Recent developments in employment law

The latest issues, decisions and proposed changes impacting business and workplace risk

2025 and beyond: more employment changes taking effect

By Tarsha Gavin and Ruby Evans

Wage theft laws, harsher penalties for underpayments, and changes to super

The new year has seen more amendments to the Fair Work legislation taking effect, while further changes to superannuation laws are also on the horizon.

Criminal wage theft

From 1 January 2025, wage theft has been criminalised under the Fair Work Act 2009 (Cth) (FW Act).

Under the new wage theft provisions, employers are guilty of a criminal offence if they intentionally underpay their employees amounts owed under the FW Act, a Fair Work instrument or a transitional instrument. The new criminal offence attracts significant maximum penalties, including:

• for companies, the greater of $8.25 million or three times the underpayment amount; and
• for individuals, up to 10 years imprisonment and/or the greater of $1.65 million or three times the underpayment amount.

For more information, see our November Insight.

Increase in civil penalties for underpayments

From 1 January 2025, the maximum civil penalties available for wage underpayments have also increased. The new laws mean that for companies (excluding small business employers), the maximum penalty for such contraventions will be the greater of the following:

• 1,500 penalty units or, for serious contraventions, 15,000 penalty units; and
• three times the value of the underpayment (if the applicant seeks this penalty option).

Superannuation changes

From 1 July 2025, the minimum superannuation guarantee rate will increase to 12%. This is the last of the legislated incremental increases to the superannuation guarantee rate.

From 1 July 2026, 'Payday Super' is expected to commence. From this date, employers will be required to make employees' superannuation guarantee contributions at the same time as paying their salary or wages. Currently, employers are required to make super guarantee payments quarterly and by the quarterly due dates set by the Australian Taxation Office in order to avoid the super guarantee charge. Treasury has suggested that this change will make it easier for employees to track their entitlements and encourage better payroll management from employers.

This year, it will be important for employers to start preparing for the incoming Payday Super, including considering changes to current payroll systems and processes.

$1.44 million in damages awarded for psychiatric injury after dismissal 

By Tegan Ayling, Steve Hatzipavlis and Jaden Ametson

The High Court has clarified that damages can be awarded for psychiatric injury resulting from a breach of an employment contract after finding that an employer breached a workplace policy that was incorporated into the contract.¹

Key takeaways

• Employers should exercise caution when referencing policies in employment contracts to avoid unintentionally creating contractual rights and obligations, which may ultimately result in damages if a breach occurs.
• As well as ensuring procedurally fair investigation and disciplinary processes, employers should consider whether their own policies or procedures require that certain steps are taken in a disciplinary matter and, if so, whether those policies or procedures are being followed in practice.

Background

Mr Elisha was employed by Vision Australia Limited (Vision). In May 2015, Vision stood Mr Elisha down to investigate an allegation of aggressive and intimidating conduct that occurred two months earlier at a hotel while on a work trip. In its letter, Vision directed Mr Elisha to attend a meeting to respond to allegations of serious misconduct relating exclusively to the hotel incident. The letter enclosed a copy of Vision's Disciplinary Procedure (Procedure), which required that allegations of a more serious nature be provided in writing to an employee before a formal disciplinary meeting at which the employee would be given an opportunity to respond. During the meeting, Mr Elisha responded to the allegations in the letter about the hotel incident.

Two days after the meeting, Vision terminated Mr Elisha's employment. One of its reasons for the termination was that Vision had accepted the allegation of aggressive conduct at the hotel because 'that's exactly what [Mr Elisha] does', relying upon a separate unsubstantiated allegation of an existing 'pattern of aggression'. Following his dismissal, Mr Elisha was diagnosed with a major depressive disorder, leaving him with no capacity to work in the foreseeable future. Mr Elisha commenced proceedings against Vision, claiming damages for psychiatric injury caused by Vision's breach of contract because it did not follow the Procedure.

The decision

The High Court decided that Vision's investigation and disciplinary process was in breach of the Procedure, including because the decision-makers:

• had already made conclusions about the allegations against Mr Elisha before hearing his response; and
• took into account prior unrelated allegations of a 'pattern of aggression' by Mr Elisha that had no proper foundation or substance and that were not put to Mr Elisha for his response.

