Employment & labour legislation in Australia

Country snapshot

Key considerations

Which issues would you most highlight to someone new to your country?

Australia has a highly regulated employment system with a complex framework of requirements which differ between occupations and industries, and in some respects, between states and territories.

The National Employment Standards (NES), contained in the Fair Work Act 2009 (Cth), set out 10 minimum entitlements which apply to all employees (other than some state public sector employees), including restrictions on:

• maximum hours of work;
• paid and unpaid leave;
• notice of termination of employment; and
• redundancy pay.

The national employment tribunal (the Fair Work Commission) makes modern awards, which are quasi-statutory instruments that set out a range of minimum terms and conditions of employment, which are equal to or more generous than the NES for particular industries and occupations (eg, covering matters such as hours of work and rostering, meal and rest breaks, overtime and penalty rates for night time and weekend work).

The level of union membership in Australia is steadily declining, although certain industries which remain heavily unionised (eg, construction, transport, health and maritime).

What do you consider unique to those doing business in your country?

The modern award system described above is unique. Determining award coverage for all employees in a business can be a complex exercise and therefore represents a compliance risk for many businesses.

The national workplace relations regulator (the Fair Work Ombudsman) has a broad range of powers that include:

• receiving complaints from members of the public;
• investigating suspected contraventions of workplace laws; and
• commencing litigation against employers to enforce the law.

Australia has a comprehensive general protections regime that protects employees from being subjected to adverse treatment (dismissal or otherwise) on the basis of the employee having or exercising a workplace right (eg, involvement with an industrial association or making a complaint in relation to their employment).

Australia also has a comprehensive occupational health and safety regime that requires employers to maintain a safe workplace and comply with a government-managed workers’ compensation scheme.

Is there any general advice you would give in the employment area?

Employers should identify whether their employees are covered by a modern award or enterprise agreement. It is relevant to not only the terms of employment for their employees, but also their eligibility to make an unfair dismissal claim. This may require seeking legal advice.

Emerging issues/hot topics/proposals for reform

Are there any noteworthy proposals for reform in your jurisdiction?

There are a range of state-based labour hire schemes being proposed or introduced. These schemes place obligations on entities providing or using labour hire services.

With the rise of the gig economy, there has been a significant focus on the legal difference between employees and independent contractors. Several test cases have been agitated through the court system and there are current proposals for legislative reform to extend employee benefits to gig economy workers. It is likely that this will be an area for reform in the medium to long term.

Modern slavery legislation was recently introduced. This regime obliges certain businesses to report on the measures that they have in place to identify and address the risk of human exploitation in their supply chain.

A national enquiry is currently being conducted into sexual harassment in the workplace. Once finalised, a range of recommendations are likely to be made, including further legislative reform. These measures could include compulsory reporting mechanisms for sexual harassment and increased obligations on employers in respect of the duty to provide a safe workplace.

What are the emerging trends in employment law in your jurisdiction?

There is an increased focus on:

• protecting vulnerable workers and ensuring employers are providing employees with their minimum entitlements;
• the provision of leave for employees affected by family violence;
• regulators seeking to impose personal liability on managers and advisers who are deemed to be involved in a company’s breaches of employment law; and
• preventing and addressing workplace bullying and harassment.

Australia is also witnessing a shift towards the utilisation of casual, as opposed to permanent, employees. Many businesses engage contingent labour or utilise offshore arrangements in order to meet operational requirements and minimise labour costs.

There has also been a general decline in disputes focused on collective or industry-wide issues, with a correlating increase in claims made by individual employees. 

The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

The main sources of employment law in Australia are:

• legislation (federal, state and territory laws);
• industrial instruments; and
• the common law.

The Fair Work Act is the key federal legislation which governs employment and workplace relations in Australia and applies to most Australian employers.

The Fair Work Act is supplemented by other federal, state and territory laws relating to specific areas, including:

• work;
• health and safety;
• superannuation;
• long-service leave;
• workplace surveillance; and
• anti-discrimination.

Some state legislation also governs state public sector employees.

Industrial instruments made under the Fair Work Act include modern awards and collective agreements (more commonly known as enterprise agreements). A modern award is a quasi- legislative instrument made by the Fair Work Commission (FWC). Modern awards set minimum terms and conditions of employment for employees in particular industries and occupations.

