Macpherson Kelley

Forums For Adjudicating Employment Disputes

The Fair Work Commission (‘FWC’) (a Commonwealth, Australia-wide, tribunal) has jurisdiction to hear industrial and employment disputes, including unfair dismissal claims, workplace bullying claims and broader based employment claims called ‘general protections’ claims.

Contractual claims can be brought in the civil courts of the relevant State or Territory. Claims relating to discrimination in employment can be brought in specialist administrative bodies and/or tribunals in the States or Territories or in the Federal courts. Claims of misrepresentation in establishing the employment relationship can be brought in the Federal or State courts.

The Main Sources Of Employment Law

Australia is a common law jurisdiction with its own federal court system (including, relevantly, the Federal Court of Australia and the Federal Circuit Court). Further, the six States and two Territories each have their own court systems. All employment arrangements are governed by general common law principles of contract law. There are, however, various legislative requirements which override those general principles in some instances. The main sources of legislation are the Fair Work Act 2009 (Cth) (‘Fair Work Act’) and State and Federal anti-discrimination, workplace compensation and occupational health and safety laws.

Although not legislation, ‘enterprise agreements’ (generally, collective agreements between employees, employer(s) and any relevant union(s)) or ‘awards’ (industry or occupation-based instruments) may also impose minimum terms and conditions of employment.

National Law And Employees Working For Foreign Companies

The statutory rights under State and Federal law will apply to all individuals physically working in Australia, regardless of their nationality, and regardless of the law governing their contract of employment.

National Law And Employees Of National Companies Working In Another Jurisdiction

Generally, statutory rights do not apply when the employee is physically based outside Australia, however there are some exceptions to this. Contractual law can still apply based on common law principles.

Data privacy

Federal privacy laws, including the Privacy Act 1988 (Cth), regulate the collection and handling of personal information. The minimum privacy standards are known as the Australian Privacy Principles (‘APPs’). The APPs apply to all private sector businesses with an annual turnover of more than AU$3 million, all private health services providers nationally, a limited range of small businesses and all Australian government agencies. However, the APPs do not generally apply in relation to an employee’s personal information if the information is used for something that is directly related to the employment relationship between the employer and the employee. Employers are required to make and keep accurate and complete records of certain information in relation to their employees. The required records include matters such as employees’ hours worked and wages paid. These must be kept for 7 years.

Legal Requirements As To The Form Of Agreement

There is no legal requirement for an employment contract to be in writing. However, some awards prescribe that certain matters relating to the employment must be agreed in writing.

Mandatory Requirements
  • Trial Period
  • An employer has no legal obligation to provide a new employee with a trial period, otherwise known as a ‘probationary period’. However, the Fair Work Act imposes a minimum period of six months continuous employment (12 months for an employer with fewer than 15 employees, including associated entities) before an employee has the right to make an unfair dismissal claim (addressed below).

  • Hours Of Work
  • The National Employment Standards provide that the maximum weekly ordinary hours of work for a full-time employee are 38 (with the potential to average hours over up to a 6-month period). An employer can request an employee to work reasonable additional hours. There is no limit on the number of additional hours that can be worked, so long as the additional hours are ‘reasonable’, taking into account certain prescribed considerations.

  • Special Rules For Part-time Work
  • A part-time employee typically works regular hours each week. However, the number of hours worked is less than the maximum weekly ordinary hours of 38 hours.

    Most leave entitlements are effectively pro-rated based on a part-time employee’s lesser ordinary hours (as compared to a full-time employee).

    Enterprise agreements and awards may also contain specific provisions with respect to part-time employees.

  • Earnings
  • An employer must pay an employee at least the national minimum wage –($19.84 per hour as at 1 July 2020 - 30 June 2021 or $753.80 per 38 hour week (before tax)). Casual employees caught by the national minimum wage receive a loading of at least 25% on top of the national minimum wage for casual work.

    The FWC reviews the national minimum wage annually.

    There are different rates depending on the type of work performed and, in the case of workers below 21 years of age, the age of the employee.

  • Holidays/Rest Periods
  • Permanent employees accrue 4 weeks of ’annual leave’ per year of service. The entitlement accrues progressively and up to an indefinite balance. Accrued unused annual leave must be paid out upon termination of employment.

    There are also paid public holidays, and various compulsory daily rest periods and breaks, which an employer must observe.

