In Australia, an employee can be employed on a permanent basis (as a full-time or part-time employee) or casual basis. Permanent employees can also be employed for a fixed or maximum term.

The nature of an employee’s employment status will dictate some of the terms and conditions of their employment, such as hours of work, leave entitlements and remuneration.

While Australia does not use “blue-collar worker” and “white-collar worker” to define employment status, these terms are widely understood when referring to particular industries.

Every employment relationship in Australia is regarded as being based on a contractual relationship between the employer and employee. There are generally four types of employment contracts.

• Permanent: this is the most common type of contract in Australia. This category of employee is employed on an ongoing basis and can be either full-time or part-time.
• Casual: these contracts are for employees who perform work on an “as needs” basis and they provide no guarantee of ongoing work.
• Fixed or maximum term: these contracts operate for a specific period of time, such as one year. At the end of this time the contract immediately comes to an end and the employee’s employment is terminated. Recent legislative changes impose limitations on how fixed-term contracts can be used. Fixed-term contracts made on or after 6 December 2023 cannot be for longer than two years, including any extensions or renewals, unless an exception applies.
• Executive: these contracts are for employees in management positions or performing professional duties. They ordinarily include additional terms such as a restraint of trade.

An employment contract does not have to be in writing, as the relationship can be constituted by a verbal agreement, written agreement or a combination of both. It may be possible to infer that an agreement has been reached, in the absence of documentation, from the parties’ conduct, such as commencing work or paying wages.

Maximum Hours

The National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (“FW Act”) provide that the maximum weekly hours are 38 hours per week, plus  “reasonable additional hours”.

“Reasonable additional hours” will be determined by factors including:

• whether the employee receives overtime payments and penalty rates;
• whether the employee receives other compensation for, or remuneration that reflects an expectation of, working reasonable additional hours;
• the nature of the employee’s role; and
• the employee’s level of responsibility.

Overtime Pay

Employment contracts often stipulate that any reasonable additional hours are compensated for through an employee’s total remuneration.

Employees who are covered by a modern award or enterprise agreement will be entitled to overtime pay in accordance with the relevant industrial instrument. Employees who are not covered by a modern award or enterprise agreement do not receive remuneration for overtime unless their contract of employment provides for these payments. These employees may be required to work reasonable additional hours (as discussed above) over 38 hours per week.

The rate of pay for overtime will vary depending on the terms of the industrial instrument or contract, but overtime is usually paid at a rate of time and a half for the first several hours and double time thereafter. While there is no strict limit on amounts of overtime set out in legislation, some modern awards may prescribe a minimum amount of time between shifts (usually ten hours), which prevents employers from requiring their employees to work successive shifts of overtime within a short period.

Flexible Arrangements

Every modern award contains a flexibility provision that allows an employer and individual employees to agree to vary the application of various terms of the modern award, including the application of overtime rates. This agreement is only valid if it is genuine (ie, without coercion or duress) and must be entered into after the employee has commenced employment with the employer. Any agreement that is entered into must result in the employee being better off overall, at the time the agreement is made, than the employee would have been if no individual flexibility agreement had been made. In addition to this, after 12 months’ continuous service, the following may request flexible working arrangements in writing:

• employees who are parents or have responsibility for the care of a child who is school age or younger;
• employees who are a carer as defined in the Carer Recognition Act 2010 (Cth); or
• employees who have a disability, are 55 or older, are pregnant, are experiencing family or domestic violence, or are caring for or supporting an immediate family or household member who requires care or support because of family or domestic violence.

While there are no mandated flexible working arrangements, the typical types of flexible working arrangements are modifications to:

• hours of work (eg, start and end times);
• work patterns (eg, days of work or job sharing); or
• locations of work (eg, working from home).

All employees are entitled to a minimum wage. The minimum wage is provided by the FW Act and is reviewed annually by the Fair Work Commission Expert Panel. As of 1 July 2024, the national minimum wage is AUD24.10 per hour, or AUD915.90 per week.

