Are businesses ready for casual conversions?

On 26 August 2024, the Closing Loopholes reforms will commence. Are Australian businesses with embedded cultures of casual contracts ready for the changes?

The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 amends workplace relations laws, including but not limited to changes to payments for some labour hire engagements, new workplace delegates’ rights, specific protections for persons subjected to family and domestic violence, and the criminalisation of wage theft.

Under the reforms, casual employees who have worked for 12 months with regular patterns of hours need to be offered the option to convert to full-time or part-time (permanent) employment. Of course, certain eligibility requirements need to be met for this to occur.

Casual employees themselves will be able to request that their employer convert their employment to full-time or part-time (permanent) in certain situations.

As these reforms come into place, there are protections that ensure that employers can’t reduce a worker’s hours of work, or terminate their employment to avoid having to offer or accept a request for casual conversion.

For example, an employer can’t deliberately change their employee’s roster so they don’t meet the eligibility requirements.

HR Leader reached out to employment law partner Michael Byrnes from Sydney-based firm Swaab about the upcoming changes and how organisations with a high amount of casual employees should adjust.

“There have been a number of changes in relation to casual employment in recent years, with significant court decisions (most notably the High Court decision in WorkPac v Rossato, which overturned a full Federal Court decision with a different outcome) and two sets of legislative changes, one in 2021 under the previous Coalition government and the Closing the Loopholes reforms to take effect on 26 August 2024,” Byrnes said.

“Defining what constitutes a casual employee has, in recent times, been an ongoing contest between form and substance. The High Court decision in Rossato and the 2021 amendments gave primacy to the terms of the employment contract, a victory for form.”

Brynes explained that the upcoming amendments are somewhat complex, with a lot of moving parts for organisations to manage.

“The latest amendments move away from that approach and instead focus on what is described as ‘the real substance, practical reality and true nature of employment’. This is a more complex, nuanced test where various factors need to be considered, not just the terms of the employment contract,” he said.

“While an approach that favours substance over form is arguably fairer, it also opens up the possibility of more disputation, as the correct legal position for any individual employee is more ambiguous and one about which reasonable minds might disagree.”

An example of the disputations that Brynes refers to, could be whether or not an employer wants to convert a casual to full-time or part-time employment. If an employee who fits in the parameters of the conversion goes to their employer to request the conversion, but the employer says no, they must have reasonable grounds for declining the employee.

These requests must also be answered within 21 days. The multiple variables that go into this request could open a wide range of employment law disputes, which it is assumed a number of organisations are somewhat fearful of.

“Apart from the more complex definition of casual employment, the other significant change is that the new amendments empower employees by creating a regime that emphasises employee choice. Employees will be able to give a notice to convert from casual to permanent employment in certain circumstances,” Byrnes said.

“The employer will need to respond to such a notice within 21 days, either accepting or rejecting the conversion to permanent employment. This time frame includes consultation with the employee before responding. Disputes about conversion can be referred to the Fair Work Commission.”

“Employers will need to develop, or enhance existing, processes for addressing issues relating to casual employees. These processes need to engage with the more complex definition of casual employment and the procedural requirements, especially in fully dealing with casual conversion notices within 21 days.”

As Brynes laments, organisations will have to have strategies in place to deal directly with casual conversions. It’s yet another interaction and task that could fall on the desk of HR leaders across industries. However, if processes and strategies aren’t implemented and abided by, the complexity of these changes could result in disputes between employers and employees, which is the last thing that organisations want.

“Reliable information about the employment relationship related to the new definition of casual employment, such as whether the employee performed a regular pattern of work and the future availability of the work performed by the employee, will need to be capable of being accessed and analysed in a timely fashion [by organisations],” Brynes said.