    State and Territory laws also provide for paid ‘long service leave’ where certain conditions are met. Generally, employees will be entitled to such leave where they have worked for the same employer continuously for a requisite period, or in some cases for different employers within the same industry for the requisite period. After meeting a threshold period of continuous service, unused long service leave entitlements must be paid out on termination.

  • Minimum/Maximum Age
  • An employee is not required to retire at a certain age, and it is generally unlawful discrimination to require an employee to retire because they have reached a certain age. Maximum age limits apply only to certain statutory appointments in the public sector. Otherwise, age discrimination is proscribed by Federal and State laws.

  • Illness/Disability
  • Employees have a right to access personal/sick leave if suffering from an illness or injury. This entitlement is addressed in more detail below.

    Discrimination in employment on the basis of illness or disability is proscribed by legislation. Discrimination is not unlawful, however, if the employee cannot fulfil the inherent requirements of the position without the employer having to make unreasonable adjustments.

  • Location Of Work/Mobility
  • The employee’s normal place of work is not required to be specified by the employer in writing. Mobility clauses can be included in the contract of employment. Where the job requires travel to other temporary locations, it is normal for the employer to reimburse all reasonable travel expenses.

  • Pension Plans
  • Currently an employer must either contribute an amount equal to 9.5% of an employee’s ‘ordinary time earnings’ to a compliant superannuation fund (subject to a maximum contributions base) or pay a tax of an equivalent or higher amount. The level of contribution is set to increase to 10% of ordinary time earnings from 1 July 2021.

    An employer must provide a new employee with information giving them an option to nominate the superannuation fund of their choice or the name of the fund to which the employer will make contributions by default.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • A range of “family-friendly” rights exist, including unpaid parental/adoption leave (see below), domestic violence leave, and the ability to seek flexible working arrangements in certain circumstances. For some of these rights, employees must have completed 12 months of service to qualify.

  • Compulsory Terms
  • In addition to a minimum rate of pay (see above), the National Employment Standards include that all permanent employees are entitled to: work no more than a maximum of 38 ordinary hours work per week plus reasonable additional hours, up to 2 years of unpaid parental leave, 4 weeks paid annual leave per year, 10 days of paid personal/carer’s leave (sick leave or carer’s leave) per year (pro-rated for part-time employees) and if exhausted up to 2 days of unpaid carer’s leave, 2 days of paid compassionate leave, 5 days of unpaid family and domestic violence leave, unpaid leave to participate in voluntary emergency management activities, paid leave to undertake jury service, paid long service leave (generally calculated based on 2 months per 10 years of service), paid public holidays, up to 5 weeks’ notice of termination of employment (depending on age and length of continuous service), and up to 16 weeks redundancy pay if an employee is dismissed because their position became redundant. Only some of these compulsory entitlements apply to casual employees.

    Employers must also give all new employees the “Fair Work Information Statement” and also provide casual employees with the “Casual Employment Information Statement”, both prepared by the Fair Work Ombudsman - an Australian Government agency with powers to prosecute employers who do not comply with their statutory obligations.

    Employers are also required to offer regular casual employees conversion to full-time or part-time employment where the employee has been employed for 12 months or more and during the last 6 months, worked a regular pattern of hours on an ongoing basis, unless there are reasonable business grounds for not making the offer.

  • Non-Compulsory Terms
  • The employer and the employee are free to agree to any other terms in addition to the compulsory provisions, provided that these terms are no less favourable than the compulsory terms set out above, certain other statutory rights and any applicable terms under an award or enterprise agreement.

Types Of Agreement

All employment relationships are contractual in nature, whether or not the terms have ever been reduced to writing. Contracts of employment (whether express or implied) exist in several different forms: maximum or fixed term, permanent full-time or part-time, casual.


There are rules relating to secrecy and confidentiality of employer information that are implied into the employment relationship.

During the employment relationship an employee is under an implied duty to respect the confidentiality of the employer’s commercial and business information. Therefore, information that an employee is expressly told is confidential, or obviously is confidential, is protected without covenant.

The employee remains bound by the implied duty of confidentiality, after the employment relationship has ended, so long as the information remains confidential in nature. In addition to the implied duties, an employer may include in the employment contract an express term specifying the type of information that it considers is confidential, and therefore protected from improper use or disclosure. Many employers also include post-employment restrictive covenants as a means of protecting confidential information (see below).