Modern awards and enterprise agreements also prescribe a separate minimum wage (along with penalties, allowances and other benefits) which may be higher than the national minimum wage. An employee covered by either industrial instrument must be paid at or above the relevant minimum wage.

The FW Act contains the NES which provide a safety net (or minimum level) of entitlements for employees, regardless of an employee’s level of remuneration. The NES apply regardless of whether an employee is covered by a modern award or enterprise agreement, and cannot be stripped away by any conflicting terms in a contract of employment.

Permanent Employees

The NES for permanent employees are:

• Maximum weekly hours – 38 per week, plus reasonable additional hours.
• Requests for flexible working arrangements – after 12 months’ service, certain categories of employees can request a flexible working arrangement.
• Offers and requests to convert from casual to permanent employment – in some circumstances employees can request for their employment status to be converted from casual to permanent.
• Parental leave and related entitlements – after 12 months’ continuous service, both parents may take separate periods of 12 months’ unpaid parental leave.
• Annual leave – four weeks’ paid annual leave per year of service, five weeks’ paid leave for shift workers (pro-rata amounts for part-time employees).
• Other leave – employees are entitled to ten days of personal/carer’s leave each year (pro rata for part-time employees), two days of compassionate leave per occasion and ten days of paid family and domestic violence leave each year.
• Community service leave – an employee may be absent from work for jury service, a “voluntary emergency management activity” or other community service activities prescribed by the FW Act.
• Long service leave – employees are entitled to long service leave as set out in a modern award, or in its absence, relevant state or territory legislation.
• Public holidays – employees are entitled to be absent from work on a public holiday without loss of pay.
• Superannuation contributions – employers have an obligation to make superannuation contributions to a superannuation fund. The current rate is 11.5%. This will increase to 12% on 1 July 2025.
• Notice of termination and redundancy pay – an employee is entitled to up to four weeks’ notice of termination (an additional week is required if the employee is over 45 and has at least two years of continuous service). Employees also have an entitlement under the FW Act to redundancy payment of up to a maximum of 16 weeks’ pay.

• Fair Work Information Statement and Casual Employment Information Statement – these contain information about an employee’s terms and conditions of employment, as well as their rights and obligations, and must be provided to all new employees.

Casual Employees

Casual employees have some entitlements under the NES. Casual employees are not entitled to paid leave under the NES (except for family and domestic violence leave); however, they may take unpaid forms of compassionate leave, carer’s leave, community service leave and public holidays. Casual employees may also be entitled to long-service leave depending on the terms of the relevant state legislation. Casual employees employed on a regular and systematic basis will also be entitled to request flexible working arrangements and take unpaid parental leave.

In Australia, restrictive covenants are legal and will be upheld by the courts provided they go no further than is reasonably necessary to protect an employer’s “legitimate business interests”. Restrictive covenants are used by employers to protect their business by preventing employees from engaging in a range of competitive activities during, and after, their employment.

The most common types of restrictive covenants are:

• non-compete covenants;
• non-solicitation covenants; and
• non-dealing covenants.

Non-compete covenants prohibit former employees from approaching clients, working for competitors or establishing their own businesses during the period of restraint. 

To be enforceable, restrictive covenants need to be properly drafted and are usually framed by reference to:

• a geographical area;
• a period of time;
• defined industries, businesses or activities that the employee cannot be involved in; and/or
• classes of people (such as customers, clients or employees) with whom the employee is restricted from dealing.

If an employer suspects a former employee is in breach of their post-employment restrictive covenants then, prior to commencing litigation, it is common to write to the former employee to demand the former employee cease and desist from any and all activity. In order to comply with this demand, the employer may require the former employee to provide written undertakings to confirm the former employee’s ongoing compliance with the post-employment restrictive covenants.

If a former employee continues to act in breach of their post-employment restraints then an employer can seek enforcement of the restraints by applying for an interlocutory injunction (ie, an order to stop the former employee from breaching the restrictive covenants). Damages may also be available in some cases.

Non-solicitation covenants are similar to non-competes except they prevent former employees from pursuing clients, customers and suppliers. They also seek to prevent the solicitation of former employees.