The High Court agreed that if a proper process had been undertaken Mr Elisha's employment would not have been summarily terminated.

The High Court needed to consider whether the Procedure was incorporated as a term of Mr Elisha's employment contract to determine the breach of contract question and then whether damages for psychiatric injury were available for breach of an employment contract. The High Court confirmed that:

• based on the wording in Mr Elisha's employment contract and the Procedure, the Procedure was incorporated into the employment contract. This meant Vision's breach of the Procedure was a breach of contract; and
• although the precise psychiatric injury suffered by Mr Elisha did not have to be contemplated by Vision, it was reasonable to expect that the impact of Vision's flawed process and the consequences of that created a serious possibility of psychiatric injury. Vision also contemplated those potential consequences in its own procedures by requiring that certain processes be followed, including support and counselling in relation to the dismissal process.

The High Court concluded that damages for psychiatric injury were recoverable as a result of Vision's breach of contract and reinstated the $1.44 million damages awarded to Mr Elisha in earlier proceedings.

When the BOOT doesn't fit: Fair Work Commission rejects proposed enterprise agreement

By Sonia Millen and Jessica Hodgson

Proof of informed and representative voters important for establishing a genuine agreement to an enterprise agreement

The Fair Work Commission (FWC) rejected a proposed enterprise agreement on the basis that it was not genuinely agreed to by the employees who would be covered by it.²

Key takeaways

When negotiating an enterprise agreement, employers should take appropriate steps to ensure that:

• employees have a sufficient interest in the terms of the agreement and are sufficiently representative of the employees that would be covered by it, including that they are employed across the full range of classifications in the agreement (as far as possible), particularly where certain classifications are worse off under the agreement compared to the applicable award;
• employees understand the effect of the proposed agreement, including how the agreement will alter their existing entitlements and terms and conditions of employment, including any that are less favourable than those in the award; and
• the proposed agreement passes the better off overall test (BOOT) for all the classifications in the agreement, even if no employees are currently employed in some of the classifications that the agreement seeks to cover.

When has an agreement been 'genuinely agreed' to?

Decision

The FWC dismissed an application to approve the Hawthorne Plant and Logistics Pty Ltd Enterprise Agreement 2024 (Agreement) because it did not pass the BOOT for all employee classifications, and the FWC was not satisfied that the agreement was genuinely agreed to by the employees.

Relevantly, section 188 of the Fair Work Act (FW Act) sets out the factors the FWC must consider when determining whether an enterprise agreement has been genuinely agreed, including (amongst others):

• whether employees requested to approve the agreement have a sufficient interest in the terms of the agreement and are sufficiently representative, having regard to the employees the agreement is expressed to cover; and
• whether the employer has taken all reasonable steps to explain the terms of the agreement and the effect of those terms to employees.

Sufficient interest and sufficiently representative

The Commissioner's primary concern was that the employees entitled to vote were not employed across the full range of classifications covered by the Agreement. Namely, at the time of the ballot, Hawthorne Plant and Logistics Pty Ltd (HPL) did not have any employees employed in two of the lower-level construction worker classifications. These concerns were heightened when considered in light of the fact that these classifications were the most disadvantaged under the proposed agreement, including the applicable rates of pay under the agreement that failed the BOOT.

HPL contended that the enterprise had no 'regular use' for the employees in the lower-level classifications. However, the FWC found that the Agreement 'does provide for employment at those levels' and it would remain open to HPL to increase the use of those employees during the life of the Agreement. This was significant because such employees would be worse off under the Agreement compared to the award (in the absence of undertakings being made by HPL) and yet had no representation in voting.

Explanation of the Agreement

The FW Act requires employers to take all reasonable steps to explain the terms of a proposed agreement and the effect of those terms to the relevant employees. This requirement has a 'protective purpose' of ensuring that employees understand how their wages and working conditions will be affected if they vote in favour of an agreement, enabling them to make an informed decision.