Ownership of Inventions/Other Intellectual Property (IP) Rights

In the absence of any express contractual terms, copyright legislation confers on the employer ownership of copyright in any work created by an employee performing their duties in the course of employment. There is no equivalent provision concerning ownership under patent, design or trademark law. In such a case, the general rule is that an employer owns what has been “created in the course of employment” unless there are express employment terms to the contrary. Ultimately, the question of ownership falls to a Court to determine whether what has been created was “created in the course of employment” and whether there are other implied contractual terms conferring ownership in the circumstances. Employers generally (and should) include an express clause in the employment contract conferring ownership on the employer of all types of IP to avoid costly litigation to determine this.

Pre-Employment Considerations

There are no compulsory pre-employment considerations, other than with respect to relevant migration laws (see below).

Employers may require applicants to undergo a National Police History Check and/or undertake that they are fit to perform the inherent requirements of the position.

Employers also have strict obligations to ensure the health and safety of employees so far as is reasonably practicable. Thus, in some circumstances, it may be reasonable for an employer to require a candidate to undergo a health and fitness or medical assessment before commencing employment.

Hiring Non-Nationals

An employer must ensure that it only employs individuals who are legally entitled to work in Australia.

Different requirements apply depending on the type of visa held by a foreign national. The relevant legislation provides for a number of visas permitting an employee to work, conferring either temporary or permanent residence of an overseas national. Overseas students have limited working rights in certain circumstances.

An employer will be liable to a civil or criminal penalty if they employ someone who is not entitled to perform the work for which they are engaged in Australia.

Hiring Specified Categories Of Individuals

While there are child labour and anti-discrimination laws regulating to the categories of employees that can be hired, there are no other laws that deal specifically with specified categories of individuals.

The Modern Slavery Act 2018 (Cth) requires certain entities that have an annual consolidated revenue exceeding $100 million in Australia to report on their structure, operations and supply chains and provide an assessment of their risk of exposure to modern slavery. The Act reflects an attempt to minimise exploitation of at-risk groups, including, for example, immigrants, children, women and those from non-English speaking backgrounds.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

There are specific rules relating to outsourcing, insourcing and where there is a change of outsourced service provider. All of these scenarios are regulated by the Transfer of Business provisions in the Fair Work Act. There is no requirement that the employee(s) carrying out the work in question automatically transfer with the work and thereby become employees of the new entity carrying out the work. Where employees do transfer to the new entity, some entitlements under the National Employment Standards will automatically carry over, while the new employer can decide if they want to recognise other entitlements. If an enterprise agreement (or other form of statutory collective bargaining agreement) applies to the workplace, the employee(s) will retain those terms and conditions after a transfer, unless the new employer obtains an order from the FWC that varies the terms and conditions or that the agreement ceases to operate.

The old employer under awards and or enterprise agreements may be required to consult with the affected employee(s) and any representatives prior to the transfer taking place.

Changes To The Contract

In accordance with common law contractual principles, an employer may not change any terms of the employee’s contract without the employee’s consent. Such consent may be express (by the employee agreeing to the change) or implied (by the employee continuing to work for the employer without protest for an appropriate period of time after being made aware of the change).

Any change of terms to which the employee does not consent will amount to a breach of contract. If the change is a significant one which goes to the root of the contract, the contract may be regarded as having been repudiated and the employee is entitled to accept such repudiation and treat the contract as at an end. In so doing, the employee may also claim that he or she has been constructively dismissed (and seek damages accordingly).

Change In Ownership Of The Business

When there is a change in ownership of a business (except a change merely in the shareholding ownership), the Transfer of Business provisions of the Fair Work Act are likely to apply. There is no requirement that the employees carrying out the work in question automatically become employees of the new owner of the business. Where employees are employed by the new employer, some entitlements under the National Employment Standards will automatically carry over, but the new employer can decide if they do not want to recognise others. If an enterprise agreement applies to the work, the employees will retain those terms and conditions unless the new owner obtains an order from FWC that the agreement is varied or ceases to operate.

All enterprise agreements and most modern awards include a consultation term which requires the employer to consult with employees to whom the enterprise agreement/award applies (and with applicable representatives) about major workplace changes that are likely to have a significant effect on their employment. These consultation obligations would apply to the old employer in a transmission of business such that they should consult with the affected employees (and their representatives) in the lead up to the change in ownership taking place.