Restrictive covenant clauses are generally used when employing or promoting an individual to a mid, senior or executive position. Employers need to use these clauses carefully and they should be tailored to an individual employee so that they are enforceable and go no further than necessary to protect the interests of the employer.

The Privacy Act 1988 (Cth) requires organisations (other than small businesses) to adhere to a set of Privacy Principles (the “Principles”) in the collection and management of “personal information”. The Principles include the requirement for organisations to take reasonable steps to protect personal information from misuse, interference, loss or unauthorised access.

An important exception to compliance with the Principles covers the “employee records” of current or former employees but only when used by the employer in relation to their employment. An employee record is defined quite broadly to include personal or health records relating to employment, which can go so far as to capture documents concerning the termination of an employee’s employment. This exemption does not cover prospective employees, contractors or employees of other companies (such as labour hire employees or employees of a subsidiary).

It is important that employers ensure that prospective employees have a legal right to work in Australia. Significant penalties may apply to employers who employ individuals who do not have a legal right to work in Australia (including financial penalties and withdrawal of sponsorship status).

The FW Act, and the obligations that arise under it, do not apply to foreign employment relationships. However, the FW Act extends to employees working overseas and employees of a foreign or overseas company who work in Australia, if they are an Australian-based employee.

Foreign workers can work in Australia in accordance with the stipulations in their visa. Registration requirements will depend on what type of visa the employee has. For example, an employer who hires a person on a “working holiday maker” visa must register for “pay as you go” withholding tax.

There are no specific regulations or restrictions on employees who work remotely from home. Working from home continues to exist in a post-pandemic world, with many employers adopting a hybrid approach to working.

Employers continue to have obligations to employees working from home and key considerations include the following:

• Work, health and safety obligations – employers have a duty to ensure the health and safety of workers regardless of where they are physically located.
• Confidential information – working from home can present a number of challenges for protecting the confidential information of employers. Employers should ensure they have computer, privacy and confidential information policies that are regularly reviewed and updated to address the issues employees face when working from home on a regular basis.

Sabbatical leave is not a statutory entitlement under employment legislation in Australia. However, employers may, at their discretion, agree to an employee’s sabbatical.

For several years the physical workplace, as well as the way people work, have been transforming. Working from home or hybrid working has become an option for many employees. Some employers have favoured open-plan offices and hot-desking instead of individual offices. The drivers of this change include the desire to increase collaboration between colleagues, the view that these changes increase productivity and the desire of some employees to continue working from home in a post-pandemic world.

There have also been changes to the way people work with the rise of the gig economy. There has been much debate in Australia about the status of these workers and the rights to which they should be entitled. The leading cases have generally classified these workers as independent contractors. There are ramifications resulting from this categorisation as, in Australia, employees have significantly more legal rights.

The government recently brought in a number of legislative reforms for “employee-like” forms of work which are designed to provide this category of workers with more legal rights. These reforms give the FWC powers to make minimum standards orders or guidelines for work performed by “employee-like” or digital platform workers. A minimum standards order might include terms relating to:

• payment terms;
• deductions;
• record-keeping; and
• insurance.

The reforms also provide a framework to enable “employee-like” workers to access consent-based collective agreements. Further, “employee-like” workers will have access to protections against unfair deactivation and unfair termination.

Unions in Australia can represent employees to assist in resolving workplace disputes and to act as a representative during bargaining negotiations. Bargaining negotiations occur when an employer and its employees negotiate the terms and conditions of an enterprise agreement which will cover the employees’ employment.

Unions are employee representative bodies that represent their members. Unions must operate in accordance with the Fair Work (Registered Organisations) Act 2009 (Cth).

Employers may wish to negotiate and implement an enterprise agreement in order to tailor the terms and conditions of employment to the specific requirements of a business. A proposed enterprise agreement must be voted in by the majority of employees.

The process of creating an enterprise agreement in Australia involves a period of bargaining, which must take place in good faith. This means employers should attend and participate in meetings, disclose relevant information, and give genuine consideration to, and respond to, proposals. However, good faith bargaining does not require employers and employees to make concessions during bargaining or to enter into an agreement.

