All Providers – Fair Work – Closing Loopholes: Right to Disconnect, Independent Contractor Changes and Casual Employment Changes Now in Effect

Casual Employment and Employee Choice Pathway

Definition of Casual Employee

The Fair Work Act has a new definition of ‘casual employee’. A person is defined as a casual employee if, when they start employment:

• there is no firm advance commitment to ongoing work, considering a number of factors (see below for details of these factors), and
• they are entitled to a casual loading or specific casual pay rate under an Award, registered agreement or employment contract.

The new definition for Casuals applies to casuals employed from 26 August 2024. Any casual employees who commenced before 26 August 2024 will remain casual under the previous definition.

Firm Advance Commitment

To determine firm advance commitment, it is assessed on:

• the real substance, practical reality and true nature of the employment relationship, and
• several other factors. These include whether:
  • the employer can offer or not offer work to the employee (and whether this is happening)
  • the employee can accept or reject work (and whether this is happening)
  • it’s reasonably likely there will be future work available of the kind the employee usually performs in the employer’s business, based on the nature of the business
  • there are full-time or part-time employees performing the same kind of work in the employer’s business as the work the employee usually performs
  • the employee has a regular pattern of work even if it changes over time due to, for example, reasonable absences because of illness, injury or other leave.

For this assessment, not all factors need to be satisfied and a single factor won’t determine whether a person can be considered a casual or not. There may also be other factors that apply.

The contract of employment, or the contract and any mutual understanding or expectations between the employer and employee that aren’t in the contract, can also be considered when assessing whether there is a firm advance commitment.

Previous Casual Employee Definition

Before 26 August 2024, a person was a casual employee if:

• they were offered a job
• the offer didn’t include a firm advance commitment that the work would continue indefinitely with an agreed pattern of work. Firm advancement included:
  • whether the employer could choose to offer the employee work and it would be the employee’s choice to work or not
  • whether the employee would be offered work when the business needed them to work
  • if the employment was described as casual
  • if the employee would be paid a casual loading (a higher pay rate for being a casual employee), or a specific pay rate for casual employees.
• they accepted the offer knowing that there was no firm advance commitment when they became an employee.

Employees who start as a casual will stay casual until their employment status changes either through:

• a conversion process or Fair Work Commission order, or
• accepting an alternative employment offer and starting work on that basis.

Casual Employment Information Statement (CEIS)

The Casual Employment Information Statement (CEIS) has been updated to meet the new requirements for casual employees. It includes:

• the definition of a casual employee
• how casual employment can be changed, including when an employee can notify their employer of their intention to change to permanent employment
• the reasons why an employer may not accept an employee’s notice
• the role of the Fair Work Commission to deal with disputes.

The version of the CEIS current at the time must be provided to new casual employees:

• before, or as soon as possible after they have started employment
• for small business employers (fewer than 15 employees) after 12 months of employment
• for other employers, after 6 and 12 months of employment, then after every 12 months of employment.

Sham Arrangements

If an employer is using sham arrangements to avoid paying certain entitlements to casual employees, new protections are now in place. It is illegal for an employer to:

• knowingly say something false to convince a current or former full-time or part-time employee to enter into a contract for casual employment to do the same work (or mostly the same work), or
• dismiss or threaten to dismiss an employee to engage them as a casual employee to do the same work (or mostly the same work).

The maximum penalties for businesses or individuals for each category of engaging in sham arrangements are:

• $93,900 for individuals
• $469,500 for businesses.

New Employee Choice Pathway

There is a new ‘Employee Choice Pathway’ under the National Employment Standards and requirements for employees requesting to change from casual employment to permanent full-time or part-time employment.

Under the new pathway, an eligible casual has the right to request casual conversion, if they want, if:

• after 6 months (12 months for those employed by a small business – 15 employees or less), and
• they believe they no longer meet the requirements of the casual employee definition.

The notice to request to change to permanent employment under the employee choice pathway must be in writing.

A casual employee can change to permanent employment (full-time or part-time) at any time if the employer and employee agree.

Transitional Arrangements

For casuals employed before 26 August 2024, the period of employment will be 6 months (or 12 months if employed by a small business) from 26 August 2024.

When assessing eligibility for the employee choice pathway, any employment before 26 August 2024 is not counted.

The employer’s offer for casual conversion continues to apply for 6 months (does not apply to small business).

The right for an employee to request casual conversion continues to apply for 6 months (12 months for those employed by a small business).

If eligible, a casual who was employed before 26 August 2024 can make a notification under the Employee Choice pathway after 6 months (from 26 February 2025), or after 12 months if employed by a small business (from 26 August 2025).

Contractor or Employee? New Definitions for Employment

To help determine whether a worker is an independent contractor or an employee, a new definition of employment has been added to the Fair Work Act. The new definition focusses on the relationship between the employer and employee, and the following must be considered:

• the real substance, practical reality and true nature of the working relationship
• all parts of the working relationship between the parties. This includes the terms of the contract and how the contract is performed in practice.

Depending on whether your organisation is a constitutionally covered business (most commonly a Pty Ltd business), or state referred business, will determine if these new rules apply. The new definition does not generally apply to state referred businesses. To check which definition applies to your organisation, visit State referred national system businesses.

