s taken the statutory definition around the contract but then incorporated all these other considerations,” Mr Foster said.

While a more open-ended definition would create more opportunities for casual employees to get access to more stable, permanent work, some commentators are concerned about the imprecise language used in the bill.

“What struck me was that in an attempt to provide more certainty for workers, they’ve actually provided a test and framework that is incredibly uncertain ... The language they use is very much open to subjective interpretation,” said Mr Foster.

“Some of the language is so broad I don’t even really know what it means.”

Judges would be asked to consider things like the “real substance”, the “practical reality”, and the “true nature” of the employment arrangement.

Mr Foster continued, “one of the huge implications for employers is that it’s not enough to simply change your contract, your processes are going to have to be up to scratch”.

2. A shorter casual conversion period

Currently, businesses have 12 months before casual employees are offered the opportunity to convert to a permanent position.

Should the bill come into law, this period will be halved, and small businesses, which are currently excluded from casual conversion requirements, will have 12 months before offering casual conversion.

“What’s really significant [about the bill] is that the exemption for small businesses is gone. The flexibility that they need, they no longer will have with engaging casual staff,” Mr Foster said.

“On one level, that’ll be huge on costs, but on another, what you see is a sort of alignment. All these entitlements ... whether its casual conversion, whether its unpaid parental leave, effectively the bill is trying to bring it all together.”

Employment law reform is all about balancing the rights of the employer with those of the employee. It’s about boosting productivity while paying mind to the individuals involved in business operations.

“This is about offering people more secure work ... if you’re there for 12 months, you really should be offered something more. But there’s an impost it creates on small business, which often don’t even have a dedicated HR function,” Mr Foster said.

According to Mr Foster, should the bill become law, some small businesses will be surprised to find themselves potentially in breach of the Fair Work Act, having failed to track their 12-month casual conversion assessment period.

More commonly, small businesses will have to find new ways to remain flexible under unpredictable economic conditions.

“The downside for employers is you lose your flexibility. Certainty of work is a great thing. However, I think what the government hasn’t done is manage to balance certainty with making sure there’s flexibility,” Mr Foster said.

“Small businesses just don’t have the bottom line, really, to put people on permanently, particularly in the current economic climate, and then just pay or additional loadings and entitlements.”

“Now, that doesn’t mean they can use casual employment as a way of getting around their obligations. But it’s just another consequence.”

3. Tighter safeguards against circumvention of casual conversion

The bill proposes a penalty for deliberate circumvention of a business’s casual conversion obligations and would make it illegal for an employer to misrepresent an employment agreement as casual.

Mr Foster outlined three main ways a business might attempt to circumvent its casual conversion obligations. An employer might:

1. Stop offering work.
2. Substitute a consistent work pattern for a less consistent one.
3. Refuse a conversion request on an illegitimate basis.

“It’s almost making that protection a positive protection or positive obligation for employees by turning them into rights that are effectively protected,” Mr Foster said.

“The real issue is how do you ensure that those employees that need certainty get it while still ensuring employers have the flexibility they need without it costing them significantly more?”

“To be honest, I don’t know if either side has really cracked that.”

For more on the proposed changes, click here for a recent HR Leader article.