Social Security Contributions

An employer must contribute an amount (currently 9.5%, but increasing to 10% from 1 July 2021) of an employee’s ordinary time earnings to a superannuation fund, subject to a maximum contributions base (which generally increases from 1 July each year). A superannuation fund may pay a pension or lump sum upon retirement and may also provide insurance for total and permanent disability, while in the workforce. There are no other social security contributions imposed on employers. The Department of Social Services administers a range of means-tested welfare benefits for the unemployed, low paid or sick employees and retirees.

Accidents At Work

Employers have a common law duty to have regard to the safety of their employees. Employers are also responsible under common law for loss and damage suffered by third parties caused by the acts of their employees where the employees were acting in the course of their employment.

In addition to common law duties, a number of additional obligations are imposed on employers through legislation (most significantly the various occupational health and safety statutes applying in each State or Territory). The Commonwealth and a majority of States and Territories have implemented a single set of model Work Health and Safety (WHS) laws. In addition, the employer also owes specific statutory duties to members of the public who are affected by the activities of the employer, and other people’s employees working on their premises. In some instances, a breach of the employer’s statutory duties may give rise to criminal and civil liability.

There are also statutory ‘workers compensation’ insurance schemes in each State and Territory that provide for payment of medical costs and compensation for loss of income due to illnesses or injuries suffered by workers as a result of their work, funded by premiums paid by employers. Employees may also be able to seek other common law damages if they are seriously injured.

Discipline And Grievance

Where an employee is eligible for protection from unfair dismissal (see further below), an employer’s failure to give the employee a warning about their poor performance and an opportunity to improve will likely render any performance-related dismissal unfair. Generally, a dismissal will also be unfair if the employer’s decision to dismiss the employee is made before giving the employee the opportunity to respond to the reason for the dismissal.

An employer is also prohibited by the Fair Work Act’s general protections provisions from taking adverse action against an employee, including by way of termination, because of certain proscribed reasons (including because the employee has made a complaint or inquiry in relation to their employment).

The Corporations Act 2001 (Cth) (‘Corporations Act’) also provides protection to whistle-blowers who report certain misconduct about companies and company officers. The Corporations Act prevents detrimental action being taken against an employee whistleblower.

More generally, employers are free to apply contractual rights and implement their own policies to deal with disciplinary practices and employee grievances, so long as those policies provide for procedural fairness.

Harassment/Discrimination/Equal pay

Employees are protected from discrimination on various grounds, including sex, age, sexual orientation, marital status, race, religion or belief, disability, family responsibilities, parental or carer status, political activity or belief, membership or non-membership of a trade union or other industrial activity.

Such discrimination is prohibited before the employment relationship commences (for example, in advertising for a job), during the employment (for example, in failing to promote) or on termination.

Prohibited conduct includes both direct discrimination (for example, refusing to employ a man or woman) and indirect discrimination (for example, by imposing a condition which is irrelevant to the job but is such that fewer people of a particular group can qualify).

An employer may take a ‘special measure’ for the purpose of promoting or realising substantive equality for members of a group with a particular attribute without discriminating. For example, by increasing employment opportunities for Indigenous persons.

Sexual harassment is a separate type of claim but is linked with discrimination. It involves unwanted conduct of a sexual nature that a reasonable person, having regard to all the circumstances, would have anticipated would have offended, humiliated or intimidated the victim.

There is no minimum period of employment for protection from discrimination or sexual harassment. Discrimination or sexual harassment can lead to a complaint to State of Federal human rights bodies and claims in anti-discrimination tribunals or the Federal Courts. There is no limit to the damages which can be awarded (and this may include ‘general damages’ for hurt, distress and humiliation). Compensation may be awarded for personal injury if the employee can show that the discrimination caused the harm.

In addition, persons alleging discrimination or sexual harassment may file claims with the FWC under the general protection provisions (referred to above).

Victimisation is a form of prohibited discrimination, which generally involves treating a person less favourably because they have complained (or intend to complain) about discrimination or sexual harassment, or because they have given evidence in relation to another person’s complaint. An employee must not be disciplined or dismissed, or suffer reprisals from colleagues, for complaining about discrimination or harassment at work or for being involved in an investigation concerning another person’s complaint.

