By Samantha Maddern, Partner, Elizabeth Moran, Special Counsel and Amberley Speak, Lawyer

On 26 March 2021, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (Amending Act) introduced a number of changes to the Fair Work Act 2009 (Cth) (FW Act) relating to casual employment.

A key amendment is the inclusion of provisions relating to the conversion of casual employees to full-time or part-time employment (Conversion). Certain casual employees will now have a right to request Conversion, and some employers will be obliged to offer Conversion. Both offers and requests are subject to various eligibility criteria as outlined below.

As there are penalties for non-compliance, it is important that employers understand their obligations and have a procedure in place to ensure compliance. This will require, as a minimum:

Step 1:   Assessing who is eligible for an offer of Conversion;

Step 2:   Considering if there are reasonable grounds for not making a Conversion offer (or refusing a Conversion request);

Step 3:   Proactively managing obligations to make an offer; and

Step 4:   Monitoring employee requests for Conversion.

New statutory right to Conversion

Prior to the Amending Act, there was no statutory right to Conversion. Casual employees could only rely on conversion clauses in an applicable workplace instrument, such as a Modern Awards or enterprise agreement. Now Conversion is a National Employment Standard (NES) entitlement.

Employers were effectively given a six-month transition period (or grace period) to assess whether or not any of their casual employees are eligible for an offer of Conversion. They have until 27 September 2021 (September Deadline) to assess whether any of their casual employees who were employed before 27 March 2021 are eligible for Conversion and, if so, to make offers.

To assist employers in navigating this process, we outline the steps employers should take both BEFORE and AFTER the September Deadline in order to ensure compliance with their Conversion obligations under the NES.

Note: the obligation to offer Conversion does not apply to small business employers (i.e.  employers with fewer than 15 employees), but employees may request Conversion from any employers, including a small business employer.

Obligations on employers to make Conversion offers before 27 September 2021

An employer must make an offer of permanent employment to eligible casual employees, unless the employer has reasonable business grounds not to do so.

Before commencing a review of the casual workforce, employers must nominate an assessment date in which eligibility for conversion will be assessed.

Step 1: Assess who is eligible for an offer of Conversion  

An ‘eligible casual employee’ is a person who:

1. has been employed for a period of 12 months (with the 12-month period commencing the day the employee is ‘employed’); and
2. during the last six months, has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, they could continue to work as either a full-time or part-time employee (together, 12 Month Period).

One of the difficulties in determining whether an employee meets the 12 Month Period test is that the concept of ‘employed’ appears to undermine the fundamental nature of casual employment, namely, that a casual employee’s employment is terminated at the end of each engagement (and thus a casual employee can never have been employed for 12 months).

It seems likely that the intention of the legislation is to capture a 12-month employment ‘relationship’, regardless of the number of individual engagements which may have occurred during that 12-month period.

The second difficulty that employers face is assessing what constitutes a ‘regular pattern of hours’ and how to apply this in practice. The Explanatory Memorandum (EM) to the Amending Act provides an example, stating that, if an employee has worked shifts of eight hours on every Monday and Tuesday for the most recent nine months of their employment, then it will be clear they have worked a regular pattern of hours for the requisite six months. Whether an employee meets this requirement requires careful consideration of the pattern of hours worked by that employee.

We note that an offer to convert to permanent employment is based on the hours that an employee usually performs as a casual employee. For example, if they only work one day per week, the offer to convert need only be for continuing employment at one day per week – there is no obligation to offer additional hours.

If an offer is made, it must be in writing, specify whether the offer is for full-time or part-time employment, and be given within 21 days of the 12-Month Period.

