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Fair Work Commission decides that all modern awards should contain casual conversion clauses

On 5 July 2017, the Full Bench of the Fair Work Commission, handed down a significant decision for both casual employees and employers alike.  Whilst there are a number of aspects to the decision, significantly, the Full Bench determined that all modern awards should contain casual conversion clauses.

Casual conversion clauses essentially provide casual employees the ability to elect to convert to full-time or part-time employment, depending on their regular hours, albeit subject to certain restrictions.  Employers should note that as part of these clauses, the employer is required to notify the employee of their right to make the election.  Whilst a number of modern awards already contain casual conversion clauses, this decision signifies the intention that all modern awards should contain these clauses.

The Full Bench, in justifying its decision, commented in the decision summary:

“We accept the proposition advanced by the ACTU that the 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.”

The Full Bench emphasised the need for fairness in terms of offering a long term regular and systematic casual employee the opportunity to convert to permanent employment, stating:

“If the casual employment turns out to be long-term in nature, and to be of sufficient regularity that it may be accommodated as permanent full-time or part-time employment under the relevant modern award, then we consider it to be fair and necessary for the employee to have access to a mechanism by which the casual employment may be converted to an appropriate form of permanent employment.”

The Full Bench noted the operation of the 25% casual loading, and that it ‘notionally compensates’ for those benefits obtained through permanent employment, however it found that it does not take into account other detriments faced by long term casual employees, including:

  • Having to attend for work while sick;
  • Concerns whether absences will affect future employment;
  • Changes in hours without notice;
  • Sudden loss of work without notice.

Watch this space

Whilst the Full Bench have expressed that these clauses should be included in all modern awards, it has invited submissions in relation to the model clause that it proposes.  The model clause will permit employers to refuse an election to convert to permanent employment, but the grounds for such a refusal will be limited.

When implemented, we will be recommending to our clients, particular approaches to discussions on offers about, and contract terms for, casual employees and conversion to permanent employment.

Aitken Legal