NEW RULES FOR SMALL BUSINESSES EFFECTIVE FROM 26 AUGUST 2025

A number of changes pertaining to small businesses, stemming from the passage of the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 and the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024, will take effect from 26 August 2025.

If you’re a small business employer here’s what you need to know about your new obligations with respect to casual conversion and the right to disconnect.

‘Employee choice’ pathway for casual conversion

Previously, small businesses (defined as those businesses engaging fewer than 15 employees) were not required to proactively offer permanent employment to eligible casual employees.

From 26 August 2025, eligible casuals in a small business can notify their employer in writing of their intention to convert to full-time or part-time employment.

What is a ‘casual employee’?

A casual employee is defined under the Fair Work Act 2009 (Cth) as an employee:

• with no firm advance commitment to ongoing work (taking into account the real substance and true nature of the employment relationship); and
• who is entitled to a casual loading or specific pay rate under an award, registered agreement, or employment contract.

Factors which may be given weight when considering the ‘real substance and true nature of the employment relationship’ includes (but is not limited to):

• The likelihood that work of the same type will continue to be available;
• Whether permanent employees are already performing that work; and
• Whether the employee has a regular pattern of hours, even if this changes occasionally due to leave or illness.

Who is eligible to use the ‘employee choice’ pathway for conversion?

A casual employee will be eligible to make a notification for conversion if the employee:

• has been employed for at least 12 months, and
• believes they no longer meet the definition of a ‘casual employee’.

How should employers respond to a notification for conversion?

Once a notification is received, the small business employer must consult with the casual employee regarding the notification.

Afterward, the employer must respond to the employee in writing within 21 days, either accepting or not accepting the notification.

If the employer refuses to accept the notification for casual conversion, the response must clearly detail the reasons for this decision. Such reasons may include:

• the employee still meets the definition of ‘casual employee’;
• there are genuine business grounds for not accepting the notification (e.g., there would be significant impact on business operations); and/or
• accepting the change would mean the employer won’t comply with recruitment or selection processes required by law.

Right to disconnect

This is a new workplace right that enables employees to refuse to engage with their employer or third-party communications outside of their designated working hours without fear of adverse consequences, unless their refusal is unreasonable.

What is considered ‘reasonable refusal’?

When determining whether an employee’s refusal to respond to out-of-hours contact is reasonable, there are a number of factors to consider, including (but not limited to):

• The reason for the contact;
• How the contact is made and how disruptive it may be to the employee;
• Whether the employee is compensated for being available for out-of-hours contact/working additional time;
• The purpose of the communication; and
• The specific responsibilities associated with the employee’s role.

What if there is a dispute?

If there is a dispute about the right to disconnect, employees and employers must firstly try to resolve this at the workplace level.

If the dispute cannot be resolved, both employees and employers can ask the Fair Work Commission to deal with the dispute. The Fair Work Commission may make orders, such as requiring an employee to respond to contact, or requiring an employer not to make contact, outside of normal working hours.

Considerations for small businesses

‘Employee choice’ pathway

Small business employers should:

• Review their casual workforce and note employees who may soon qualify to request conversion;
• Ensure payroll and rostering systems can track and report on work patterns;
• Train managers on the new request process and what constitutes ‘reasonable business grounds’ for refusal; and
• If required, update contracts, workplace policies, and procedures to reflect the changes.

Right to disconnect

Small business employers should:

• Determine how often and why the business would contact employees out-of-hours;
• Identify if there are positions (e.g. Store Managers) where out-of-hours contact is more likely to occur and consider if additional compensation is required;
• Train managers on the new limitations for contacting employees out-of-hours; and
  If required, update contracts, review workplace policies, and procedures to reflect the changes.
  
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