Enterprise agreements are collective agreements entered into between employers and their employees that can be negotiated to meet the needs of particular enterprises. These agreements must be reviewed by the FWC and will only be approved if the employees are better off over all than if the applicable modern award applied. There is no requirement to enter an enterprise agreement, however, the Fair Work Act provides significant scope for unions to compel an employer to bargain for an agreement.

There is no statutory requirement to issue a written employment contract to an employee. However, all employees in Australia will be considered to have an employment contract whether it is written or oral. An employment contract must not provide terms or conditions of employment that are inferior to the National Employment Standards (NES) and any applicable industrial instruments. 

Who do these cover, including categories of worker?

Australian employment law generally protects individuals working pursuant to an employment contract (ie, employees), rather than a contract for services (ie, independent contractors). However, the Fair Work Act and the Independent Contractors Act 2006 (Cth) provide certain protections for independent contractors and work, health and safety legislation uses an expanded definition of ‘worker’.

The Fair Work Act applies to all employees other than some state public sector employees. However, different rules may apply to employees depending on whether they are permanent or casual and whether they are covered by an award or enterprise agreement.

Generally, the employment of a non-management employee is covered by an award, which regulates matters including:

• minimum wages;
• hours of work;
• overtime and penalty rates;
• consultation; and
• dispute resolution.

However, in some industries relatively senior employees may be covered by an award and in other industries more junior employees may not be covered by any award. Employers should take steps to identify award coverage for their workforce.

Misclassification

Are there specific rules regarding employee/contractor classification?

The distinction between employees and independent contractors in Australia is determined at common law by applying a multi-indicia text. No single factor determines whether an individual is an employee or contractor, and the courts will consider the totality of the relationship.

Factors considered in determining whether an individual is an employee or independent contractor include:

• the degree of control that the company has over how and when work is performed;
• whether there is an expectation of work;
• which party provides tools and equipment;
• whether the individual has a right to delegate the work;
• whether the individual provides their services to more than one entity;
• the method of payment; and
• entitlement to paid leave and other employee benefits.

Different rules apply for superannuation, workers compensation and tax purposes as legislation in these areas contains definitions of ‘employee’ which differ from the common law. As a result, an individual may be deemed an independent contractor at common law and accordingly characterised as such for the purposes of the Fair Work Act, but deemed an employee for superannuation purposes.

Contracts

Must an employment contract be in writing?

Employment contracts need not be in writing. It is common for contracts to be partly written and partly oral. However, on commencing employment all employees must be provided with a copy of the Fair Work Information Statement, which informs them of their rights under the NES.

Are any terms implied into employment contracts?

Terms can be implied into an employment contract as a matter of law, fact or industry custom or practice, but only where absolutely necessary and not if those terms would be inconsistent with the express terms of the contract.

Key terms implied as a matter of law into employment contracts in Australia include:

• duties on the employer to:
  • provide a safe system of work;
  • avoid foreseeable risks of hardship or injury; and
  • supervise; and
• duties on the employee to:
  • obey lawful and reasonable orders;
  • act in the employer’s best interests; and
  • use skill and care in the performance of their functions.

If there is no written employment contract or an employment contract does not contain an express term as to notice of termination, the common law will imply a term into an employment contract to the effect that the contract is terminable by the giving of reasonable notice. What is considered reasonable notice depends on an employee’s:

• seniority;
• remuneration;
• length of service;
• age; and
• prospects of finding alternative employment.

Are mandatory arbitration/dispute resolution agreements enforceable?

While commercial agreements containing pre-dispute arbitration procedures are likely to be enforceable provided that the procedure is sufficiently certain, it would be highly unusual for a contract of employment to contain such procedures.

Enterprise agreements must contain a dispute resolution clause under the Fair Work Act, and this is often utilised by unions to agitate disputes in the FWC. The FWC cannot formally arbitrate in respect of a dispute unless the enterprise agreement empowers it to do so, and in this case, it is important to confirm precisely what the enterprise agreement empowers the FWC to arbitrate.

Mediation agreements are enforceable, but not common in the context of employee disputes. This is because most employee claims are made under the Fair Work Act and involve a statutory process that includes pre-proceedings conciliation.