The FWC found that HPL's explanatory document had significant deficiencies, including:

• no information regarding existing entitlements;
• no assessment of whether the proposed entitlements were more or less beneficial than those under the applicable award (for example, omitting the fact that employees would not receive annual leave loading under the Agreement); and
• no explanation of the effect of the terms of the Agreement, such as the fact that two classifications would be worse off against the award (in the absence of undertakings).

The FWC concluded that without sufficient representation and explanation, the Agreement could not be genuinely agreed to and therefore was not capable of being approved.

When does bullying occur 'at work'? 

By Sayomi Ariyawansa and Anastasia Hatzisarantinos 

Recent anti-bullying decisions

The Fair Work Commission (FWC) has recently considered the meaning of 'at work' within the anti-bullying provisions of the Fair Work Act (FW Act).

Key takeaways

• An employee who is absent from work on workers' compensation when bullying conduct has occurred may be considered not 'at work' for the purposes of an anti-bullying application brought by them.
• The bullying conduct of a perpetrator may still be considered bullying occurring at work even where the bullying conduct continues to be engaged in by the perpetrator while they are on leave.

Meaning of 'at work'

In Application by Ms Tammy Whitnall-Comfort (Whitnall-Comfort),³ the FWC rejected a worker's request to make stop bullying orders where the alleged bullying occurred while she was absent from work on workers' compensation. In Application by Kavita Sharma (Sharma),⁴  the FWC made stop bullying orders in circumstances where part of the alleged bullying occurred while the perpetrator was on leave – in that case it was not contested that at all relevant times, the applicant was 'at work'.

Section 789FF of the FW Act allows the FWC to make orders to stop bullying if it is satisfied that the worker has been bullied 'at work', and there is a risk that the worker will continue to be bullied 'at work'.

A worker is not 'at work' if they are absent from work on workers' compensation

In Whitnall-Comfort, the applicant alleged that other employees were constantly talking about her and laughing at her while she was on workers' compensation, and discussed highly confidential and personal information about her, including in relation to 'her WorkCover'.

The FWC decided that the applicant was not 'at work' when any of the alleged bullying behaviour occurred, for the reasons that:

• she was absent on workers' compensation at all times the alleged bullying occurred; and
• during the period of absence, she was not performing any work for her employer or engaging in any other employer-authorised or permitted work activity.

This provided a sufficient basis for the FWC to reject her application.

A perpetrator need not be at work at the time they engage in bullying

In Sharma, the applicant alleged that she was bullied by an individual in her workplace. The bullying manifested in constant questioning of the applicant's capabilities, hostile and demanding emails causing stress, repeated attempts to change her reporting structures and making unreasonable workload demands.

It was not contested that the applicant was 'at work' at all relevant times. However, it was observed that the perpetrator of the relevant conduct was on leave for 'stress and anxiety' for part of the time he engaged in bullying behaviours. This did not pose a barrier to the FWC making a finding in favour of the applicant – indeed, the fact that the perpetrator continued to engage in bullying while he was on leave was considered to be evidence of his 'relentless conduct'. The FWC found it was unlikely the conduct would cease and that there was a risk that the applicant would continue to be bullied at work.

In this case, the FWC made a stop bullying order with orders directed at the applicant's employer (in relation to implementing an anti-bullying policy and providing training), and orders directed at the perpetrator (including requiring him to cease communication with the applicant).

Home hazard no stumbling block for compensation claim

By Tegan Ayling and Bella Busby

Novel risk caused injury arising from employment

An employee has successfully claimed compensation for an injury sustained while working from home after tripping over a puppy fence.

Key takeaways

• Although working-from-home arrangements may now be an ongoing feature in Australian workplaces, it is essential to consider the work health and safety risks that might arise from such arrangements and put sufficient measures in place, striking a careful and appropriate balance between employee and employer responsibilities.
• This case is also a reminder for employers to remain vigilant and implement appropriate measures to ensure that work health and safety obligations are properly discharged in all types of workplaces (including onsite and remote locations).

What happened?

The employer, City of Charles Sturt in South Australia, initially approved an employee's request to work from home to care for a colleague's dog. The employee subsequently put up a 60cm fence in the doorway of her home office to keep the dog away from her pet rabbit.

