Australia: Fair Work Commission Rules on Casual Terms in Modern Awards

A Full Bench of the Fair Work Commission, Australia’s national workplace relations tribunal, has been tasked with conducting a review of casual terms in Modern Awards to ensure they are consistent with major industrial relations legislation introduced by the Australian Federal Government earlier this year. As part of its review, the Full Bench is to consider, amongst other things, whether existing “engaged as a casual” and “paid by the hour” type definitions in Modern Awards are consistent with the new statutory definition for casual employees.

Under Australian law, many employees are covered by Modern Awards. Modern Awards are instruments made by the Fair Work Commission (“FWC”) under the national workplace relations legislation, the Fair Work Act 2009 (Cth) (“FW Act”), which set out minimum terms and conditions of employment for employees covered by those Awards. The Award provisions are generally in addition to the National Employment Standards (“NES”), the NES being the 10 minimum standards of employment, which apply to all employees covered by the national workplace relations system and provided for in the FW Act.

On 27 March 2021, workplace entitlements and obligations for casual employees provided in the FW Act were amended by the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (“Amending Act”).

The amendments included introducing a statutory definition of ‘casual employee’ in s 15A of the FW Act and casual conversion arrangements in Division 4A of Part 2-2 of the FW Act.

The newly inserted cl 48 of Schedule 1 to the FW Act requires the FWC to conduct a review and vary Modern Awards where necessary to remove inconsistencies, difficulties or uncertainties caused by the amendments to the FW Act (“Review”).

The Review is being conducted in 2 stages. In the first stage the Full Bench considered the nature and scope of the Review, and reviewed ‘relevant terms’ (this being a term that amongst other things defines or describes casual employment) in an initial group of 6 Modern Awards (“Stage 1 awards”). The Full Bench expressed its Stage 1 considerations and provisional views in its decision Casual terms award review 2021 [2021] FWCFB 4144 which it handed down on 16 July 2021.

New statutory definition of casual employee

Under s 15A(1) of the FW Act, a person is a casual employee if:

1. an offer of employment made by the employer to the person is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and
2. the person accepts the offer on that basis; and
3. the person is an employee as a result of that acceptance.

In determining whether there is no such firm advance commitment, as per s 15A(2), only the following can be considered:

1. whether the employer can elect to offer work and whether the person can elect to accept or reject work;
2. whether the person will work as required according to the needs of the employer;
3. whether the employment is described as casual employment; and
4. whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument.

In the Review, the Full Bench addressed its provisional views on whether various award definitions of casual employment across the Stage 1 awards were consistent with the new statutory definition of ‘casual employee’ in the FW Act, ruling:

1. “Engaged as a casual” and “paid by the hour” type casual definitions were inconsistent with s 15A, in the sense that an employee can be designated a casual under the award definition but not be a casual under the definition in the FW Act and vice versa.
2. While “residual category” (meaning an employee not covered by award definitions of full-time or part-time employment) and “employment day-to-day” type casual definitions may not be directly inconsistent with s 15A, definitions of this type could give rise to relevant difficulties or uncertainty because of differently-expressed casual definitions in s 15A and in the awards.

The Full Bench was of the provisional view that Modern Awards would operate consistently and effectively with the FW Act if award definitions of casual employment were replaced with a reference to the definition in s 15A of the FW Act. As far as practicable, the necessary variations replacing existing definitions in awards with the definition in s 15A or referring to s 15A will be operative from 27 September 2021.

The Full Bench then considered provisions in the Stage 1 awards regarding types of employment, and confirmed its view that:

1. Award terms requiring employees to be informed on engagement about the basis on which they are employed are not inconsistent with s 15A(1) and nor do such terms give rise to any uncertainty or difficulty.
2. Award provisions that do not distinguish full-time and part-time employment from casual employment by reference to full-time and part-time employment being ongoing employment are not, for that reason alone, conceptually inconsistent with the definition of casual employment in s 15A(1).
3. Fixed term or maximum term employment does not fall within the definition of s 15A of the FW Act.

Casual conversion

The Amending Act inserted a new Division 4A into the NES relating to offers and requests for casual conversion.

Relevantly, only 7 modern industry awards do not contain a casual conversion clause. Of the 114 Modern Awards with casual conversion clauses, 89 contain the FWC’s ‘model clause’ and 25 contain award-specific terms.

The ongoing effect of s 55(4) of the FW Act is to permit award terms that are ancillary, incidental or supplementary to the casual conversion NES, provided the effect of those terms is not detrimental to an employee in any respect when compared to the NES.

With respect to the industry-specific Retail, Pastoral, and Hospitality Awards, the Full Bench stated that the model award casual conversion clauses were less beneficial for employees than the NES casual conversion entitlements in some respects. Furthermore, removing the model clauses from the awards and replacing them with references to the NES provisions concerning casual employment would make the awards consistent and operate effectively with the FW Act.

However, the Manufacturing Award casual conversion clause (cl 11.5) was found to be more beneficial than the NES residual right to casual conversion to the extent that it allows a request for conversion to be made after only 6 months’ casual employment. Nonetheless, the Full Bench again proposed to entirely delete cl.11.5 (and 11.6) from the Manufacturing Award and replace them with a reference to the NES casual conversion entitlements.

Key Action Points for Human Resources and In-house Counsel 

• In the decision, the Full Bench stated that ‘draft determinations addressing the variations identified in this decision will be issued shortly’. Interested parties must provide any comments on the draft determination by 4PM (AEST) Friday, 30 July 2021.
• You may particularly wish to comment if seeking an earlier operative date for award variations that would align award definitions of casual employment with s 15A of the FW Act.
• Given the changed definition of casual employee in both the FW Act and the Award, you should examine the position of your current “casual” employees, to ensure that the classification as “casual” employees continues to be appropriate, and that you are complying with the changed award provisions, including but not restricted to the casual conversion provisions in the Act and the relevant Award.

Authors: Greg Robertson, Amelia Dowey and Afif Haque