The concept of equal pay is recognised by legislation, namely the Equal Pay provisions of the Fair Work Act. Those provisions are aimed at classes of work where there are differences in rates of remuneration between men and women where the work is of comparable value. Further, the Workplace Gender Equality Act 2012 (Cth) requires universities and private sector employers with more than 100 workers to report annually on how the organisation is performing against a set of ‘gender equality indicators’. These indicators include the composition of the organisation’s workforce and the extent to which men and women receive equal remuneration.

The Fair Work Act has a discrete jurisdiction to prevent bullying. The FWC has broad powers to make orders it considers appropriate, to prevent workplace bullying, known as a stop-bullying order, but it is not empowered to make an order requiring payment of a pecuniary amount or reinstatement. Bullying is also a breach of an employer’s primary duty to provide a safe place of work under occupational health and safety laws. A breach of those laws could lead to substantial fines and imprisonment. An employer may also be liable to make payments under worker’s compensation legislation, where the bullying results in a physical or mental injury.

Compulsory Training Obligations

There are no compulsory training obligations for employees generally, but some trades/professions impose their own standards/expectations.

Offsetting Earnings

It is possible for employers to off-set earnings against employee’s debts. However, the employer may only make a deduction from an employee’s wages if it meets certain requirements under the Fair Work Act. These requirements include that the deduction is authorised by a statutory or contractual provision or a term of an enterprise agreement or award, the employee has given his or her prior written consent to the deduction, and the deduction is principally for the benefit of the employee.

Payments For Maternity And Disability Leave

The Federal Government funded paid parental leave scheme provides eligible employees with up to 18 weeks of pay at the national minimum wage ($753.80 per week as at 1 July 2020 – 30 June 2021) and for 2 weeks of pay at the minimum wage for fathers or same sex partners of the mother of the child. In addition, many employers voluntarily (or as a result of collective bargaining) provide for paid parental leave funded by the employer.

Paid personal leave is available (as described earlier) if an employee cannot attend work due to an illness or injury.

Workers compensation schemes (as described earlier) provide for payments to employees if they are unable to work as a result of an illness or injury arising as a result of the employment.

Workers who are unable to work as a result of illness or injury not related to work may be able to access social security payments or, if they are injured as a result of a traffic accident, third party insurance schemes.

Compulsory Insurance

Employers are required to maintain workers compensation insurance under an approved policy with an authorised insurer, against liability for injury or disease sustained by employees during, and arising out of, their employment.

Absence For Military Or Public Service Duties

Employees are entitled to take leave for military or jury service duties or participate in voluntary emergency management activities (as described earlier).

Works Councils or Trade Unions

Employees have a workplace right to join or not join a trade union and to participate in activities as a representative of other employees. An employer who refuses to employ, dismisses or takes any other adverse action against a person because of such membership/non-membership, or industrial activity, is liable to prosecution and claims for damages. Where such claims are made, the employer must establish that the adverse action was taken for reasons that did not include the persons membership or non-membership of an industrial association or because of their decision to engage or not engage in certain industrial activities. Where an employee succeeds in such a claim, penalties may be imposed on the employer and any person involved in the adverse action.

Trade unions have a right to enter premises on 24 hours’ notice to hold discussions with employees during authorised breaks or to investigate suspected breaches of industrial instruments. An employer and union can agree on the location within an employer’s premises where a union may meet with the employees. In the absence of any agreement, the employee lunchroom is the default location for such meetings to take place.

In negotiations for an enterprise agreement, employers must bargain in good faith with bargaining representatives of employees, which can include a trade union. Where a union wants to bargain for an enterprise agreement, but the employer does not want to bargain, the union may make application to the FWC for a majority support determination. If a majority of the employees support the union’s involvement, the employer must recognise and bargain in good faith with the union.

Employees’ Right To Strike

There is no general right for employees to strike. However, certain immunities will be granted in respect of taking “protected industrial action”. Action may be protected industrial action if it is taken during enterprise bargaining negotiations. For industrial action to be protected, it must be taken after the nominal expiry date of an enterprise agreement has passed, and conducted strictly in accordance with statutory requirements, which include obtaining an order from the FWC to conduct a ballot beforehand and providing the employer with notice of the actual industrial action to be taken at least 3 working days before the action commences.

Employees On Strike

Employers can dismiss employees if they engage in industrial action that is not “protected industrial action”, but employers must not dismiss employees on such grounds where the action is “protected”.

