Small business owners who employ casual staff are set to be impacted by new provisions that will allow some casual employees to convert to full-time or part-time work after 12 months of employment.

On 1 October 2018 a new standard conversion clause will be incorporated into 85 awards, giving some casual workers the right to request full-time or part-time employment if they have worked certain, regular hours over a 12-month period, if your business is giving out awards then you should think about getting a Corporate Plaque Awards.

The clause could have a major impact on the way small business owners employ, manage and roster casual staff.

What is casual conversion?

Casual conversion is where casual employees are given the right, subject to certain prerequisites, to request a full time or part time position after a certain period of tenure.

Not all employers will be familiar with the concept of casual conversion, as in many businesses and industries casual conversion rights and obligations have not existed for some time. From 1 October 2018, however, casual conversion rights and obligations will affect the majority of employers across Australia.

Casual conversion – the history

Casual conversion is one of the primary means through which unions in Australia have historically sought to limit casual work. As a result, casual conversion obligations have existed on an “on-again, off-again” basis within Australia’s industrial history.

Following test cases run by the union movement from the late 1990s, casual conversion became a standard term of industrial awards. Under the Work Choices regime from 2006, casual conversion terms were unable to be included in Federal awards. When Work Choices was repealed by the Fair Work Act in 2009, casual conversion clauses were initially only included in Modern Awards for industries where casual conversion had become standard.

As a part of the four yearly Modern Award review in 2017, the Fair Work Commission determined that all Modern Awards should include a casual conversion term. Since then there has been much public consultation as to the form of the model term to be included in Modern Awards.

On 9 August 2018, the finalised form of the model term was determined, as was the fact that from 1 October 2018 a model conversion term will be included in Modern Awards.

Casual conversion – the model term

From 1 October 2018, 84 Modern Awards will have the following model conversion term included:

XX Right to request casual conversion

  1. A person engaged by a particular employer as a regular casual employee may request that their employment be converted to full-time or part-time employment.
  2. A regular casual employee is a casual employee who has in the preceding period of 12 months worked a pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to perform as a full-time employee or part-time employee under the provisions of this award.
  3. A regular casual employee who has worked equivalent full-time hours over the preceding period of 12 months’ casual employment may request to have their employment converted to full-time employment.
  4. A regular casual employee who has worked less than equivalent full-time hours over the preceding period of 12 months’ casual employment may request to have their employment converted to part-time employment consistent with the pattern of hours previously worked.
  5. Any request under this subclause must be in writing and provided to the employer.
  6. Where a regular casual employee seeks to convert to full-time or part-time employment, the employer may agree to or refuse the request, but the request may only be refused on reasonable grounds and after there has been consultation with the employee.
  7. Reasonable grounds for refusal include that:
    1. it would require a significant adjustment to the casual employee’s hours of work in order for the employee to be engaged as a full-time or part time employee in accordance with the provisions of this award – that is, the casual employee is not truly a regular casual employee as defined in paragraph (b);
    2. it is known or reasonably foreseeable that the regular casual employee’s position will cease to exist within the next 12 months;
    3. it is known or reasonably foreseeable that the hours of work which the regular casual employee is required to perform will be significantly reduced in the next 12 months; or
    4. it is known or reasonably foreseeable that there will be a significant change in the days and/or times at which the employee’s hours of work are required to be performed in the next 12 months which cannot be accommodated within the days and/or hours during which the employee is available to work.
  1. For any ground of refusal to be reasonable, it must be based on facts which are known or reasonably foreseeable.
  2. Where the employer refuses a regular casual employee’s request to convert, the employer must provide the casual employee with the employer’s reasons for refusal in writing within 21 days of the request being made. If the employee does not accept the employer’s refusal, this will constitute a dispute that will be dealt with under the dispute resolution procedure in clause X. Under that procedure, the employee or the employer may refer the matter to the Fair Work Commission if the dispute cannot be resolved at the workplace level.
  3. Where it is agreed that a casual employee will have their employment converted to full-time or part-time employment as provided for in this clause, the employer and employee must discuss and record in writing:
    1. the form of employment to which the employee will convert – that is, full-time or part-time employment; and
    2. if it is agreed that the employee will become a part-time employee, the matters referred to in clause X.
  1. The conversion will take effect from the start of the next pay cycle following such agreement being reached unless otherwise agreed.
  2. Once a casual employee has converted to full-time or part-time employment, the employee may only revert to casual employment with the written agreement of the employer.
  3. A casual employee must not be engaged and re-engaged (which includes a refusal to re-engage), or have their hours reduced or varied, in order to avoid any right or obligation under this clause.
  4. Nothing in this clause obliges a regular casual employee to convert to full-time or part-time employment, nor permits an employer to require a regular casual employee to so convert.
  5. Nothing in this clause requires an employer to increase the hours of a regular casual employee seeking conversion to full-time or part-time employment.
  6. An employer must provide a casual employee whether a regular casual employee or not, with a copy of the provisions of this clause within the first 12 months of the employee’s first engagement to perform work. In respect of casual employees already employed as at 1 October 2018, an employer must provide such employees with a copy of the provisions of this subclause by 1 January 2019.
  7. A casual employee’s right to request to convert is not affected if the employer fails to comply with the notice requirements in clause XX(p).