Where employee claims under the Fair Work Act are dealt with by the FWC or another individual by way of mediation, conciliation or by making a recommendation or expressing an opinion, the outcome is not binding on the parties, except in the circumstances outlined above regarding enterprise agreements.

Where disputes are arbitrated in accordance with a dispute settlement term under an enterprise agreement, the decision of the arbitrator will be binding on the parties, subject to any rights of appeal.

How can employers make changes to existing employment agreements?

An employer and an employee may make changes to a contract of employment if both parties agree. It is prudent to record a change to a contract of employment in writing (eg, in a deed). One party cannot unilaterally alter the terms of a contract as this would amount to repudiation, thereby giving the employee the option to terminate the contract or elect to continue performance of the contract. Depending on the circumstances, an employee may be able to claim damages for the employer’s repudiation. 

Foreign workers

Is a distinction drawn between local and foreign workers?

No distinction is drawn between local and foreign workers, but only Australian citizens, permanent residents and others who hold appropriate visas are entitled to work in Australia. New Zealand citizens have an unrestricted right to work in Australia under special category visas.

The working entitlements of all workers must be confirmed by employers and labour suppliers, and criminal offences and civil liability provisions apply to persons allowing or referring non-citizens to work without a visa or in breach of restrictions in their visa.

The Fair Work Ombudsman regularly prosecutes employers which engage in exploitative workplace practices regarding foreign workers. 

Recruitment

Advertising

What are the requirements relating to advertising positions?

When advertising a role, it is vital that advertisements are not unlawfully discriminatory or misleading. However, subject to these requirements, generally there are no laws stipulating what an advertisement should contain, and the employer has discretion in relation to the information provided to potential job applicants.

There are legal requirements not to discriminate against particular people or groups of people in relation to hiring. A number of federal and state laws prohibit discrimination against job applicants on the basis of specified characteristics. In addition, the general protection provisions of the Fair Work Act prohibit employers from discriminating against job applicants on the basis of particular characteristics.

There are exemptions under some state and federal discrimination legislation for affirmative action programmes, provided that they promote the objects of the legislation.

Background checks What can employers do with regard to background checks and inquiries in relation to the following:

(a)Criminal records?

Criminal record checks are permitted, although there are some limited protections for individuals with a criminal record under discrimination legislation. Discrimination on the basis of an irrelevant criminal record is unlawful under federal and some state legislation, although there is limited recourse for a individual who suffers discrimination on this basis under federal jurisdiction. There is also legislation which prohibits the disclosure of spent convictions (ie, convictions which are more than a specified number of years old). The period before a conviction becomes spent varies between states. 

(b)Medical history?

Employers can request information about an applicant’s medical history if it is relevant to whether the applicant can perform the inherent requirements of the role for which they are applying. Using information about a prospective employee’s disability, including physical or mental conditions or illness in determining whether to recruit would breach anti-discrimination legislation, unless that information is relevant to the employee’s ability to perform the inherent requirements of the role.

(c)Drug screening?

Employers can request that prospective employees undergo drug screening as part of a recruitment process. The use of results from drug screening should be justified and proportionate to the role for which the individual has applied. Drug screening is more common in safety-critical and heavy industry sectors (eg, aviation, transport and construction), or public sector roles (eg, police officers).

(d)Credit checks?

Employers can carry out credit and finance checks on prospective employees, including whether they have been subject to any sanctions by the corporate regulator, the Australian Securities and Investments Commission. Credit checks are more common where the position involves giving financial advice or where financial difficulties could expose the employee to risks of bribery or other security risks.

(e)Immigration status?

Employers are responsible for ensuring that all employees have a right to work in Australia. Foreign workers must hold a valid work visa. Employers found to have employed, referred or contracted a foreign national who does not have permission to work in Australia, or is in breach of their visa conditions (ie, an illegal worker), face significant penalties.

(f)Social media?

Internet searches of a job applicant’s publicly accessible social media profiles in order to identify any negative personal activities or behaviour are common. However, employers should not require that a prospective employee provide their social network passwords in the recruitment process. If an employer refuses to employ a prospective candidate because of political or religious views expressed on social media, the applicant could make a claim under anti-discrimination legislation for unlawful discrimination on the basis of their religion or political beliefs.

