Legal Framework
Australia is a federation of States and Territories. The Constitution permits the Commonwealth Parliament (that is the Federal Parliament) to pass legislation, which relates to certain specified matters, whereas State Parliaments have the power to pass legislation in relation to any matter pertaining to that State. Should a clash between State legislation and Commonwealth legislation arise, a valid Commonwealth law will prevail to the extent of any inconsistencies. The Constitution provides for the Federal Parliament to make laws in relation to industrial disputes extending beyond the boundary of more than one State (the “conciliation and arbitration power”). This formed the basis of the split between State and Federal power for a century, with the Commonwealth legislating for the conciliation and arbitration of industrial disputes crossing State boundaries, and the States legislating for other intra-state areas of industrial relations. In the 1980s, the Federal Parliament began using the power given to it under the Constitution to make laws with respect to corporations to encroach on areas of law-making that were previously the domain of State Parliaments. In the 1990s, this trend extended to the area of employment law and saw the Federal Parliament use its power to make laws with respect to corporations and in relation to employers and employees, instead of relying on the conciliation and arbitration power. The High Court of Australia upheld this approach to industrial relations, and it continues to be used by the current “Fair Work” legislation.
Key sources of employment law in Australia include the following:
- The Constitution;
- Common law;
- Legislation, in particular, the Fair Work Act;
- Contracts of employment and contracts for services;
- Awards and enterprise agreements; and
- International labour
Key Institutions in Australian Employment Law
Key regulatory bodies and other institutions in Australian employment law include the following:
The Courts
The Constitution requires matters involving enforcement of Federal laws to be brought before the Federal Court of Australia and/or the Federal Circuit and Family Court of Australia, rather than an administrative tribunal, for example, the Fair Work Commission. The State courts, including the Supreme Court, District Court and Local Court, adjudicate employment matters arising from breach of contract, other common law rights or State legislation.
The Fair Work Commission
The Fair Work Commission is an independent national workplace relations tribunal. The Commission is responsible for providing for the national minimum wage; changes to, or creation of modern awards; hearing workplace related matters brought before it by an individual or organisation for conciliation or arbitration; and making decisions in relation to industrial action, transfer of business, unfair dismissal and enterprise bargaining.
The Fair Work Ombudsman
The FWO is an independent statutory agency, which is responsible for investigating suspected breaches of workplace rights; enforcing workplace laws before the courts; and providing an educative service to employees and employers concerning their rights and obligations in the workplace.
The Australian Human Rights Commission (“AHRC”)
The AHRC is an independent statutory organisation that has a variety of responsibilities concerning the operation of federal discrimination laws, including the resolution (by investigation and conciliation) of complaints in relation to breaches of human rights and discrimination under federal laws.
State and Territory Agencies
State and Territory agencies that hear matters relating to employment include, for example, the Civil and Administrative Tribunals in both New South Wales and Victoria. In New South Wales, complaints relating to breaches of anti-discrimination legislation are referred to the NSW Civil and Administrative Tribunal by the President of Anti-Discrimination NSW. The equivalent body in Victoria is the Victorian Civil and Administrative Tribunal, which as well as hearing civil and administrative matters also deals with matters relating to equal opportunity, racial and religious vilification and disability discrimination in its Human Rights Division.
Equivalent bodies in other States and Territories include:
- the Australian Capital Territory Civil and Administrative Tribunal
- the Queensland Civil and Administrative Tribunal
- the South Australian Civil and Administrative Tribunal
- the State Administrative Tribunal of Western Australia
- the Tasmanian Civil and Administrative Tribunal
- the Northern Territory Civil and Administrative Tribunal.
Trade Unions and Employer Associations
Historically, there have been a large number of trade unions in Australia. However, the number of unions has decreased over time. Between 1986 and 1996, the number of unions in Australia decreased by 194, with amalgamations being the main reason for the decline. Specifically, a policy of strategic unionism was adopted which saw the amalgamation of a large number of smaller unions into 20 “super unions”. Since 1992, trade union membership has declined. Between 1992 and 2022, the proportion of employees who were trade union members has fallen from 41.1% to 12.5% (from 45.5% to 11.4% for men and 35.9% to 13.6% for women).
Employer associations primarily act as lobbyists and provide members with advisory services. The major employer associations in Australia are the Australian Industry Group and the Australian Chamber of Commerce and Industry.
