Casual employment is a critical component of Australia’s flexible workforce, but recent changes to the Fair Work Act 2009 (Cth) have reshaped the landscape, particularly around the issue of casual conversion. The most recent changes in August 2024 further modify these provisions, creating a new “employee choice pathway” for casual conversion.

This blog post covers the key elements of both the 2021 and 2024 changes, detailing the different obligations for employers with more than 15 employees, small businesses with fewer than 15 employees, and the exemptions and carve-outs applicable to small businesses.

What is Casual Conversion?

Casual conversion refers to the right of a casual employee to request or be offered a conversion to permanent (full-time or part-time) employment. This provision aims to provide casual employees who have consistently worked regular hours with an opportunity to transition to permanent employment, thus gaining access to entitlements such as paid leave, redundancy pay and notice of termination.

Definition of a Casual Employee

Under the Fair Work Act 2009 (Cth), a casual employee is defined as:

• An individual offered employment by an employer with no firm advance commitment to continuing and indefinite work according to an agreed pattern (s 15A, updated August 2024).
• The assessment now considers the “real substance, practical reality, and true nature” of the employment relationship, not just the contract terms.

Key Changes from 2021 to 2024

1. Employee-Initiated Process: “Employee Choice Pathway” (August 2024)

• 2024 Changes: Eligible casual employees can now initiate the conversion process by notifying their employer in writing of their intention to convert to permanent employment. This marks a shift from the 2021 rules, which required employers to proactively offer conversion to eligible employees.

2. Modified Eligibility Timeframe

• 2021 Requirement: Employees were required to complete 12 months of employment to be eligible for conversion.
• 2024 Changes: Employees can now request conversion after 6 months of employment (12 months for small businesses), shortening the timeframe compared to the 2021 rules.

3. Employer Response Obligations

• 2021 Requirement: Employers were required to offer conversion within 21 days of an employee becoming eligible.
• 2024 Changes: Employers must respond in writing within 21 days to an employee’s notification of their intention to convert. Employers can only refuse the conversion for specific reasons, such as the employee still meeting the casual definition or certain operational grounds.

4. Enhanced Dispute Resolution Mechanisms

• 2024 Changes: The Fair Work Commission is empowered to deal with disputes about the new employee choice arrangements, including through compulsory arbitration. This is a new mechanism to resolve disagreements more efficiently.

5. Transitional Arrangements

• 2024 Changes: There are transitional provisions allowing the current casual conversion pathways to continue applying for a transitional period for casuals employed before 26 August 2024.

6. New Definition of Casual Employment

• 2024 Changes: The definition focuses on the absence of a firm advance commitment to continuing and indefinite work. It emphasises assessing the “real substance, practical reality, and true nature” of the employment relationship, rather than just contractual terms.

7. Frequency of Information Provision: Casual Employment Information Statement (CEIS)

• 2021 Requirement: Employers were required to provide the CEIS once at the start of employment.
• 2024 Changes: The CEIS must now be provided more frequently:
• For small businesses: After 12 months of employment and then annually.
• For other employers: After 6 and 12 months, then annually.

8. Protections Against Sham Arrangements

• 2024 Changes: New protections prohibit employers from knowingly misrepresenting permanent employment as casual or dismissing an employee to re-engage them as a casual. Higher penalties are introduced for such violations.

Obligations for Employers with More Than 15 Employees

For employers with more than 15 employees, the Fair Work Act 2009 (Cth) outlines several key obligations related to casual conversion:

1.  Proactive and Employee-Initiated Conversion Processes

• Employers must comply with both the 2021 proactive offer requirements and the 2024 employee-initiated notification process.

2.  Response to Employee Requests

• Employers must respond to employee requests within 21 days and can only refuse based on specific, reasonable grounds, aligning with the new dispute resolution mechanisms.

3.  Penalties for Non-Compliance

• Civil penalties can apply for failing to comply with these provisions:
  • Individuals: Up to 60 penalty units (AUD $18,780).
  • Corporations: Up to 300 penalty units (AUD $93,900).

Obligations for Small Businesses (Fewer Than 15 Employees)

1.  Employee Right to Request Conversion

• The new “employee choice pathway” applies, but small businesses still retain the exemption from proactively offering conversion. Eligible employees can request conversion after 12 months (as opposed to 6 months for larger businesses).

2.  Protections and Dispute Resolution

• Small businesses must comply with new dispute resolution mechanisms introduced in 2024 and provide the CEIS more frequently.

Key Takeaways for Employers

1.  Stay Updated on Changes:

• Employers must be aware of both the 2021 and 2024 changes and how they interact, especially regarding proactive offers and employee-initiated requests.

2.  Document Decisions Clearly:

• Whether you are a small or larger employer, maintaining clear, written records of all decisions related to casual conversion requests and offers is essential to demonstrate compliance and avoid disputes.

3.  Seek Advice if Unsure:

• If in doubt about your obligations under the Fair Work Act, seek legal or HR advice to ensure you comply with the law and avoid potential penalties. With new protections and penalties, legal advice can help ensure full compliance and avoid costly mistakes.

4.  Implement Compliance Procedures:

• Ensure processes are in place for responding to employee requests within 21 days and that employees receive the CEIS at the required intervals.

Final Comments

The August 2024 changes to the Fair Work Act significantly shift the balance of power towards employees by allowing them to initiate the conversion process. Employers should understand their new obligations and ensure their practices align with the updated laws to foster a fair and compliant workplace.

If you need tailored advice or have specific questions about how these changes impact your business, feel free to contact Peoplemix Consulting for pragmatic guidance.

Bibliography

• Fair Work Act 2009 (Cth). Retrieved from Federal Register of Legislation.
• Fair Work Ombudsman. (2024). “Casual employment changes”. Retrieved from Fair Work Ombudsman.
• Fair Work Ombudsman. (2024). Changing from casual to full-time or part-time employment (casual conversion). Retrieved from Fair Work Ombudsman.
• Fair Work Ombudsman. (2024). “Becoming a permanent employee”. Retrieved from Fair Work Ombudsman.
• Fair Work Ombudsman. (2024). “Casual employees”. Retrieved from Fair Work Ombudsman.
• Fair Work Ombudsman. (2024). “Closing Loopholes”. Retrieved from Fair Work Ombudsman.
• Fair Work Ombudsman. (2024). “National Employment Standards”. Retrieved from Fair Work Ombudsman.

Further Reading

1. Ashurst. (2021). “Countdown to casual conversion”. Retrieved from Ashurst.
2. Ashurst. (2024). ” Closing Loopholes No. 2 Bill passes: the latest industrial relations reforms (Casuals)”. Retrieved from Ashurst.
3. Small Business NSW. (2024). “Casual conversion: what you need to know”. Retrieved from Small Business NSW.