Doing Business in Australia 2015: Employment Law

There are both Federal and State laws governing industrial relations in Australia. Federal laws override the laws of a State, to the extent of any inconsistency.

Federal laws – The Commonwealth Fair Work Act 2009 (FW Act) is the primary piece of industrial relations legislation. There are also separate equal opportunity, anti-discrimination and privacy laws.

The FW Act applies to all private sector employees throughout Australia, except for some in Western Australia (who are governed by State laws).

State laws – State industrial relations laws principally cover state public sector (government) employees. However, State laws apply to private and public sector employers in relation to matters such as long service leave (but not other forms of leave), work health and safety, workers’ compensation, workplace surveillance and anti-discrimination (which has dual State/Federal coverage). Employees in Western Australia are also governed by State workplace legislation.

Minimum terms and conditions of employment

The National Employment Standards (NES) under the FW Act set the minimum conditions of employment for most private sector employees. The NES deal with: 

  • maximum hours of work (38 plus reasonable additional hours)
  • annual leave (4 weeks’ paid leave each year)
  • personal and carer’s leave (10 days total each year)
  • compassionate leave
  • unpaid parental leave (12 months plus the right to request an additional 12 months)
  • flexible work arrangements for parents and carers
  • community service leave (including jury service)
  • public holidays
  • notice of termination and redundancy (sliding scales based on age and length of service)
  • long service leave (limited application, but dealt with by State laws) and
  • information in the workplace.

Employers cannot ‘contract out’ of the NES.

Long service leave – Different laws in each State govern long service leave. After completing a specific period of continuous service with an employer (eg 10 or 15 years), employees are entitled to an extended period of paid leave (eg in NSW, 2 months after 10 years).

Paid parental leave – Parents of children born or adopted on or after 1 January 2011 are entitled to take leave, while receiving the national minimum wage, for up to 18 weeks. The pay is funded by the Federal government and is means tested. The leave is in addition to other entitlements including employer-funded paid parental leave which is often offered as a matter of company policy.

Awards and agreements

Terms and conditions of employment can be subject to minimum standards and controlled through regulated collective / enterprise agreements and awards.

Awards – Federal ‘awards’ under the FW Act contain base level entitlements determined by the Federal industrial tribunal. They operate in conjunction with the NES and either apply to specific occupations or to specific industries. State-based awards (typically industry based) apply in the State public sectors.

Enterprise agreements – A collective enterprise agreement can be negotiated directly with employees or with employee unions. They are usually employer specific and contain pay and conditions to suit the business, which are over and above those in the relevant award. They override an award to the extent of any inconsistency.

Taxation and superannuation

Taxation – There is a raft of taxation legislation in Australia relevant to employers including:

  • payroll tax levied by state governments on the payroll paid to employees in that state
  • income taxation “pay as you go” (PAYG) deductions from employees’ remuneration which are remitted to the Australian Taxation Office (including levies such as a 2% “Medicare” levy in respect of Australia’s national health scheme)
  • fringe benefits tax which arises from most non- monetary forms of remuneration which are employee benefits such as car parking.

Different tax rates may apply to amounts paid to employees upon the termination of their employment, depending upon the type of payment (ie wages, leave etc) and type of termination (eg a redundancy where a position is no longer needed).

Superannuation/self-funded pension – The superannuation guarantee legislation requires employers to make compulsory superannuation contributions on behalf of employees, currently at the rate of 9.5% of employees’ “ordinary time earnings”. Employees are generally able to choose the superannuation fund into which contributions are made. Australian workers are unable to access their superannuation benefits until they reach a minimum age (generally, age 65) or meet other conditions for payment (eg invalidity following illness or injury). 

After permanently leaving Australia, and the expiry of a temporary resident visa, expatriate employees can apply for a refund of their superannuation (subject to withholding tax and other conditions).

Termination of employment

Termination of employment with notice – Employment is usually terminable by notice given by either party. The FW Act provides for a scaled notice period on the termination of employment, up to a maximum of 5 weeks. 

Termination of employment without notice – Termination without notice (known as “summary dismissal”) is only available in limited circumstances where an employee has committed an act of serious or wilful misconduct.

Redundancy – An employee’s position is “redundant” where the employer no longer requires that role to be done by anyone, or when an employer becomes insolvent or bankrupt. Redundancy pay (sometimes called severance pay) is separate from notice, and a minimum entitlement is prescribed in the NES and in some awards and enterprise agreements..

Types of employment related litigation

Claims under the FW Act – The FW Act provides two primary grounds for an employee to challenge dismissal:

  • Unfair dismissal claims – An ‘unfair dismissal’ occurs when the employee’s dismissal is ‘harsh, unjust or unreasonable’. This includes considering if there was a valid reason for the dismissal, and if it was procedurally fair. In a successful challenge, an employee can be reinstated with full back pay or receive up to six months’ remuneration as compensation. High income earners ($133,000 as at 1 July 2014) are generally not able to make unfair dismissal claims.
  • General protections claims – The FW Act includes general protections of workplace rights (including entitlements under awards or enterprise agreements) and freedom of association (the right to join a union), and prohibits unlawful workplace discrimination. An employer cannot take adverse action, including injuring an employee in their employment (a wide concept that may range from incorrect pay to demotion or loss of opportunity) or dismiss an employee, in contravention of the general protections.

Stop bullying jurisdiction – The FW Act allows a worker at work in certain organisations (generally corporations) to apply to the Fair Work Commission for a “stop bullying order”. The order cannot be for compensation. A person who breaches a “stop bullying order” may receive a fine.

Claims for damages for breach of contract – Commonly these claims are for damages in relation to an alleged breach of contract arising from a failure to give “reasonable” notice of termination. They are often pursued by senior employees who do not have access to unfair dismissal claims because they earn above the requisite remuneration cap.

Other avenues for relief – Other avenues for relief may include a claim for underpayment of wages, a complaint, or claim for compensation arising from sexual harassment, victimisation or other unlawful discrimination or a claim for damages arising from breaches of the Australian Consumer Law for misleading or deceptive conduct.

Work health and safety

Australia has comprehensive legislation requiring employers (or “persons conducting a business or undertaking”) to ensure the health and safety of employees, other workers and visitors to their work sites. 
The obligation is strict and non delegable. It is criminal legislation, and officers of businesses can be personally liable. Large fines are imposed for breaches, up to a maximum of $3 million in most states.