Each manager needs to decide if "business casual" is right for his or her company.
Source: Summit 1A, page 40, 1st edition, Pearson Longman Publication
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"Casual" here is an adjective that is becoming a noun in common use.
The common phrase is something like, "Dress is casual." Here "casual" is an adjective describing the type of clothing that is expected to be worn at some event. It's a predicate adjective, like, "The box is brown" -- "brown" is an adjective describing "box".
"Business casual" is just adding another modifier: not ordinary casual, but a little more formal, business casual.
I say that it's an adjective that is becoming a noun because more and more people say it without including a noun like "dress" for it to modify. For example someone might say, "We use business casual here."
But still, it's PRIMARILY an adjective, describing "dress" or "dress code" or "clothing" or similar words.