(g)Other?

Background checks in all of the above areas would involve the collection of personal information relating to a job applicant within the meaning of the Privacy Act 1988 (Cth). Therefore, an employer’s collection and use of such information is subject to the restrictions imposed by the act.

Wages and working time

Pay

Is there a national minimum wage and, if so, what is it?

Yes, employees (other than those covered by an award or enterprise agreement) are entitled to the national minimum wage, which as of 1 July 2018 is A$18.93 per hour for adults, with casual employees entitled to a 25% loading. Employees covered by an award or enterprise agreement are entitled to the minimum wage set by the award or enterprise agreement. 

Are there restrictions on working hours?

Under the National Employment Standards, employees can be required to work a maximum of 38 hours per week, plus reasonable additional hours. Awards or enterprise agreements may alter this requirement.

Generally, there are no specific restrictions on the number of hours of overtime that an employee may work, although an employee may refuse to work unreasonable overtime hours. 

Hours and overtime

What are the requirements for meal and rest breaks?

Requirements vary depending on the industry and award or enterprise agreement coverage. For example, some awards and agreements require a meal break after five hours and some require a minimum amount of time off between the end of one shift and the start of another (often approximately 10 hours).

How should overtime be calculated?

For employees covered by an award or enterprise agreement, overtime should be calculated in accordance with applicable award or agreement provisions (if it has terms dealing with overtime pay). Some awards and enterprise agreements allow employees to accrue paid leave entitlements instead of taking overtime pay (so-called ‘time in lieu’).

Payment for overtime is unregulated for employees not covered by an award or enterprise agreement (so-called ‘salaried’ employees).   

What exemptions are there from overtime?

Employees not covered by an award or enterprise agreement are not entitled to overtime under the Fair Work Act. Accordingly, in circumstances where an employee is not covered by an award or enterprise agreement, the employee will be entitled to entitlements for working additional hours only if provided under the employment contract. 

Is there a minimum paid holiday entitlement?

Yes, the Fair Work Act provides employees with an entitlement of four weeks’ paid annual leave per year (five weeks for shiftworkers), which is calculated based on the employee’s ordinary hours of work. Casual employees have no entitlement to paid annual leave. 

What are the rules applicable to final pay and deductions from wages?

Most modern awards provide that employers must pay employees their final payment within seven days of their employment ending. At such time, an employee is entitled to be paid any outstanding wages and accumulated annual leave, if applicable. In some cases, additional amounts may be payable, including:

• accrued or pro rata long-service leave;
• payment in lieu of notice (if the employee is not serving out their notice or being placed on garden leave); or
• redundancy pay if the reason for termination was redundancy.

If an employee fails to give the required notice when they resign, most awards allow an employer to deduct an amount equal to one week’s wages from the employee’s final pay. For non-award employees, a similar entitlement may be included in the employees’ contracts of employment.

The Fair Work Act provides strict parameters for deductions from an employee’s pay, and a failure to comply with these can result in a civil penalty being imposed on the employer.

In general, an employer can deduct money from wages only if it is:

• principally for the employee’s benefit and they agree in writing; or
• allowed by:
  • a law;
  • a court order; or
  • the Fair Work Commission;
• allowed under an applicable award; or
• allowed under the applicable enterprise agreement and the employee agrees to the deduction.

Record keeping

What payroll and payment records must be maintained?

Employers must maintain records of:

• rates of pay;
• wages paid;
• deductions made; and
• any incentive-based payments, loadings or allowances.

Employers must also keep records of hours worked for employees who work casual or irregular hours or whose pay rate varies based on hours worked and records of overtime hours and time taken in lieu of overtime. These records (as well as other information) must be kept for seven years. If records are not kept or are incorrect, the employer may face significant fines. These records must be readily legible, in English and readily accessible to a fair work inspector.

Employers must provide an employee with a pay slip (in a specified form) within one day of paying their wages.

Discrimination, harassment & family leave

What is the position in relation to: Protected categories

(a) Age?