The new definition does not affect the meaning of ‘employee’ and ‘employer’ in other existing laws defining employment. For example:

• tax
• superannuation
• workers compensation.

Contractors will typically provide services for another business or person instead of being employed by them. They do not receive employee entitlements. They will negotiate their own charges and fees as well as their working arrangements, and can work for more than one business or person at a time. If engaging with contractors, it’s important to know:

• how to confirm if someone is a contractor
• where to find information about entitlements and support.

For workers already engaged by constitutionally covered businesses:

• the start of relationship test applies before 26 August 2024
• the whole of relationship test applies from 26 August 2024.

Both tests involve considering the terms of the contract. The terms of the contract can be verbal, in writing or a mix of both.

Whether a worker is a contractor or an employee depends on a number of factors. These include:

• the amount of control the business has over how work is performed
• who holds financial responsibility and risk
• who supplies the tools and equipment
• the worker’s ability to delegate or subcontract work
• how hours of work are set
• any expectation of work continuing indefinitely.

These factors are used in different tests depending on:

• when the test is applied
• the type and location of the business who engages the worker.

The main difference between the tests is:

• the start of relationship test focuses on what the parties have agreed, for example as set out in a contract and any later variations to that contract.
• the whole of relationship test requires consideration of the practical reality of the relationship, including the terms of the contract and how the contract is performed in practice.

Unfair Contract Terms and Contractor Rights with the Fair Work Commission

A contractor can now make an Application to the Fair Work Commission if they believe that their contract contains an unfair contract term/s.

Conditions under which an Application to the Fair Work Commission can be submitted are if:

• there is a ‘constitutional connection’. That is, the contractor has a contract with a constitutional company (usually a Pty Ltd or Ltd Company)
• the contractor is earning under the High Income Threshold ($175,000, from 01 July 2024), and
• the services contract was entered into after 26 August 2024.

The Commission can cancel or change the contract terms if they determine they are harsh or unfair.

A Contractor earning above the High Income Threshold ($175,000) can still apply to the Federal Court or the Federal Circuit and Family Court of Australia to have their services contract reviewed if they believe the contract to be harsh or unfair.

Sham contracting arrangements came into effect on 27 February 2024 – you can read more about this in our previous update.

Right to Disconnect

The Right to Disconnect allows employees of non-small businesses to refuse to monitor, read, or respond to work-related communications outside their working hours, unless it is unreasonable to do so. This protection covers a wide range of contact methods, including phone calls, emails, texts, social media messages, and other communication platforms, whether the contact comes from an employer, a colleague, or even a third party such as clients or suppliers.

While these provisions aim to protect employee work-life balance, there are situations where refusing to respond may be considered unreasonable, such as urgent legal requirements or critical business matters.

If you are a non-small business employer (with 15 or more employees), these rules are already in effect, and it is crucial to understand and respect employees’ rights to disconnect after hours. If you are a small business employer, you have until 26 August 2025 to comply with the new regulations.

Here’s what it means for your business:

• Set clear expectations: You must not expect employees to be available outside their normal working hours unless it is reasonable for them to do so. Setting clear boundaries on this issue is essential to ensure compliance.
• Consider individual circumstances: Before assuming employees are available after hours, take into account their personal circumstances, such as family or caring responsibilities, and whether they are being paid extra for availability outside their regular hours, such as being on-call.
• Balance business needs with employee rights: While you may need to contact employees outside their ordinary hours occasionally, this should be limited to critical or urgent matters. Routine contact or expecting ongoing availability may lead to legal risks if challenged by employees.

If an employee is reasonably exercising their right to disconnect, the employer must not take adverse action against that employee.

Aged Care Award 2010 [MA000018]

For workers employed under the Aged Care Award 2010, the Right to Disconnect does not prevent an employer from contacting, or attempting to contact, an employee outside of their working hours to notify them of:

• an emergency roster change, or
• a recall to work

Nurses Award 2020 [MA000034]

For workers employed under Nurses Award 2020, the Right to Disconnect does not prevent an employer from requiring an employee to monitor, read or respond to contact, or attempted contact, from the employer outside of their working hours where:

• the employee is being paid an on-call allowance, and
• the contact is to notify them that they are required to attend or perform work or give other notice about the on call.

It also does not prevent an employer from contacting, or attempting to contact, an employee outside of their working hours to notify them of:

• an emergency roster change, or
• a recall to work

Social, Community, Home Care and Disability Services Industry Award 2010 [MA000100]

For workers employed under the Social, Community, Home Care and Disability Services Industry Award 2010, the Right to Disconnect does not prevent an employer from requiring an employee to monitor, read or respond to contact, or attempted contact, from the employer outside of their working hours where:

• the employee is being paid an on-call allowance, and
• the contact is to notify them that they are required to attend or perform work or give other notice about the on call.