There are strict limitations with respect to what employees may be paid during periods of industrial action.

Employers’ Responsibility For Actions Of Their Employees

Employers are generally responsible for the acts of their employees, except where an employee is acting wholly outside the course of his or her employment. In some circumstances, an employer may avoid vicarious liability for the actions of its employees if it can prove, on the balance of probabilities, that it took reasonable precautions to prevent certain conduct occurring.

Procedures For Terminating the Agreement

In all cases the termination of an employment contract must comply with the terms of the contract.

As stated earlier, certain employees are protected by the Fair Work Act’s unfair dismissal jurisdiction. A person who has been dismissed may bring an unfair dismissal application where they have completed a minimum employment period (6 or 12 months depending on the number of employees across all associated entities), they are not an irregular casual employee, and their employment is either covered by an award or enterprise agreement or their remuneration is below the high income threshold (AUS$153,600 in the year ending 30 June 2021).

Employees who are protected from unfair dismissal are entitled to make an application to the FWC for a remedy. In a claim of unfair dismissal, the FWC must take into account whether:

  • there was a valid reason for the dismissal related to the person’s capacity or conduct;
  • the employee was given a warning and opportunity to improve, among other things;
  • the employee had the chance to respond to the reason for dismissal before the decision to dismiss was made;
  • the dismissal was a harsh penalty to impose on the employee for the poor performance or misconduct; and
  • the employee was not unreasonably prevented from having a support person present at any discussions relating to the dismissal.

If the FWC finds that a dismissal was unfair, it may reinstate the employee (including making an order for payment of income lost as a result of the dismissal) or order the employer to pay up to 6 months’ remuneration as compensation.

Instant Dismissal

The employer can terminate employment by instant dismissal if the employee is guilty of serious misconduct. Even in this instance, where the employee is within a class of employees protected from unfair dismissal, the employer must still give the employee an opportunity to respond to the allegations of misconduct before making the decision to dismiss in order to satisfy the test of fairness (see above).

Employee's Resignation

The employment can generally always be terminated by the employee’s resignation. Normally the contract, or any applicable enterprise or award, will stipulate the notice period required.

Termination On Notice

The employer can terminate the employment on notice, subject to the potential exposures to a potential liability for claims such as an unfair dismissal claim (if relevant). The Fair Work Act sets out statutory minimum periods of notice (from 1 to 5 weeks) which will override any lesser contractual notice period. The length of the minimum period of notice is dependent on the period of continuous employment and whether the employee is over 45 years of age at the time notice is given.

If the employee’s contract of employment has not specified the amount of notice to be given by the employer, it may be implied that the contract can be terminated on some other reasonable period of notice. Factors taken into account in determining what is reasonable include the employee’s age, length of service, seniority, level of remuneration, what the employee gave up coming to the position, and any established industry practice.

Termination By Reason Of The Employee's Age

Termination of employment by reason of the employee’s age is prohibited by anti-discrimination legislation and the Fair Work Act.

Automatic Termination In Cases Of Force Majeure

The contract may be deemed “frustrated” where intervening events make its continued performance impossible, although instances of this are rare. Death of the employee or complete destruction of the workplace are examples.

The Fair Work Act allows employers to stand down employees without pay if the employees cannot be usefully employed because of industrial action, a breakdown in machinery or other stoppage of work for which the employer cannot reasonably be held responsible. Limitations on this entitlement to stand down employees can be imposed by enterprise agreements or individual contracts.

Collective Dismissals

An employer has specific obligations under the Fair Work Act to notify the relevant Government agency (known as Centrelink) and any relevant registered employee associations where the employer has collectively dismissed 15 employees or more for reasons of an economic, technological, structural or similar nature, or for reasons including those reasons.

Termination By Parties’ Agreement

The parties are entirely free to agree on termination on any grounds they desire.

Where the parties agree to terminate the employment, they are not required to obtain the approval of a court or regulatory body before the termination is effective.

Directors Or Other Senior Officers

There are no special rules which relate to the method of termination of a director’s or other senior officer’s employment. In the case of a statutory director (or other company officer), termination of employment does not automatically bring to an end the directorship. Separate steps will be required to bring the directorship to an end (pursuant to the company’s articles of association) and requires written notification to the Australian Securities and Investments Commission.

