ALERT: Introduction of Casual Conversion Clause In Modern Awards

By 4 October 2018Business, Podcast

Employers need to look ahead when it comes to casual workers converting to permanent full or part time employment following the Fair Work Commission’s decision to incorporate casual conversion clauses into 84 modern awards which currently to not have such a provision.  This change will affect employers in a broad range of industries including those working in retail and hospitality.

In this podcast, Brontë Shaddock, a lawyer from our business and employment team dicusses the decision of FWC to incorporate casual conversion clause in modern awards and its effect on employers in a broad range of industries across Australia.

What is casual conversion?

Casual conversion provides casual workers with the option to request that their employment be converted to full-time or part-time employment after completing a certain period of tenure and subject to restrictions.

As casual conversion rights have been absent from many businesses and industries for some time, the concept of casual conversion may be foreign to some employers.  In fact of the 122 modern awards only 28 currently contain a casual conversion clause.  From 1 October 2018, however, casual conversion rights and obligations will affect the majority of employers across Australia.

Background – Why the change?

The FWC’s decision to introduce casual conversion clauses comes after a number of employer and union bodies petitioned the FWC to introduce a casual conversion clause into all modern awards as part of the FWC’s 4 yearly review of modern awards in 2017.  The full bench of the FWC ultimately held that the inclusion of casual conversion clauses in modern awards is necessary in order to meet the awards objectives. Specifically, the FWC accepted the proposition, put forward by the Australian Council of Trade Unions, that unrestricted use of casual employment without the safeguard of a casual conversion clause may operate to undermine the fairness and relevance of the safety net of modern awards and national employment standards.

There is no constraint on the employer choosing to engage as casuals persons who equally might readily be engaged as permanent full-time or part-time employees under the terms of the modern award. The lack of any such constraint creates the potential to render the NES irrelevant to a significant proportion of the workforce,” the Commission stated.

While the FWC noted higher casual rates are designed to compensate employees for entitlements such as annual leave and personal leave, they fail to account for the negative impacts long-term casual employment can have on workers.  These include workers continuing to work while sick due to concerns that absences will affect future employment, poorer health and safety outcomes and a limited career path.

Although the FWC found the majority of employers did not exploit their ability to engage casual staff where the NES entitlements did not apply, some employers did appear to employ individuals as casual workers indefinitely despite the employees seeking, or at the very least being interested in, a permanent position.

What rights and/or obligations does the model clause create?

After significant public consultation, the FWC released the finalised model conversion clause in August this year.   The model clause will be incorporated into modern awards from 1 October 2018.

Under the model conversion clause a regular casual employee, who over a calendar period of 12 months has worked a pattern of hours on an ongoing basis which the employee could perform as a full-time or part-time employee has the right to submit a written request to their employer to convert to full-time or part-time employment.

Under the model conversion clause, employers are required to notify employees of their right to request a conversion, within 12 months of their initial engagement.

Can employers refuse an employee’s request for conversion?

Yes, an employer may refuse a casual employee’s written request to convert to permanent employment after consulting with the employee and provided the refusal is on reasonable grounds.  Reasonable grounds may include:

  1. the conversion would require significant adjustment to the casual employee’s hours of work to accommodate them in full-time or part-time employment under the applicable modern award;
  2. it is known or reasonably foreseeable that the casual employee’s position will cease to exist within the next 12 months;
  3. it is known or reasonably foreseeable that the employee’s hours of work will be significantly reduced within 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.

The model clause requires employers to consult with employee’s regarding its decision to refuse a request for conversion.  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 an employee does not agree with an employer’s refusal they may have recourse to the dispute resolution provisions of the applicable modern award and to the adverse action provisions of the FW Act.

How will these changes impact employers?

Recent case law indicates that courts will enforce casual conversion clauses and that employers who fail to comply with their obligations may be liable for significant penalties.  Employers will therefore need to review the model conversion clause and applicable modern award to ensure compliance.

Another issue for employer’s to keep in mind is that employee’s service as a casual may count in respect of certain service based entitlements, such as redundancy pay.  A Full Bench decision considered this issue a number of years ago, with the bench holding that a permanent employee’s initial service as a casual employee did count towards the calculation of their redundancy payment.

What do employers need to do next?

Employers that engage casual workers covered by a modern award should:

  1. on and from 1 October 2018 review the applicable modern award or enterprise agreement to determine their obligations;
  2. review, develop and/or amend systems to identify casuals engaged on a regular or systematic basis and to monitor their period of engagement;
  3. ensure casual employees are given a copy of the conversion clause within the first 12 months of their first engagement. For casual employees already employed as at 1 October 2018, employers must provide them with a copy of the conversion clause by 1 January 2019; and
  4. consider and respond to any request by a casual employee to convert to permanent full time or part time employment; and
  5. in the event of a refusal, provide the employer must provide the employee with its reasons for the refusal in writing and within 21 days of the request being made.

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