The Fair Work Act, Modern Awards and Enterprise Agreements
The Fair Work Act 2009 (Cth)
The Fair Work Act provides the primary statutory framework for employment law and industrial relations across Australia
The Fair Work Act applies to “national system employers” and “national system employees”.
A “national system employee” is an individual in so far as he or she is employed, or usually employed by a national system employer, except if on a vocational placement.
The Fair Work Act defines a “national system employer” to mean any of the following entities, so far as they employ, or usually employ an individual:
- constitutional corporations;
- the Commonwealth and Commonwealth authorities;
- employers of flight crew officers;
- maritime or waterside workers who are engaged in “constitutional trade or commerce”;
- bodies corporate;
- other persons who carry on commercial, government or other activities in the Territories; and
- other employers who are covered by the Fair Work Act as a result of State legislation, which refers powers over industrial matters to the Commonwealth. (All States and Territories have referred their powers to the Commonwealth in respect of their employees other than those set out in the paragraph below).
Employers that are not national system employers are not covered by the Fair Work Act and instead remain covered by the relevant State legislation. Employers that are not national system employers include:
- in Tasmania: State public sector employers;
- in New South Wales, Queensland and South Australia: State public sector employers and local government employers;
- in Western Australia: State public sector employers, local government employers and private non-constitutional
The Fair Work Act contains the following:
- the National Employment Standards;
- regulation of modern awards and enterprise agreements;
- a good faith bargaining obligation;
- provision for the setting of minimum wages;
- regulation of transfers of business;
- rights and responsibilities of employees, employers, and organisations (that is, general protections, protection against unfair dismissal, and regulation of industrial activity).
The last few years have seen various amendments to the Fair Work Act. These developments are outlined below.
New Developments
In 2023 and 2024, the federal government passed several amendments to various laws regulating employment in Australia, such as:
- amendments to the Fair Work Act 2009 regarding fixed term contracts, small business redundancy obligations, employee authorised deductions, protection of employees subject to domestic and family violence, workplace delegates’ rights, labour hire arrangements, superannuation contributions and wage theft; and
- amendments under the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Cth) regarding the positive duty to take measures against sexual harassment.
Following are some key amendments to note:
Fixed term contracts
From 6 December 2023, new rules regarding engaging employees on fixed term contracts came into force. Under the new section 333E of the Fair Work Act, employees cannot be engaged under fixed term contracts for longer than two years (with no more than two renewals), except in a range of exceptional circumstances listed under section 333F. Those exceptions include contracts for the completion of specialised tasks, training contracts, contracts to complete projects funded by government grants, and any circumstance permitted by a modern award.
The above fixed term contract limitations do not apply to certain specific categories of fixed term contracts entered into after 6 December 2023 and on or before 30 June 2024. From 1 July 2024 onwards, the limitations apply in full to these categories of fixed term contracts entered into on or after this date. These specific categories include organised sport, high performance sport, live performance, higher education and funding reliant positions.
Practices that involve artificial changes to the contracts to make them appear as different jobs will also fall foul of these provisions. These are civil penalty provisions, and a serious contravention (involving deliberate and systematic breach) can attract significant penalties.
If a fixed term contract does not meet the new limitations, the fixed term provisions of the contract will not apply and the contract will be taken to continue beyond the contract end date. Other terms and conditions of employment under the contract will still apply, including entitlements from any relevant legislation, award, agreement or employment contract. If there is a disagreement as to the terms of a fixed term contract, the Fair Work Commission has the power to deal with such disputes.
Positive duty regarding sexual harassment
Changes introduced by the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 came into effect from 12 December 2023.
Under section 47C of the Sex Discrimination Act 1984 (Cth), employers have a positive duty to take “reasonable and proportionate” measures to eliminate sexual harassment, harassment on the grounds of sex, hostile workplace environments and victimisation, as far as possible.
Under the Australian Human Rights Commission Act 1986 (Cth), the AHRC now has powers to:
- inquire into compliance of the positive duty;
- ensure compliance with the positive duty by issuing compliance notices, applying to courts for an order to direct compliance with such notices, or entering into enforceable undertakings with duty-holders;
- promote an understanding and acceptance, and public discussion, of the positive duty;
- undertake research and educational programs in relation to the positive duty; and
- commence court proceedings.
