“Casual employee” definition: The details, the flaws and the likely outcome

On December 9, 2020, the federal government introduced the long-awaited Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 into the House of Representatives.

The bill was introduced after what Minister for Industrial Relations Christian Porter described as “extensive consultation with employer and employee groups”, who spent more than 150 hours deliberating five key areas of industrial relations.

One of those key areas, and perhaps the most controversial, was the uncertainty about casual employment and how a casual worker was defined.

In order to remove this uncertainty, the bill introduces, for the first time, a statutory definition of the “casual employee”, which has become increasingly contentious following the recent decisions of WorkPac Pty Ltd v Skene [2018] FCAFC 131 and WorkPac Pty Ltd v Rossato [2020] FCAFC 84.

It does this by proposing a new subsection 15A(1) of the Fair Work Act 2009 (Cth), which would define a person as a casual employee if:

An offer of employment 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”;
The person accepts the offer on that basis; and
The person is an employee as a result of that acceptance.

The explanatory memorandum to the bill notes that the new definition reflects the common law principle that the essence of casual employment is the absence of a “firm advance commitment to continuing and indefinite work according to an agreed pattern of work”, as confirmed in Skene and Rossato.

However, a new subsection 15A(2) would also be inserted into the Fair Work Act. This subsection would provide that when determining whether or not an employer has made “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”, regard must be had only to the following considerations:

Whether the employer can elect to offer work and whether the person can elect to accept or reject work;
Whether the person will work only as required;
Whether the employment is described as casual employment; and
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.

The explanatory memorandum to the bill acknowledges that this exhaustive list narrows the factors a court can consider in assessing whether a person is a casual employee, and purportedly does so to provide “the greatest degree of certainty”.

However, there are two fundamental flaws with this proposed definition of casual employment.

The first is that the assessment of whether or not a person is a casual employee is made “at the time the offer is made”. This is reinforced by subsection 15A(4) which provides that the question of whether a person is a casual employee is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party.

This is problematic where, for example, the employment relationship begins with an expectation that it will be casual in nature but develops into something more permanent.

This very scenario was contemplated in the following illustrative example from the explanatory memorandum:

“Anika owns a hairdressing salon. Anika’s business is doing very well and her clientele list is rapidly growing.

“Anika hires Ollie, an experienced hair stylist, to help the business cope with increasing client bookings. Ollie’s offer of employment specifies that he will only be offered shifts as required to meet increasing business demand.

“The offer describes the position as casual, and provides that he will be paid as a level 5 Hair and Beauty Employee under the Hair and Beauty Industry Award 2010, and will receive the required 25 per cent loading for casuals.

“It is clear from Ollie’s offer of employment that he is free to refuse shifts. Ollie negotiated a higher rate of pay, but his acceptance of the offer otherwise incorporate these terms.

“When Ollie first starts working for Anika, his shift patterns are irregular and change significantly week to week.

“After several months, one of Anika’s part-time hair stylists quits and rather than advertising for a new employee Anika asks Ollie to cover those shifts, as he has demonstrated himself to be a skilled stylist and great addition to the team.

“Ollie agrees and thereafter works shifts from 10am to 3pm Thursday to Saturday each week.”

In this example, the explanatory memorandum provides that Ollie remains a casual employee, even if he is working regular and systematic hours each week.

This is because the assessment of the nature of the relationship is made only at the time the relationship was first formed. As a result, a person’s employment status cannot unintentionally change over time.

This is a significant failing in the proposed definition and one that could be easily exploited by employers.

While it may bring some level of certainty to the characterisation of an employment relationship, it completely ignores the reality that casual arrangements can naturally evolve into permanent arrangements and continue in this form for extended periods of time.

The second flaw with the proposed definition is the restriction of relevant considerations when assessing whether or not a firm advance commitment has been made.

Traditionally courts have preferred ‘substance over form’ in this area, in recognition that the parties themselves should not be able to deem the relationship to be something that it is not.

This new statutory definition would be an unfortunate shift to ‘form over substance’. That is, it would give primacy to the terms that are agreed between the parties at the outset of the employment rather than looking at how the relationship actually operates in practice.

This is again reinforced by subsection 15A(3) which provides that a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work.

In other words, an employee can regularly work full-time hours in practice but still be considered a casual employee if the terms of the employment contract assert as much.

Alarmingly, this could allow an employer to simply include each of the considerations outlined in subsection 15A(2) in the express terms of the contract, thereby deeming the worker to be a casual employee.

In fact, this is specifically contemplated by the explanatory memorandum, which provides:

“The elements of the absence of a firm advance commitment may be expressly specified in the terms of a written offer of employment. However, there is no requirement for the offer and acceptance to be in writing, and the definition is intended to apply to informal arrangements.”

Once again, this leaves the definition of casual employment open to exploitation by employers.

In conjunction with subsection 15A(4), it means that employers could construct a casual employment relationship on paper, only to then direct the employee to work regular full-time hours once the employment commences.

In this scenario, given the paramountcy afforded to the terms of the contract, the worker would still be considered a casual employee, even if all aspects of the employment are permanent in practice.

Each of these problems is then compounded by subsection 15A(5), which provides that a person would remain a casual employee under the new definition until their employment is converted to permanent employment (which comes with its own problems) or they accept an alternative offer of employment on a permanent basis, both of which are uniquely within the control of the employer.

Given these flaws, there will no doubt be resistance from employee groups and unions to this proposed definition and only time will tell as to whether the definition will survive in its current form.

If it does, it could have a lasting impact on casual employees and the rights of workers in Australia generally.