During her morning break, the employee went to make a coffee in her kitchen. As she was climbing over the fence, she tripped and fell. The employee sustained injuries to her shoulder and knee, which required a hospital visit and subsequent treatment.

The employee made a workers compensation claim, which was initially rejected because the employment was not considered a significant contributing cause of her injuries.

However, the South Australian Employment Tribunal took a different view. The Tribunal considered the relevant legislation and the principle that compensation is not necessarily limited to circumstances where an employee is injured while actually completing a work task, but it extends to times when the employee is on an authorised paid break.

It was also relevant that, while the employee had already worked from home from time to time, following the COVID-19 pandemic, the employer expanded its working-from-home arrangements. At the time of the incident, the employer had been continuing to offer flexible working arrangements on an ad hoc basis and the employee had sought approval to work from home to look after her colleague's dog.

Although the employee had created a hazard in her workplace by putting up the fence and the specific risk of tripping over it was not a risk that was known to her employer, the possibility that she could slip and fall in her home should have been contemplated. Other than requiring a working-from-home checklist, the employee was responsible for ensuring a safe working environment in her home. In any event, prior to the incident, the employee had not completed a checklist, nor was she directed to do so when she requested to work from home to care for her colleague's dog.

Ultimately, the employee was working from home with approval from her employer. Since the injury occurred during an authorised paid break at the employee's workplace and the fence was part of that workplace, the injury arose out of her employment. The fence, being a workplace hazard, was a significant contributing cause of the injuries, and as a result, the Tribunal held that the employee was entitled to compensation.

Reluctance towards flexible working arrangements not constructive dismissal

By Sarah Lunny, Matt Stark, Sophie James

Hesitation about ongoing flexible work arrangements did not force resignation

The Fair Work Commission (FWC) has decided that an employer did not 'force' an employee to resign by requiring him to request flexible working arrangements every three months, seeking information in support of those requests and expressing hesitation about approving future requests.⁵

Key takeaways

• This decision is a reminder that there is a 'high bar' to establish constructive dismissal, with the employee bearing the burden of proving that they had no real choice but to resign.
• It is reasonable for an employer to request further information from an employee where there is a change in the employee's circumstances that justifies a flexible working arrangement.

Background

The employee was employed by Maxxia Pty Ltd (Maxxia) as a Customer Care Consultant. As a full-time carer for his wife, it was not disputed that the employee was entitled to request flexible working arrangements under the Fair Work Act (FW Act).

Over a 12-month period, the employee submitted four requests for flexible working arrangements, which included working from home and a compressed working week. Although Maxxia granted each of the requests, it required the employee to lodge a new request every three months, which the employee found frustrating as it made it difficult to arrange his wife's ongoing care. Additionally, before granting two of the requests, Maxxia asked the employee to provide supporting information about changes to his circumstances.

As the expiry date of his fourth flexible working arrangement approached, the employee made a verbal request for a fifth flexible working arrangement. In response, his manager told him that after a period of 12 months, it 'becomes harder' to approve a further request. The employee interpreted this to be an outright refusal of his request and resigned the following day.

Decision

The employee lodged a general protections application against Maxxia, alleging that he was constructively dismissed. Maxxia raised a jurisdictional objection to the application, arguing that the applicant was not dismissed because he had resigned.

Acknowledging that it is a high bar to prove constructive dismissal, the FWC upheld the jurisdictional objection, deciding that the employee's evidence did not establish he was forced to resign.

Although the FWC acknowledged that the employee was under stress due to his caring responsibilities, which was compounded by the need to submit multiple flexible working arrangement requests, the FWC commented that overall Maxxia had shown a 'great level of sympathy' towards the employee. The FWC found that based on Maxxia's flexible working arrangements policy and its past approvals of the employee's requests, it was probable that the employee's verbal request would have been accepted had he not resigned the following day. The FWC also found that it was 'entirely reasonable' for Maxxia to request additional information in support of new flexible working arrangements requests, despite the employee interpreting this as 'pushback' against the requests.