Under the Age Discrimination Act 2004 (Cth), various state-based legislation and the general protections provisions of the Fair Work Act, it is unlawful to discriminate (either directly or indirectly) against an individual on the basis of their age in employment. This includes in the areas of:

• recruitment;
• working conditions and salary;
• promotion;
• training and development;
• disciplinary action; and
• termination.

Certain exceptions apply under the legislation. For example, it is lawful for an employer to discriminate based on an individual’s age if that individual is unable to carry out the inherent requirements of the role because of their age.

An individual who is subject to discrimination can lodge a general protections claim with the Fair Work Commission (FWC) or make a complaint to the Australian Human Rights Commission (AHRC) or relevant state tribunal.

(b) Race

Under the Racial Discrimination Act 1975 (Cth), various state-based legislation and the general protections provisions of the Fair Work Act, it is unlawful for an employer to discriminate (either directly or indirectly) against an individual on the basis of their:

• race;
• colour; or
• national or ethnic origin.

This includes in the areas of:

• recruitment;
• working conditions and salary;
• promotion;
• training and development;
• disciplinary action; and
• termination.

An individual experiencing discrimination can lodge a general protections claim with the FWC or make a complaint to the AHRC or relevant state tribunal.

(c) Disability?

Under the Disability Discrimination Act 1992 (Cth), various state-based legislation and the general protections provisions of the Fair Work Act, it is unlawful to discriminate (either directly or indirectly) against an individual on the basis of their disability in employment. This includes in the areas of:

• recruitment;
• working conditions and salary;
• promotion;
• training and development;
• disciplinary action; and
• termination.

‘Disability’ includes:

• temporary and permanent disabilities;
• physical disabilities;
• intellectual disabilities;
• sensory disabilities;
• neurological disabilities;
• learning and psychosocial disabilities;
• diseases or illnesses;
• physical disfigurements;
• medical conditions; and
• work-related injuries.

There are certain exceptions under the legislation, where treating an individual differently because of their disability is not unlawful. For example, it is not unlawful for an employer to discriminate against an individual on the basis of their disability if they would be unable to carry out the inherent requirements of the role, even if the employer made reasonable adjustments for the individual. An adjustment is reasonable if it does not impose unjustifiable hardship on the employer.

An individual experiencing discrimination can lodge a general protections claim with the FWC or make a complaint to the AHRC or relevant state tribunal.

(d) Gender?

Under the Sex Discrimination Act 1984 (Cth), various state-based legislation and the general protections provisions contained in the Fair Work Act, it is unlawful to discriminate (either directly or indirectly) against an individual on the basis of their:

• sex;
• sexual orientation;
• gender identity;
• intersex status;
• marital or relationship status;
• pregnancy; or
• breastfeeding in the area of employment.

This includes in the areas of:

• recruitment;
• working conditions and salary;
• promotion;
• training and development;
• disciplinary action; and
• termination.

The legislation also protects individuals with family responsibilities and makes sexual harassment unlawful.

An individual experiencing discrimination can lodge a general protections claim with the FWC or make a complaint to the AHRC or an applicable state tribunal. 

(e) Sexual orientation?

Please see the above section on gender.

(f) Religion?

Under the Fair Work Act an employer must not take adverse action against an employee or prospective employee because of their religion.

In addition, under legislation in the Australian Capital Territory, Northern Territory, Queensland, Tasmania, Victoria and Western Australia, it can be unlawful to discriminate against an individual on the basis of religion or religious activity.

Certain exceptions may apply under applicable state and territory-based legislation.

An individual who is subject to discrimination on the basis of their religion can make a complaint to the FWC or the applicable state tribunal or commission.

(g)Medical?

The AHRC can receive and investigate complaints in relation to discrimination on the basis of a medical record. In Tasmania and the Northern Territory, there is specific legislation prohibiting discrimination on the basis of an irrelevant medical record.

In some circumstances, it may be appropriate for an employer to direct an employee to obtain a medical report from a medical practitioner to ensure that the employee can perform the inherent requirements of their role without risk to their health or safety or the health and safety of others. This should be balanced with the employer’s obligation to not unlawfully discriminate against an employee on the basis of illness or injury and to accommodate any illness or injury.

Please see the section on disability for further information.

(h)Other?