Changes to the test for casual employees
From 26 August 2024, a new test for determining whether an employee is a casual employee, will come into effect. The new test will be based on whether there is a work relationship characterised by no firm advance commitment to ongoing and indefinite work. In determining whether the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work, the new section 15A of the Fair Work Act will set out the following criteria:
- consideration of the “real substance, practical reality and true nature of the employment relationship”;
- consideration that a firm advance commitment may be in the form of a mutually agreed term in a contract of employment or a mutual understanding or expectation between an employer and employee;
- whether there is an inability of the employer to elect to offer work or an inability of the employee to elect to accept or reject work;
- whether it is reasonably likely that continuing work of the kind performed by the employee will be available in future; and
- if the employee engages in a regular pattern of work, noting that a pattern of work will be regular even if it is not absolutely uniform and includes some fluctuations and variations over time.
Employees can either seek to be converted to permanent employees or apply to the Fair Work Commission to change their employment status by applying the above criteria. The Commission will have additional powers to deal with disputes about casual employment. It will also be a civil remedy offence to misrepresent employment as casual.
Notably, the onus will now be on the casual employee to make a request to change their employment status (once certain thresholds are met, including that the employee has been employed for at least 6 months (or 12 months for small business employers)). This is a significant divergence from the former provisions, under which, employers were obligated to make a determination regarding offering permanent employment to an employee within 21 days after the employee completes working for the employer for a 12 month period.
Labour hire arrangements
From 15 December 2023, a new Part 2–7A under the Fair Work Act has come into effect. This Part empowers the Fair Work Commission to make “regulated labour hire arrangement orders”. The aim of this reform is to ensure that employers who supply their employees to perform work for a “regulated host” pay their employees the same rate of pay as employees of the host who perform work of the same kind. Regulated hosts must also provide sufficient payroll information to those employers to enable them to comply with their new payment obligations. Although this Part is now in effect, labour hire arrangement orders can only come into operation from 1 November 2024.
Labour hire employers, regulated hosts, unions as well as individual employees can apply to the Commission for labour hire arrangement orders.
The Commission cannot make a regulated labour hire arrangement order unless it is satisfied that the arrangement will be for supply of labour rather than for provision of a service. In considering this, the Commission must have regard to:
- the involvement of the employer in matters relating to the performance of the work;
- the extent to which, in practice, the employer directs, supervises or controls the regulated employees when they perform the work, including by managing rosters, assigning tasks or reviewing the quality of the work;
- the extent to which the regulated employees use or will use systems, plant or structures of the employer to perform the work;
- the extent to which the employer will be subject to industry or professional standards or responsibilities in relation to the regulated employees;
- the extent to which the work is of a specialist or expert nature.
The Commission also cannot make a regulated labour hire arrangement order unless it is “fair and reasonable” to do so, considering:
- pay arrangements that apply to the regulated employees as well as the employees of the regulated host;
- the current and historical coverage and application of the industrial instrument;
- the relationship between the regulated host and the employer, including whether they are related bodies corporate or engaged in a joint venture or common enterprise;
- the amount to which employees are entitled to be paid under the industrial instrument;
- the nature of the work required to be performed by the regulated employee—such as expertise, professional industry, and the extent to which the regulated host supervises the regulated employee and has control over their work on a daily basis; and
- any other matters the Commission considers relevant.
Superannuation contributions
The Superannuation Guarantee Charge Act 1992 (Cth) regulates mandatory contributions that employers must make to employees’ superannuation funds and the Australian Taxation Office (“ATO”) enforces any breaches of such employer contributions. From 1 January 2024, in addition to the superannuation guarantee law, the Fair Work Act also contains a right to superannuation contributions for employees.
A new Division 10A has been added to the National Employment Standards of the Fair Work Act. This means that unless the ATO has already commenced proceedings in relation to their unpaid superannuation contribution, employees will have the option of commencing proceedings for unpaid superannuation contributions under the Fair Work Act.
Any breaches of the new Division 10A will be subject to the civil penalty provisions. However, under section 116E, when making orders for compensation, a court must consider whether it would be most appropriate for the component of compensation relating to unpaid superannuation to be paid into the employee’s superannuation fund.
