Explained: Labor seeks new casual worker conversions, legal definition to stop “double dipping”

Australian employers could face a new set of rules when converting casual employees to permanent workers and a fresh definition of casual work, under changes flagged by Minister for Employment and Workplace Relations Tony Burke.

Burke is slated to speak at the Sydney Institute on Monday, outlining the latest priorities in the Labor government’s ongoing industrial relations reform agenda.

Here’s what employers need to know.

What does Tony Burke say?

As part of the Labor government’s long-established challenge on what it dubs “insecure work”, Burke says the federal government wants to form a new pathway for casual conversion and legislate a new definition for casual work.

More than 850,000 casual workers would have access to the expanded conversion pathway, according to Burke.

“No casual will be forced to become a permanent employee,” Burke will say, according to The Guardian.

“But for those who desperately want security – and are being rostered as though they were permanent – for the first time, job security will be in sight.”

Burke accuses some employers of ‘double dipping’, by securing the most beneficial parts of permanent work — namely, a consistently available workforce — with the most desirable parts of casual contracts — the ability not to pay entitlements like annual leave or sick leave, or offer watertight job security.

Some casual employees are “being used as though they’re permanent workers and the employer is double dipping — taking all the advantages of a reliable workforce and not providing any of the job security in return,” Burke will say.

Casual employees who convert to permanent employees would not be eligible for benefits like annual leave payments in arrears under the federal government plan.

The March 2021 amendment to the Fair Work Act will revert under Labor’s plan, he adds.

“I want to go back to the definition that we all had before two years ago,” Burke will say.

What are the current casual conversion rules?

A new casual conversion right was slotted into the Fair Work Act in March 2021 which compels employers to ask casual employees if they’d like to convert to permanent employment.

There are certain limitations: the worker must have spent at least 12 months at the business, and must have performed a regular pattern of work over the last six months of that period, which they could continue working without any major adjustment.

Employees are under no obligation to convert to permanent employment.

Businesses can also avoid making those offers if they have “reasonable grounds” not to, like if the employee’s position will cease to exist in the next year, their hours will significantly shrink, or if a permanent conversion would radically change the hours they have to work.

Crucially, the Fair Work Commission notes small businesses — that is, businesses with fewer than 15 employees — do not have to offer casual conversions, but employees are still free to ask if they meet the above requirements.

You can read more about the rules here.

What about the definition of casual work?

Separately, March 2021 also brought about a new definition of what casual work actually is.

Before then, without a statutory definition in the books, the courts took a broad look at the conditions of an employee’s working relationship when determining if it counted as casual or not.

That framework was put to the test by two high-profile Federal Court cases — WorkPac v Skene and WorkPac v Rossato.

In Workpac v Skene, the Full Court of the Federal Court found that because there was no statutory definition for casual work, it had to apply its own test to what counts as a casual employee.

To do so, it considered the employment relationship as a whole.

It eventually ruled that fly-in, fly-out worker Paul Skene not be counted as a casual employee, but a permanent employee eligible for the entitlements permanent employment brings.

The Federal Court handed down a similar view in Workpac v Rossato, finding Robert Rossato should have also been considered a permanent employee.

Both decisions were incredibly significant.

They suggested a pathway for casual employees to claim permanent working entitlements like annual leave after earning casual wage loading, a move fearful employers dubbed ‘double dipping’.

To clarify the circumstances for other businesses, the Fair Work Act was amended in March 2021 to reflect that a person counts as a casual employee “if they accept a job offer from an employer knowing that there is no firm advance commitment to ongoing work with an agreed pattern of work”.

In effect, it made the character of written contracts — not the day-to-day reality of the job — a key determinant in what counts as casual work.

WorkPac successfully appealed the Rossato decision in the High Court in August 2021, effectively ruling he was a casual, while rejecting how the Federal Court judged the “totality” of the working arrangement in Workpac v Skene.

Both the amended Fair Work Act and the final outcome of the Workpac v Rossato case set new standards, which the Labor government is now seeking to change.

You can read more about the Rossato decision here.

What do industry groups say?

Matthew Addison, chair of the Council of Small Business Organisations Australia (COSBOA), has questioned the need for further tweaks to casual conversion pathways.

“It’s been in place for a fair period of time and employees typically do not take up their option to convert from casual to permanency,” Addison told SmartCompany on Monday.

“Although this regime has been built into the IR system for a couple of years, the takeup is way below 5%.

“So we’re not quite sure what problem the minister and the government have identified, and we’re not quite sure exactly what solution he is bringing to the table that is not already here.”

The decision not to retroactively apply permanent employment benefits on recently-converted casuals is welcome, Addison added, but COSBOA is hoping to see further detail on the proposal soon.

More concerning is the proposed tweak to the statutory definition of casual work.

“Until we see the detail, until we see the proposed definition, we are very uncomfortable with the journey that we’re on,” Addison said.