The Fair Work Commission (FWC), in a landmark ruling arising from its quadrennial review into all modern awards, has held that casuals who work regular hours are entitled to request a conversion to permanent status after twelve months of service. An employer may only deny an employee’s request on reasonable grounds.

Background

The FWC began by considering the historical development of casual employment in Australia. It noted that, “it is difficult to assign any consistent legal or practical criteria to the concept of casual employment.” A casual employee may be legitimately engaged under a succession of fixed-term contracts, or under a single ongoing contract that is terminable without notice. Similarly, casual employment may be utilised for short-term, intermittent and irregular work, or as an alternative legal arrangement for long-term work with regular, rostered hours.

Competing claims

Bearing that in mind, the Commission considered the merits of the Australian Council of Trade Union’s (ACTU) claim for a clause allowing for conversion to permanent status for so-called “permanent casuals” to be inserted into every modern award that doesn’t already include one. The ACTU also applied for a variation to the small number of modern awards already containing a casual conversion clause, such that employees would be “deemed” a permanent employee after six months of service unless they opted out.

Employer groups including the Ai Group and the Australian Council of Commerce and Industry (ACCI) opposed the ACTU’s claim. They further claimed that the burden placed on employers to notify employees of their rights to request conversion was disproportionately onerous to the benefits it produced, and should be removed from modern awards containing a casual conversion clause.

Consideration

The FWC had to determine whether the proposed casual conversion clause was necessary to achieve the modern awards objective: to ensure that “modern awards, as well as the National Employment Standards (NES), provide a fair and relevant minimum safety net”.

In doing so, the FWC accepted the general thrust of the ACTU’s case, drawing a number of conclusions favourable to the Union peak body. These included:

  • Casual employees, who are disproportionately young, female and award-reliant, generally suffer a range of detriments unique to casual work;
  • Casuals often lack “any real prospects of career progression” because employers are less likely to offer training and development opportunities to casuals, and because many employers prefer a workforce with high rates of casuals. While this may not be a problem for many casuals, such as students seeking an income while studying for a career in an unrelated field, many workers during their prime working years accepted casual employment as it was the only work on offer, only to become “locked into” it over time;
  • Many casual employees suffer worse health outcomes as an incidence of their casual employment. This was in large part due to the stress of “insecure work” as well as the greater tendency of casual employees to work while sick, because of their inability to access personal leave under the NES. Furthermore, many casuals are put at greater risk of workplace injury due to a general lack of information about workplace rights, exclusion from consultation processes and lower levels of instruction and training;
  • Many long term casuals experienced difficulty securing housing finance and other loans; and
  • While the casual loading “notionally” compensates for the loss of NES entitlements, it does not take into account these other unique detriments.

For these reasons the FWC accepted there exist a “not negligible” number of casuals, importantly across all industry sectors, who have worked for their employers for a long period of time, have a regular working pattern, and who are dissatisfied with their casual status. The FWC held that denying these workers any mechanism to transition to full or part time employment, as the case may be, would “undermine the fairness and relevance of the safety net”.

Crafting the clause

In crafting its model clause the FWC did pay due regard to the concerns of employer groups. The FWC accepted there were a number of industries where the ACTU’s proposal of a six month qualifying period would result in seasonal workers or workers used to meet a temporary surge in demand being granted the opportunity to request conversion. The FWC adopted a twelve month qualifying period.

While the FWC accepted it was necessary that casual employees be informed of their rights under the clause, it did consider employer groups’ submissions that notification of employees was a burdensome process. Ultimately, the FWC held that the only onerous aspect of employee notification was determining which employees may be eligible for conversion. The FWC therefore adopted a term requiring employers to notify any casual of the existence of the clause within the first 12 months of their engagement.

The FWC also accepted employer groups’ submissions that there were reasonable grounds upon which an employer may not wish to convert a casual to permanent status. In doing so, the FWC adopted a term that allows employers to refuse an employee’s request on reasonable grounds. A refusal must come after consultation with the employee and must be based on facts known or reasonably foreseeable to the employer at the time. The employer must communicate its reasons for refusal in writing. Where these are not accepted, the employee is to have resort to the award’s dispute resolution procedure.

The FWC dismissed the ACTU’s second claim, that casual employees already covered by a casual conversion clause in an award should be deemed a permanent employee after six months. It held it was not necessary or appropriate to burden casual employees who preferred this status with opting out in order to convert causals desiring permanent status. The FWC also dismissed the employer groups’ claim to abolish the notification requirement in these awards. It did however invite submissions on whether the clauses in these awards should be harmonised with the new model clause.

What does this mean for employers?

The majority of employers who employ casual staff under an award will soon be covered by the model clause. Once effective, employers affected must provide a copy of the clause to each of their casual employees within the first twelve months of their engagement. If an employee makes a written request for conversion then the employer must consult with them and, if refusing the request on reasonable grounds, provide the employee with written reasons for their decision within 21 days of the request being made. The ability of some workers to refer the matter to the FWC under the dispute resolution clause in the applicable award means there will soon be a body of law surrounding what constitutes reasonable grounds of refusal.