A key element of any enterprise agreement is that it must pass the “better off overall test” to be approved. This requires that at the time the approval application is made, each award-covered employee must be better off overall under the enterprise agreement than under the modern award.

Recent legislative changes have provided unions and employees with greater scope to compel employers with common interests to come together and negotiate an enterprise agreement. The FWC has also been given greater powers to intervene in bargaining disputes and make a workplace determination if the parties have reached an impasse during the bargaining period.

An employee’s employment can be terminated with notice, summarily without notice, on the basis of redundancy, or because an employment contract has reached the end of a fixed term.

Termination

An employer must take care to ensure that it has a valid reason for terminating an employee’s employment if notice is given, particularly if the employee is eligible to make an unfair dismissal claim. If an employee’s employment is terminated, an employer may be exposed to an employee making a claim such as an unfair dismissal, general protections application or breach-of-contract claim.

Termination without notice typically occurs if an employee is found to have engaged in “serious misconduct” in their employment with the employer.

Redundancy

A redundancy occurs if an employee’s employment is terminated at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour. Ultimately, the processes adopted by an employer in a redundancy situation will depend on the circumstances, including the relative seniority of the employee whose role is being made redundant and the risks for the employer that are attached to the particular process. An employer must also take care to ensure that if the termination of an employee’s employment is characterised as a redundancy, it is a “genuine redundancy”. Often employees will request that their separation from their employment be characterised as a redundancy because of the concessional tax benefits that flow from a redundancy. In agreeing to this arrangement, an employer assumes a considerable amount of risk, including that it may potentially be in breach of its obligations with respect to withholding tax and therefore could be subject to penalties.

Additional obligations arise where an employer is considering the redundancy of 15 or more employees. In these circumstances, the employer must give written notification to Centrelink (the government agency responsible for providing social security payments and services).

Under the NES an employee is entitled to up to four weeks’ notice of termination of employment (an additional week is required if the employee is over 45 years old and has at least two years of continuous service). The NES do not require any specific period of notice to be provided by employees. However, it is common that a mutual obligation or other period of notice required by the employee will be contained in an employee’s modern award, written contract of employment or letter of offer.

The NES confirm the following notice periods based on an employee’s continuous service:

• one year or less – 1 week;
• over one year and up to the completion of three years – two weeks;
• over three years and up to the completion of five years – three weeks;
• five years and over – four weeks; and
• employees who are over 45 years old who have completed at least two years of service – an additional week on top of their notice period.

An employer may make a payment in lieu of notice to an employee if the employer does not require them to work out their notice period.

Summary dismissal means the termination of the employment of an employee without notice. An employee will typically be summarily dismissed where they are found to have engaged in “serious misconduct” in their employment with the employer. “Serious misconduct” is defined at common law and in legislation. Under the Fair Work Regulations 2009 (Cth), serious misconduct is defined to include:

• wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the employment contract, such as theft, fraud, assault, intoxication at work, or disobedience of lawful and reasonable orders; and
• conduct that threatens the health or safety of others, or the reputation, viability or profitability of the employer.

When an employee is summarily dismissed, the employer is only required to pay the employee for work performed up to the time of dismissal (including any outstanding wages) plus any statutory leave entitlements they have accrued but not yet taken, and superannuation. As there is no requirement to give notice where an employee is summarily dismissed, there is no corresponding requirement to pay notice.

Termination agreements, also known as deeds of release, can be entered into at the discretion of an employer and employee. If an employer negotiates an exit package with an employee which provides the employee with more than their legal entitlements, the employer may choose to enter into a deed of release to protect itself from future claims from the employee.

The general protections jurisdiction in Australia allows an employee to bring a claim against their employer for taking steps that resulted in a detriment or hardship to the employee in circumstances where the employee sought to exercise a “workplace right”. These types of claims, commonly referred to as adverse action claims, are often brought where a dismissal is involved.