In addition to the above, characteristics that are protected in one or more Australian states or territories include:

• industrial activity;
• political belief or activity;
• profession;
• trade;
• occupation or calling;
• old or spent criminal convictions;
• irrelevant criminal record;
• the identity of a spouse or partner; and
• physical features.        

Family and medical leave

What is the position in relation to family and medical leave?

Employees in Australia (other than casual employees) are entitled to a minimum of 10 days’ paid personal or carer’s leave for each year of service, which may be taken:

• because the employee is not fit for work as a result of a personal illness or personal injury; or
• to provide care or support to a member of the employee’s immediate family or a member of the employee’s household, who requires care or support because of a personal illness or personal injury affecting the family member, or an unexpected emergency affecting the family member.

There is also an entitlement to two days’ unpaid carer’s leave for each permissible occasion when a member of the employee’s immediate family or a member of the employee’s household requires care or support because of a personal illness or personal injury affecting the member, or an unexpected emergency affecting the member. This also applies to casual employees.

Employees with family-caring responsibilities also have protection under discrimination legislation. For example, under the Sex Discrimination Act and state-based legislation, it is unlawful to discriminate (either directly or indirectly) against an individual because of their family or carer’s responsibilities in the area of employment.

Harassment

What is the position in relation to harassment?

An employer has an obligation under legislation and common law to provide a safe working environment for employees that is free from:

• bullying;
• harassment; and
• discrimination.

Under Commonwealth and state anti-discrimination law, it is unlawful to harass another individual in the workplace on the basis of a protected attribute (eg, an individual’s sex, race, disability or age). For example, the Disability Discrimination Act prohibits harassment in the workplace based on or linked to an individual’s disability or the disability of an associate.

The law also has specific provisions relating to sexual harassment and racial hatred.

Harassment may lead to or involve bullying. Under the Fair Work Act, an employee can apply to the FWC for an order to stop workplace ‘bullying’, which is defined as repeated unreasonable behaviour by an individual towards a worker, which creates a risk to health and safety.

Whistleblowing

What is the position in relation to whistleblowing?

Australian employers are not required to have an anonymous complaints procedure.

An employee who makes a complaint about their employment – whether to their employer or to an external regulator – will be protected under the general protections provisions of the Fair Work Act, which protect employees from adverse action being taken against them because they exercised a workplace right (eg, making a complaint). Adverse action includes dismissal and altering the employee’s position to their prejudice.

Employees who are dismissed because of their whistleblowing activities may also seek remedies under the unfair dismissal or unlawful termination provisions of the Fair Work Act.

There are also protections for employees who are whistleblowers under the Corporations Act 2001 (Cth) where the employee makes a disclosure in good faith and with a reasonable basis for their belief about misconduct or dishonest or illegal activity that has occurred within the organisation which employs them. To gain such protection, the disclosure must be made to a nominated person or body. A whistleblower who satisfies the requirements of the Corporations Act must not:

• be subject to any civil or criminal liability for making the disclosure;
• be dismissed from employment or penalised in any contractual arrangements with the company; or
• be victimised.

Amendments to these provisions are currently being considered by the Australian government.

There is a variety of legislation in Australia providing protection for whistleblowers in the public sector.

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

In Australia, there is no general right to privacy. However, the collection, use and disclosure of personal information is regulated by the Privacy Act. The Privacy Act contains an employee records exemption that allows employers to collect, use and disclose employee records without obtaining consent, provided that this is related to the employment relationship.

An employee’s rights with regard to workplace monitoring varies depending on the state or territory in which they work. The most comprehensive legislative schemes exist in New South Wales and the Australian Capital Territory. For example, in New South Wales, it is generally unlawful to undertake computer, video or tracking surveillance without an employee’s consent and employers must have a policy which complies with the relevant laws. 

To what extent can employers regulate off-duty conduct?

An employer can direct an employee regarding their off-duty conduct (including their social media activity) where there is a connection with the employee’s employment. Any direction must be reasonable in all circumstances. Employers may supplement this right by including express provisions in employment contracts or policies (eg, a social medial policy).

In certain circumstances, an employer may take disciplinary action against an employee, including terminating their employment, for their off-duty conduct where that conduct, among other things:

• is likely to cause serious damage to the employment relationship;
• damages the employer’s interests; or
• is incompatible with the employee’s duties as an employee.

Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

There are no specific rules protecting social media passwords in Australia.

It is generally considered reasonable for an employer to monitor its employees’ use of email, the Internet (including social media accounts) and other computer resources, where the employees have been advised that this may occur and the employee is using employer-supplied equipment and technology. 

Trade secrets and restrictive covenants

Intellectual Property

Who owns IP rights created by employees during the course of their employment?

An employer owns IP rights created by an employee in the course of their employment. In determining whether IP rights were created in the course of employment, Australian courts will ask “what was the employee employed to do?”, taking into consideration:

• any express contractual terms;
• directions given to the employee; and
• the employee’s day-to-day working activities.

Restrictive covenants

What types of restrictive covenants are recognised and enforceable?

The three main restrictive covenants recognised in Australia (applicable post-employment) are:

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

Non-solicitation covenants prevent employees from soliciting clients, customers, suppliers or colleagues (or attempting to do so).

Non-dealing covenants prevent dealing or doing business with anyone who has a business connection with the former employer (or attempting to do so).

Non-compete covenants prevent employees from working for a competitor or establishing their own business in competition with their former employer.

The terms of the restrictive covenant should include:

• the duration of the covenant;
• the geographical area in which it is to have effect; and
• the nature of the activities to which it applies.

A restrictive covenant is presumed to be unenforceable on the grounds of being contrary to public policy. However, a restrictive covenant will be enforced where the former employer can establish that it was reasonable at the time that it was agreed. Whether a restrictive covenant is reasonable will depend on whether the employer can show:

• that it has a legitimate interest in imposing the restrictive covenant; and
• that the scope of the restrictive covenant is no wider than is reasonably necessary to protect that interest.

In New South Wales, the Restraints of Trade Act 1976 allows a court to read down a restraint which would otherwise be unenforceable so that it becomes reasonable and, as a result, enforceable.

Non-compete

Are there any special rules on non-competes for particular classes of employee?

Any employment contract may include a non-compete clause. A non-compete clause is more likely to be enforceable in circumstances where the former employee had access to confidential information regarding the former employer’s business during their employment or developed client, customer or supplier connections during their employment.

In order to improve the likelihood of a court enforcing a non-compete clause, its operation should be limited by geographical region and duration.

For further information see above regarding the Restraints of Trade Act.

Discipline and grievance procedures

Procedures

Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

There are no specific laws that an employer must comply with in relation to discipline and grievance procedures. However, an employment agreement, policy or enterprise agreement may contain grievance procedures or disciplinary processes that must be followed.

If a disciplinary or grievance procedure does not operate fairly or reasonably, an employee may be able to make an unfair dismissal claim under the Fair Work Act.

There is a variety of legislation which provides for disciplinary and grievance procedures in the public sector.

Industrial relations

Unions and layoffs

Is your country (or a particular area) known to be heavily unionised?

Union membership in Australia has been in decline for many years, with only about 15% of employees being current members of a union.

Trade unionism remains relatively strong within the public sector, with around 40% of public sector workers being union members compared with approximately 10% of workers in the private sector.

In the private sector, the influence of unions is most prevalent in particular industries, including:

• construction;
• transport;
• mining;
• maritime;
• manufacturing;
• education; and
• health. 

What are the rules on trade union recognition?

To have the rights given to unions under workplace laws, a union must be registered under the Fair Work (Registered Organisations) Act 2009 (Cth). This legislation governs, among other things:

• eligibility for registration;
• union representation rights; and
• rules about the conduct of union officers and employees.

A representative of a registered union which has the right to represent relevant employees may act as a bargaining representative for employees seeking to negotiate an enterprise agreement with an employer. The employer is required to recognise and bargain with the representative.

What are the rules on collective bargaining?

At the workplace or enterprise level, agreements are bargained between employers and employees (often through bargaining representatives) or between employers and unions directly in the case of genuinely new enterprises.

The Fair Work Act contains comprehensive rules concerning how bargaining should occur, including:

• the commencement of bargaining;
• conduct during bargaining (eg, bargaining must be undertaken in good faith);
• the content of enterprise agreements; and
• how an enterprise agreement must be made and approved by the Fair Work Commission (FWC).