New “ordinary meaning” of employee
The ordinary meaning of an employee under the Fair Work Act will be subject to a new test from 26 August 2024. Currently, the test for determining whether a worker is an employee or an independent contractor, relies on the terms of the contract between the parties (irrespective of the way the relationship operates). For the most part, the new tests reverts to a multi-factorial test under the common law — expressly providing that in determining whether a worker is an employee, the task is to determine the real substance, practical reality, and true nature of the relationship, with the following factors to be considered:
- the totality of the relationship;
- the terms of the contract governing the relationship; and
- other factors relating to the totality of the relationship including, but not limited to, how the contract is performed in practice.
Gig economy workers and road transport contractors
Effective from 26 August 2024, a new Part under the Fair Work Act will identify “employee-like workers” and “road transport contractors”, who traditionally did not fit within the mould of “employee” but performed work with majority characteristics of an employee.
Employee-workers will include persons who perform work on a digital platform and have one of the following characteristics:
- low bargaining power in negotiations;
- receive remuneration at or below the rate of an employee performing comparable work; and
- low degree of authority over the performance of the work.
Employee-like workers and road transport contractors will be able to apply to the Fair Work Commission for “Minimum Standard Orders” or “Minimum Standard Guidelines”. Alternatively, they may negotiate and enter into “collective agreements” directly with the digital labour platform.
Minimum standard orders and minimum standard guidelines may include the following terms:
- payment terms;
- deductions;
- record-keeping;
- insurance;
- consultation;
- representation;
- delegates’ rights; and
- cost recovery.
Further, employee-like workers and road transport contractors will be able to apply to the Fair Work Commission for orders in relation to unfair deactivations, unfair terminations and unfair contracts.
Right to disconnect
Effective from 26 August 2024 (or 26 August 2025 for businesses with fewer than 15 employees), a new right will now give employees the right to refuse to monitor, read or respond to contact (or attempted contact) from an employer outside of their working hours – unless that refusal is unreasonable. The right also extends to contact (or attempted contact) outside of the employee’s working hours from a third party if work related (for example, from customers or clients).
Some of the factors that must be considered in determining whether an employee’s refusal to be contacted is unreasonable are:
- the reason for the contact or attempted contact;
- how the contact or attempted contact is made and the level of disruption the contact or attempted contact causes the employee;
- the extent to which the employee is compensated (including non-monetary compensation) to remain available to perform work or be contacted, or for working additional hours, outside of ordinary working hours;
- the nature of the employee’s role and the employee’s level of responsibility; and
- the employee’s personal circumstances (including family or caring responsibilities).
The Fair Work Commission will have the power to make an order to stop refusing contact, to stop taking certain actions, or to otherwise deal with the dispute. This will also be a civil remedy provision, meaning that breach of an order could attract penalties.
Wage theft
From 1 January 2025, a new section 327A will come into effect under the Fair Work Act. This new provision introduces a criminal offence as follows:
- if an employer, who is required to pay an amount to an employee, omits to make the payment, then they will be liable if:
- it is proved “beyond reasonable doubt” that the employer intentionally engaged in the act or omission; and
- the employer intended that the act or omission would lead to failure of payment to the employee; and
- the employer could potentially rely on the defence of mistake or ignorance of fact if they can establish that at the time of the act or omission, the employer was under a mistaken belief or was ignorant of facts.
The new offence will entail a maximum possible penalty of 10 years imprisonment for individuals and/or maximum fines of up to $7.8 million—or three times the amount that was underpaid if that amount exceeds the maximum fine.
States such as Victoria, Queensland, Australian Capital Territory and Western Australia also regulate wage theft under State-based legislation.
Industrial manslaughter
The federal work health and safety legislation (“WHS Act”) has been amended to align with other state and territory legislation to include the offence of “industrial manslaughter”. The work health and safety legislation of New South Wales and Tasmania, while part of the National Work Health and Safety legislative scheme, do not currently have this offence; however, New South Wales is likely to introduce it in early 2024
Under section 30A of the WHS Act, a person conducting a business or undertaking or its officer commits an offence if they intentionally engage in conduct that results in the death of an individual, and were reckless or negligent in doing so. The penalty for a corporation is up to $18 million and in the case of an individual, they can face up to 25 years imprisonment.
In addition to creation of this new offence, the WHS Act has also been amended to:
- increase penalties for Category 1 offences; and
create criminal responsibility for corporate and Commonwealth entities.