These provisions also extend to protection from adverse action in relation to an employee’s participation in industrial activity (including their choosing not to participate in such activity), discrimination against protected attributes (such as age, sex, race and disability), dismissal due to temporary absence or illness, and coercion.

Employees can also bring claims under state or federal discrimination legislation if they believe their employment has been terminated for a discriminatory reason. There are various categories of discrimination including race, sex, age and disability.

On termination of employment, eligible employees may make an unfair dismissal application to the FWC on the grounds that their termination was unfair as it was “harsh, unjust or unreasonable”. An employee will be eligible to make an unfair dismissal claim if they:

• have served the minimum employment period (which is six months or 12 months if the employer is a “small business”);
• are covered by a modern award or enterprise agreement, or alternatively earn less than the high-income threshold (currently AUD175,000 per annum); and
• were dismissed by the employer.

The FWC has discretion to award remedies such as reinstatement of the employee or a payment of compensation if the circumstances are appropriate. The maximum compensation level for unfair dismissal claims is 26 weeks’ pay, capped at half of the high-income threshold.

In Australia, there are four main federal anti-discrimination laws that protect against discrimination on the grounds of race, sex, age and disability. Under each of these grounds, there are a number of sub-categories of protected grounds. For example, the Racial Discrimination Act 1975 (Cth) also contains grounds relating to colour, nationality, descent, ethnic, ethno-religious, national origin, and social origin discrimination. Similarly, the Sex Discrimination Act 1984 (Cth) contains a number of additional grounds, including pregnancy, breastfeeding, sexual activity, marital or domestic status, transgender status, gender identity, sexuality, family and carer’s responsibility discrimination.

In addition to the federal legislation, each state and territory has its own anti-discrimination legislation covering a wide range of protected attributes.

Under the federal system an employee can make a complaint to the Australian Human Rights Commission and, if not resolved at conciliation, the claim can progress to the Federal Court or Federal Circuit and Family Court of Australia. These courts will hear the case and, if discrimination is found to have occurred, make any order that they consider appropriate, including orders for injunctions, reinstatement and/or compensation.

The Australian Human Rights Commission Act 1986 (Cth) provides for additional protected attributes at a federal level, including irrelevant medical record, irrelevant criminal record, political belief, religious belief and trade union activity. The burden of proof lies with the complainant, that is, it is up to the complainant to prove that, on the balance of probabilities, they were directly discriminated against based on a protected attribute.

The FWC conducts most conciliation conferences by telephone or videoconference. The FWC has discretion as to how it hears cases and this may be via videoconference, “on the papers” or in person. The FWC can also permit a person to give evidence remotely via videoconferencing where it considers this appropriate.

Generally, in-person attendance is required for proceedings in the Federal Court and Federal Circuit and Family Court of Australia.

The FWC is a dedicated national workplace relations tribunal that has responsibility for approving enterprise agreements, resolving disputes, adjusting minimum wage and award conditions, resolving unfair dismissal claims and monitoring compliance with workplace laws. There is no requirement to be represented by a lawyer or paid agent. If a lawyer or paid agent wants to represent an employer or employee before the FWC they must seek the permission of the FWC.

Class action claims in the FWC are uncommon, largely because compensation is unavailable or capped in respect of many claims. Class action claims are more common for claims involving underpayments. These claims are brought in the courts and often attract significant media attention.

The FWC may arbitrate a matter in some circumstances if the parties cannot come to an agreement during a conciliation conference. The FWC does not have the power to arbitrate automatically in relation to all types of claims and the consent of the parties may be required before the FWC can arbitrate.

If a matter is settled prior to arbitration then it is common for the terms of settlement to be recorded in a written agreement signed by the parties. This is a legal document and the parties are bound by its terms. If the terms of the settlement agreement are breached then the written agreement can be enforced by application to a court. 

The default position is that parties to an unfair dismissal or general protections proceeding in the FWC cannot claim costs. However, the FWC may order a person to pay the other party’s costs if it is satisfied:

• that the person’s application or response to an application was made vexatiously or without reasonable cause; or
• that it should have been reasonably apparent that the person’s application or response to an application had no reasonable prospect of success.