How Do I Draft a Casual Employment Agreement?

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Table of Contents

• What is Casual Employment?
• Casual Conversion 
• Key Terms To Include In A Casual Employment Agreement
• Key Takeaways

As a business owner, you may be concerned with ensuring that your casual employees are provided with their minimum entitlements so as to avoid any disputes. As such, it is important to have a comprehensive casual employment agreement in place that clarifies key terms such as confidentiality, intellectual property, pay rates, and notice of termination. A casual employment agreement may help you respond to underpayment claims where a casual employee claims they are, in fact, permanent and entitled to permanent entitlements, such as paid annual leave and sick leave. This article provides a summary of: 

• what casual employment is, and 
• key terms to include in a casual employment agreement.

What is Casual Employment?

A casual employee is an individual who accepts a job knowing there is no firm advance commitment that the work will continue indefinitely at an agreed pattern. They are, therefore, employed with no firm advance commitment to ongoing work with an agreed pattern of work. Factors to consider when determining whether there is an expectation of advance commitment include whether: 

• you can offer the employee work and whether the employee can accept or reject the work; 
• you will offer work when the business needs employees;
• the employment is described as casual; and 
• you pay the employee casual loading. 

Regular and Systematic Casual Employees 

A casual employee may be considered a regular and systematic casual if:

• they have a reasonable expectation of ongoing employment; and 
• their employment occurs on a regular and systematic basis. 

Whether or not an employee is a regular or systematic casual will depend on the individual circumstances. A regular and systematic casual employee may have access to the entitlements of a permanent employee. 

It is important to ensure that you ensure that your casual employees are not, in actuality, employed on a regular and systematic basis, as this could lead to a costly dispute about their entitlements. 

Casual Conversion 

You must also be aware that casual employees have an entitlement to casual conversion under the National Employment Standards, where you may be required to offer your casual employees permanent employment. This applies if your employee has: 

• been employed by your business for at least 12 months; and 
• worked a regular pattern of hours on an ongoing basis during the last six months, which they could continue to work without significant adjustment as a full-time or part-time employee. 

An eligible employee needs to be offered casual conversion within 21 days from their 12-month anniversary. Importantly, you do not have to offer casual employees casual conversion if: 

• there are reasonable business grounds not to offer casual conversion; or 
• the employee has not worked a regular pattern of hours in the last 6 months. 

Key Terms To Include In A Casual Employment Agreement

Type of Employee 

The casual employment agreement must clearly state that the employee is being employed on a casual basis, with no firm advance commitment that the work will continue indefinitely at an agreed pattern. It is important to make this clear to minimise the chance of a dispute arising about the true nature of the employment. 

Termination

The termination clause should provide a short notice period, such as one hour’s notice, so the employer can terminate during a shift by putting the employee on notice that the shift will end in one hour.

Casual Loading

To compensate your employee for not receiving permanent entitlements such as paid annual leave and personal leave, casual employees receive a 25% casual loading. Casual loading means they receive 25% more than a permanent employee at their level. Therefore, it is crucial to separately identify the 25% casual loading from the permanent pay rate in the employment agreement.

Suppose you classify an employee as a casual, but they later successfully argue that they are a permanent employee and bring a claim for payment of permanent entitlements. In that case, you can offset the casual loading against any amounts owing.

This offset is because if you have paid a casual employee casual loading, they should not be able to claim an extra entitlement to leave if they become a permanent employee. This ‘double-dipping’ requirement can significantly reduce your liability. It can also be useful to expressly confirm in the agreement that you will pay 25% instead of permanent entitlements.

Intellectual Property

Casual employees may create valuable intellectual property (IP) for the business. Therefore, it is important to assign the IP from the employee to the business. IP may include: 

• marketing collateral for a marketing employee;
• code for a software engineering student; or 
• client information for an administrative assistant. 

The IP clause should:

• clearly define IP;
• assign all IP to the business;
• create an obligation on the employee to do anything necessary to secure ownership of the IP; and
• waive moral rights to any IP.

Confidentiality

Casual employees may be privy to information of commercial value to the business. Therefore, employees are required to maintain confidentiality throughout their employment. A confidentiality clause helps conceptualise what information must be confidential. For example, confidential information can include:

• client lists;
• marketing plans;
• inventions; and 
• business plans.

The confidential information clause should:

• clearly define confidential information and acknowledge its commercial value;
• oblige the employee not to disclose confidential information unless it is for the business’ benefit; and
• create an indemnity.

Rate of Pay

Modern awards generally cover casual employees because they are often more junior employees. If an industry or occupational award does not cover your employee, they may be covered by the Miscellaneous Award 2020. This award excludes senior employees but covers most junior employees who are not covered by other awards.

In your employment contract, you should include a rate of pay clause specifying: 

• whether an award covers the employee, and
• which award and corresponding rates of pay apply.

You must confirm the correct rate of pay for your employees, specifically for junior casual employees who are often underpaid. 

Key Takeaways

It is important to have a casual employment agreement to set out the terms of employment and defend a claim where an employee argues that their employment was, in fact, permanent. You should cover some key terms regardless of the nature of the employment, such as confidentiality, pay rate, and intellectual property. Others are specific to casual employment, such as casual loading. 

If you need help drafting an employment contract tailored to your business, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on1800 532 904 or visit our membership page.