It should be noted that:

  • Fourteen other Modern Awards will, from 1 October 2018, contain a modified version of paragraph (j) of the model term.
  • The 28 Modern Awards which, prior to 1 October 2018, contained a casual conversion term will not at this time be affected by the introduction of the new, model term2. The casual conversion terms which have to date existed within those 28 Modern Awards will remain the same for now.
  • Ongoing consultation is occurring on proposed casual conversion clauses for the meat processing and stevedoring industries, both of which have arrangements for employees that fall between casual and part-time work, and therefore the model term as set out above does not currently apply to those industries.

The upshot of the obligations of casual conversion

Whilst the term itself provides the full context of the obligations, here is a summary of the leading points:

  • The term does not have the result of obliging employers to offer permanent employment to eligible casual employees; rather it has the result of entitling eligible employees to request conversion to permanent employment.
  • To request casual conversion:
    • the employee must have worked for the employer for a period of 12 months or more; and
    • the employee must, over the preceding 12 month period, have worked a pattern of hours on an ongoing basis, which they could continue to perform as a full time or part time employee, without significant adjustment.
  • Employees engaged for short periods and/or who work irregular shifts or hours will not meet the criteria to convert.
  • Due to the wording of the model term which includes the words “in the preceding period of 12 months worked…”, the right to request conversion does not arise as a “one off” event, but is a continually exercisable right while an employee has worked the relevant pattern of hours.
  • Eligible employees seeking to convert are required to make a request to the employer in writing.
  • Employers can reject a request, provided that there has been consultation with the employee and there are reasonable grounds based on facts which are known or reasonably foreseeable (for instance, where the casual employee’s position could cease or the hours could significantly change).
  • A refusal must be put in writing with the reasons set out clearly.
  • If the employee seeks to challenge the employer’s refusal, then this will be resolved through the dispute resolution provision of the Award.
  • If a request is granted, it:
    • must be discussed and recorded in writing; and
    • will begin at the commencement of the next pay cycle.

How will the change affect your business?

It is important for employers to remember that, speaking generally, most casual employees want the 25% higher pay and therefore, they want to be employed as casuals. In those circumstances, they won’t request conversion, and the actual impact is probably not going to be as significant as the Australian Council of Trade Unions and/or the media would have us believe. If they need help communicating to their employees, then they may want to consider some classes in executive speaking training.

It will, however, be important for businesses to ensure compliance with the obligations where required as the recent cases indicate that the upshot of non-compliance can be significant. To that end, in November 2017 the Federal Court of Australia, although determining the casual conversion obligations of an employer arising under an enterprise agreement rather than a Modern Award, delivered a clear message to employers that it will enforce casual conversion clauses and that employers who fail to comply with their obligations may be liable for significant penalties. Some other recent case law indicates that employers could have exposure to casual employee claims for permanent entitlements such as annual and personal leave, notice of termination payments etc.

How do the casual conversion clauses affect labour hire?

The casual conversion clause in Modern Awards is intended to apply to employers in the labour hire sector in the same way as it applies to any other employer.

What employers should do

Employers who have casual employees should:

  • on 1 October 2018 check the applicable Modern Award or enterprise agreement to determine their obligations, familiarise themselves with them and ensure compliance.
  • give all casual employees a copy of the conversion clause:
    • within the first 12 months of their first engagement; or
    • by 1 January 2019 for casual employees already employed as at 1 October 2018
  • Keep a close eye on how the additional entitlements available to part-time and full-time staff could affect your business. This can be both financial, as well as the additional obligations you need to meet as an employer.
  • Performance manage under-performing staff asap. If your casual staff are going to have the right to request part-time or full-time work, then you want to make sure they’re the kind of staff you want to keep in your business long-term.
  • Get Advice. Managing staff, entitlements and potential conversion of casual staff to part-time of full-time employees is a complex process. Don’t do it alone — get professional advice to protect your business.

You can find more information regarding employment types and Modern Awards on the Fair Work website or their infoline on 13 13 94.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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