It also does not prevent an employer from contacting, or attempting to contact, an employee outside of their working hours to notify them of:

• an emergency roster change, or
• a recall to work

Casual Employee Definition and Employee Choice Pathway

If you are intending to hire a new casual employee after 26 August 2024, check that the proposed arrangements meet the new definition of Casual Employee before engaging the person. It is important that you are hiring workers under the appropriate employment arrangements. Make sure that you provide the casual employee with a copy of the latest version of the Casual Employment Information Statement with their employment contract.

You must ensure that you are not engaging in Sham arrangements. We recommend using the Fair Work Ombudsman Templates and the Australian Government’s Business.gov.au Employment Contract Tool to help prepare an appropriate employment contract.

For the new Employee Choice Pathway, update your Human Resources Policy and Procedure to meet the requirements. This update includes NDIS, Aged Care (Home Care), and Child Safety (NSW and QLD) Human Resources Policy and Procedure templates to address the most recent changes.

Contractor or Employee? New Definitions for Employment

If you have existing contracting arrangements in place (on or before 26 August 2024), you should check if these arrangements are affected by the new definition of employment. To determine if a worker is a contractor or employee, use the Start of relationship test. The Start of relationship test determines if a worker is a contractor or an employee based on what the parties have agreed to.

If you are a constitutionally covered business, to engage workers after 26 August 2024 you should use the Whole of relationship test. The Whole of relationship test determines if a worker is a contractor or an employee by considering the real substance, practical reality and true nature of the relationship.

Some businesses continue to use the Start of relationship test to determine if a worker is a contractor or an employee from 26 August 2024. This test is used by:

• state referred national system businesses (state referred business)
• constitutionally covered businesses when determining if a worker is a contractor or an employee:
  • before 26 August 2024, or
  • if the worker opted out of the whole of relationship test. A worker who earns more than the contractor high income threshold ($175,000) can choose not to use the Whole of relationship test to define their relationship by giving written notice.

You can use the following links to access the tests:

• Start of relationship test
• Whole of relationship test

Check that you have correctly classified workers as either an employee or contractor.

If you think you have made a mistake, contact the worker to resolve the situation and engage them under the correct employment arrangements as soon as possible. You should also seek advice from a qualified accountant if you believe you have not met your superannuation or other tax obligations with respect to the worker.

Unfair Contract Terms and Contractor Rights with the Fair Work Commission

If your business engages with contractors, you must ensure that you are not engaging in Sham Contracting and have reasonable and fair conditions in service contracts. We recommend using the Australian Government’s Business.gov.au Prepare a Contract information to help draft an appropriate contract.

If you think you have made a mistake, contact the worker to resolve the situation and engage them under the correct employment arrangements as soon as possible. You should also seek advice from a qualified accountant if you believe you have not met your superannuation or other tax obligations with respect to the worker.

Right to Disconnect

Identify key business needs: Understand when and why after-hours contact is truly necessary. If certain roles require on-call availability, ensure this is outlined in employment contracts and appropriately compensated.

Discuss expectations: Employers and employees should have open discussions about out-of-hours contact and set clear, mutually agreed expectations. Find a balance that suits both the operational needs of the business and the employee’s role.

Review policies and procedures: Ensure internal policies reflect the Right to Disconnect provisions. This may involve updating current workplace policies or introducing new guidelines on after-hours communication. You can use the NEW Right to Disconnect Policy and Procedure templates included with this update to assist with this.

Consider specific factors: When evaluating whether an employee’s refusal to engage in after-hours work is unreasonable, consider the reason for the contact, how disruptive it is, the employee’s compensation, their role, and personal circumstances.

For instance, contact may be deemed unreasonable if it’s routine or non-urgent, while a legal requirement or an emergency situation could justify after-hours communication.

Plan ahead for small businesses: Small business employers should start preparing now by reviewing their workplace practices to ensure they comply by the 2025 deadline. Gradually transitioning to these standards can help avoid last-minute disruptions.

Proactively lead by example: Encourage managers to avoid sending emails or making calls after hours, unless there’s a pressing need. When after-hours contact is required, consider how to minimise disruption to the employee’s personal life. For example, if an urgent email is necessary, clarify that an immediate response is not expected unless the matter is critical. Utilising tools such as delayed email options and adjusting communication expectations based on the employee’s role can help establish a positive work-life balance culture in your business.

This update includes the following NDIS, Aged Care (Home Care), and Child Safety (NSW and QLD) policy and procedure templates. These have been updated to address the most recent changes:

• Human Resources Policy and Procedure – updated with the new definition of Casual employee and Employee Choice Pathway requirements (Casual Conversion)
• NEW Right to Disconnect Policy and Procedure – a new policy and procedure developed to meet the requirements of the Right to Disconnect and establish processes for managing out of normal work hours contact.

For providers who have previously purchased our DVA Community Nursing Pack, SSRC Pack, or NDIS Verification Pack, the relevant policies and procedures in these have also been updated, along with each Pack’s Legislative Register. The updated documents can be downloaded from your Dashboard when logged into the Provider Institute platform as a member.

All changes have been made in blue text so they can be easily identified.

In addition, the Do Checklist accompanying this update provides detailed implementation steps to help you implement and meet the requirements of the most recent changes.

New and updated policies, procedures, and supporting documents should be endorsed by your business’ governing body, who should also regularly review them, considering feedback from staff and consumers.