For an enterprise agreement to be approved, it must pass the ‘better off overall’ test, which means that the FWC is satisfied that each award-covered employee will be better off overall under the proposed enterprise agreement than if the relevant award applied. 

Termination

Notice

Are employers required to give notice of termination?

An employer must provide an employee with the minimum notice required under the National Employment Standards (NES) to terminate their employment. The minimum notice period varies depending on an employee’s length of service and age (except for cases of serious misconduct, when no notice is required). However, an enterprise agreement or an employment contract may provide for a longer notice period.

Redundancies

What are the rules that govern redundancy procedures?

If an employee’s employment is terminated due to their role becoming redundant, they may be entitled to redundancy pay under the NES of between four and 16 weeks’ pay, depending on length of service. However, an enterprise agreement or an employee’s employment contract may provide for greater redundancy pay.

An unfair dismissal claim cannot be made if the termination of employment is a ‘genuine redundancy’, which means that:

• the employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
• the employer has complied with any obligation imposed by an applicable modern award or enterprise agreement to consult about the redundancy.

An individual’s dismissal is not a case of genuine redundancy if it would have been reasonable in the circumstances for the person to be redeployed within the employer’s business or an associated entity of the employer.

Are there particular rules for collective redundancies/mass layoffs?

The rules relating to individual redundancies also apply to collective redundancies and mass layoffs. Employers should also be aware that modern awards and enterprise agreements generally include specific consultation obligations regarding the implementation of major workplace changes (including any proposed redundancies). These consultation obligations require employers to consult with employees (or their representatives) and consider the employees’ responses to any proposed redundancies. The Fair Work Act also includes notification and consultation obligations, which can apply in circumstances where the employment of 15 or more employees is to be terminated due to their roles becoming redundant, and where employees are on unpaid parental leave. 

Protections

What protections do employees have on dismissal?

Employees have a range of protection on dismissal, which may result in claims arising from the termination of their employment. These may include claims for:

• breach of contract if the termination of their employment is not in accordance with their employment contract (eg, insufficient notice of termination or pay in lieu is provided);
• unfair dismissal (because either the process followed or the reason for the termination meant that it was harsh, unjust or unreasonable);
• unlawful discrimination if the termination of their employment is for an unlawful reason (eg, because of their age or sex); and
• adverse action in breach of general protections, which is where an employee’s employment is terminated because they have a workplace right or have exercised a workplace right (eg, if their employment is terminated because they joined a union, raised a work health and safety concern or requested unpaid parental leave).

Courts/tribunals

Jurisdiction and procedure

Which tribunals or courts have jurisdiction to hear complaints?

There are a number of avenues available to employees making a claim. The particular forum with jurisdiction to hear the complaint will depend on the nature of the claim.

While the Fair Work Commission (FWC) is the key forum for unfair dismissal claims, other claims may be decided in:

• the Federal Court;
• the Federal Circuit Court;
• state or territory courts; and
• anti-discrimination tribunals at both the state and federal level.

The Fair Work Ombudsman may also investigate or enforce compliance with workplace laws.

In some circumstances an employee may have the choice of making their claim in either the state or federal jurisdiction (eg, certain claims of unlawful discrimination). However, the employee cannot pursue the same grievance in separate jurisdictions.  

What is the procedure and typical timescale?

The procedure and timeframe vary depending on the type of claim. For example, in the case of an unfair dismissal or a general protections claim involving dismissal, an employee has 21 days after the termination of their employment to file an application with the FWC. For other claims, the limitation period may be up to six years depending on the precise nature of the claim being made. 

Appeals

What is the route for appeals?

The rules for appeal vary depending on the court or tribunal which made the decision subject to appeal.

For example, in the FWC, a party may lodge an appeal within 21 days of the decision being made. The FWC may then grant permission for the party to proceed with the appeal, with a key consideration being whether it is in the public interest to do so.

On appeal, a decision may be confirmed, quashed or varied.

While not common, it is possible for decisions to be the subject of various appeals all the way to the High Court of Australia – the highest court in the Australian judicial hierarchy. There has been a trend towards increased litigation in the superior courts for workplace relations matters in recent years.