In a landmark decision, on 5 July 2017 a 5-member full bench of the Fair Work Commission (FWC) has accepted the primary proposition of the Australian Council of Trade Unions (ACTU) that the “unrestricted use of casual employment without the safeguard of a casual conversion clause may operate to undermine the fairness and relevance of the safety net”. Accordingly, the FWC has found that it is necessary for modern awards to contain a provision by which casual employees may elect to convert to full-time or part-time employment, subject to specified criteria and restrictions, to meet the modern awards’ objective of providing a fair and relevant minimum safety net.

Whilst this aspect of the FWC’s decision has caused concern amongst employer groups that it will lead to reduced flexibility for some employers in some industries, the FWC rejected potentially more restrictive aspects of the ACTU’s claims including that:

  • all casual and part-time employees be engaged for a daily minimum period of 4 hours;
  • an employer be prohibited from hiring more casual or part-time employees until existing employees were offered more hours; and
  • casuals be given an absolute right to convert to permanent employment after six months of regular work with no right for the employer to refuse the conversion.

Key points

  • Under the proposed model casual conversion clause (to be included in 85 modern awards that do not already have such a clause), to be eligible, casual employees must have worked, over a period of 12 calendar months, a pattern of hours on an ongoing basis which, without significant adjustment, could continue to be performed in accordance with the full-time or part-time provisions of the relevant award.
  • The employer must provide all casual employees (whether they become eligible for conversion or not) with a copy of the casual conversion clause within the first 12 months of their employment.
  • An employer may refuse a conversion on the grounds that it would require a significant adjustment to the casual employee’s hours of work to accommodate them in permanent employment in accordance with the terms of the applicable modern award, or it is known or reasonably foreseeable that the casual employee’s position will cease to exist, or the employee’s hours of work will significantly change or be reduced within the next 12 months, or on other reasonable grounds based on facts which are known or reasonably foreseeable.

Who does this decision affect?

Approximately 21% of Australia’s workforce of 12.2 million are casual employees. Although some modern awards, such as those applying to the manufacturing sector, already contain a casual conversion clause, this decision will lead to all modern awards conferring a right on casual employees, in certain circumstances, to become permanent staff members.

The industries with the highest proportion of casuals are accommodation & food services, arts and recreation services, administrative & support services, agriculture, forestry & fishing, and retail. However, any employer with long term or regular casual employees is likely to be impacted by this decision once the relevant modern award is varied to include the casual conversion clause.

What should employers do now?

The FWC is giving interested parties until 2 August 2017 to make further submissions about the terms of the proposed casual conversion clause and further hearings will likely be held prior to the FWC determining the final wording of the clause and its operative date.  This provides a window for employers who employ casual staff to revisit their workforce planning. Specifically, now is the time to review your current use of casual labour – not just how many casual employees you engage, but why and how you engage them. If you have casual employees working regular, or fairly regular, hours for more than a six month period:

  • do you know how many of your existing casual employees would like permanent employment?
  • what are the consequences for your business if even a small proportion of your casual employees have the right to convert to permanent employment?
  • do you have ‘reasonable grounds’ to refuse a casual employee’s conversion request?

A final point to consider: can an employer avoid the casual conversion clause in a modern award by making an enterprise agreement without such a clause or would this mean the agreement fails the ‘better off overall test’?

4 Yearly Review of Modern Awards – Casual Employment and Part-time Employment [2017] FWCFB 3541: Decision and Summary

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