We note there is no guidance in the legislation as to the requirements of the content of a Conversion offer. It is clear, however, that the offer cannot be for specified period of time, specified task or for the duration of a specified season (section 66A of the FW Act). This means that a casual employee cannot be converted to a fixed-term or maximum-term contract. The EM acknowledges, however, that apart from a Conversion process, there is no prohibition on an employer and employee agreeing to enter into a new fixed-term or maximum-term arrangement. Obviously, the use of a fixed-term or maximum-term contract would need to be carefully considered in the circumstances, and cannot be used as a way to avoid the requirement to offer, or the right to request, Conversion.

There are then obligations on an employee to respond to an offer. If an employee fails to respond at all in writing, they are taken to have rejected the offer.

Step 2: Consider if there are reasonable grounds for not making a Conversion offer (or refusing a Conversion request)

An employer is not required to make an offer (and is able to refuse a request) on reasonable grounds. The FW Act specifies a non-exhaustive list of what may be ‘reasonable grounds’:

1. the employee’s position will cease to exist within the period of 12 months after the time of deciding not to make the offer;
2. the hours of work the employee is required to perform will be significantly reduced in that 12-month period;
3. there will be a significant change in the days and/or times the employee will be required to perform work in that period, which cannot be accommodated with the days or times the employee is available to work; or
4. making the offer would not comply with a recruitment or selection process required under a federal, state or territory law.

‘Reasonable grounds’ are not limited to the circumstances listed above. Therefore, whether an employer’s reason for not making an offer of Conversion is reasonable is to be assessed by taking into account all of the circumstances, including the needs of the employer’s business and the nature of the employee’s role.

If an employer is not making an offer of Conversion, the employer must, within the 12-Month Period, give written notice to the employee explaining why this decision was made.

Employer’s ongoing obligations

Compliance with Conversion obligations is an ongoing requirement which means employers need to put in place an appropriate procedure.

Step 3: Proactively manage obligations to make an offer

After the September Deadline, employers must follow the same processes as outlined above. However, they will have only 21 days from the casual employee’s first employment anniversary date (of the relevant 12 Month Period) to assess eligibility and provide either a Conversion offer or reasonable grounds for deciding not to make the offer.

Therefore, it is vital that employers begin to implement robust processes now to manage the assessment of eligibility on an ongoing basis. One example could be to establish a notification alert in the payroll system about employees who may become ‘eligible’ for Conversion, to ensure such employees are not inadvertently overlooked.

We also recommend conducting a holistic review of relevant company policies and procedures to ensure they are compliant with the Conversion process.

Importantly, if an employee has been offered Conversion once (i.e. at the end of the first 12-Month Period), and has rejected (or failed to respond to) the offer, there is no ongoing obligation on the employer to make subsequent Conversion offers to that employee. The obligation then rests with the employee to exercise their right to request Conversion.

Step 4: Monitor employee requests for Conversion

Some casual employees will have a right to request Conversion (both before and after the September Deadline). This right largely reflects the model terms already contained in the majority of Modern Awards.

A casual employee can request Conversion if:

1. they have been employed for a period of 12 months;
2. during at least the last six months, they have worked a regular pattern of hours on an ongoing basis which, without significant adjustment, they could continue to work as either a full-time or part-time employee; and
3. all of the following apply:

1. they have not refused an offer in the last six months before giving the request;
2. they have not already been given notice of reasonable grounds for a decision not to make an offer of Conversion;
3. an employer has not already previously refused a request; and
4. (if not a small business employer) the request is not made during the period of 21 days after their first anniversary date.

The four additional requirements in (c) above appear to have been included to minimise the regulatory burden on employers. Time will tell how effectively this objective has been met.

The request from the employee must be in writing, must request Conversion to either full-time or part-time employment (as the case may be, based upon their regular pattern of hours) and must be given to the employer.

The employer can refuse eligible requests for Conversion on the same reasonable grounds as identified under step 2 above.

Further assistance?

Our Workplace Relations, Employment and Safety team members are assisting many of our clients to comply with the new Casual Conversion regime, both before and after the September Deadline, including by reviewing and redrafting Casual Conversion policies and checklists. If you would like some help in this regard, please let us know.