There are very technical restrictions under the Corporations Act in relation to certain termination benefits that may be given to employees who hold, or who have held, ‘managerial or executive offices’, without shareholder approval.

It should be noted that regulators can consider prosecuting a director personally in addition to the employer in the event of, for example, a breach of minimum employment terms, an award or enterprise agreement, occupational health and safety laws or migration laws. Directors may also be personally liable for unpaid superannuation contributions (see above) in the event of company insolvency.

Special Rules For Categories Of Employee

There are no categories of employee to whom special rules apply, but certain categories (e.g. employees on parental leave) benefit from more generous rules for protection from dismissal.

A casual employee can be terminated without any period of notice. However, casual employees may bring a claim of unfair dismissal if they have served the minimum employment period, their employment has been regular and systematic and they had a ‘reasonable expectation of continuing employment’.

Specific Rules For Companies in Financial Difficulties

There are special rules which apply if a company is in financial difficulty. If a company goes into liquidation, all employees are automatically dismissed. Any claims by the employees against the company are as unsecured creditors, although employee claims rank above ordinary unsecured creditors. The Fair Entitlements Guarantee (a Federal Government scheme) provides some payments to employees in cases of liquidation or bankruptcy with the scheme administrator standing in the shoes of the employees in respect of recovery of those payments.

Restricting Future Activities

Generally, employment contract clauses that attempt to restrict the future activities of an employee are contrary to public policy and therefore unenforceable. The courts, however, will uphold restrictions if they are drafted sufficiently narrowly such that they are considered ‘reasonable’ in the circumstances. Essentially, such restrictions must be designed to protect a ‘legitimate business interest’ and they should be no wider than is necessary to protect those interests. Further, such restrictions must be clear and reasonable in time and area. Typical clauses include those designed to restrict an employee from joining a competitor (or setting up in competition), from soliciting business from/dealing with certain customers or from enticing other employees to leave.

Each case is considered on its own facts, so what might be considered reasonable for one position may be held by a court to be unreasonable for another.

Special Rules For Garden Leave

An employer may put an employee on garden leave unless the employment contract expressly requires the provision of work.

An employee on garden leave is not required to attend work or perform their normal duties (unless directed to do so). However, they continue to be bound by all other existing terms of their employment agreement and must be paid at their ordinary rate of pay. Generally, an employee on garden leave may not work for another employer during the period of garden leave and must be ready, willing and able to work for their existing employer if directed to do so.

Severance Payments

Normal contractual principles apply to severance payments included in the contract. In addition, unused annual leave and long service leave (after meeting a threshold period of service) is paid out at the end of the employment relationship. Employers will often choose to pay an employee in lieu of the employee’s notice period - that is, the employee may be paid an amount equal to what the employee would have received had they worked during the period of notice of termination.

In cases of redundancy there are additional statutory payments which are calculated by reference to the employee’s length of service. Redundancy payments may be greater under contract, enterprise agreements, awards or company policies.

Special Tax Provisions And Severance Payments

Contractual payments are subject to tax in the normal way. There are concessional tax rates (differing based on the age of the employee) that apply to payments made to employees in consequence of termination of employment. There is also a tax-free threshold that applies to severance payments made as a consequence of termination if the dismissal was because of the redundancy of the employee’s position.

Allowances Payable To Employees After Termination

Other than payment of superannuation contributions relating to income that was earned by the employee before the termination, employers are not required to contribute to any allowances payable to employees after termination.

Time Limits For Claims Following Termination

Unfair dismissal claims and general protections claims involving dismissals must be made within 21 days after the dismissal. Discrimination claims (including those arising from dismissal) must generally be made within one year. Contractual claims or claims relating to breaches of industrial instruments must be made within six years.

Specific Matters Which Are Important Or Unique To This Jurisdiction

Long service leave is an entitlement throughout Australia. Different entitlements exist from State to State. In addition, there are particular schemes for specified industries. For example, the construction industry is covered by portable long service leave arrangements (meaning that service in the industry rather than with a particular employer is counted in determining any entitlement to long service leave).

Australia is a federal jurisdiction, where complexity can be encountered between the operation of Federal (i.e. national) and State/Territory laws. Much of this complexity has been reduced with the creation of a national system for unfair dismissal and general protections laws, award and enterprise agreement making and regulation generally, which has been achieved by the States and Territories largely agreeing to cede their powers to the Commonwealth in the field of employment and industrial law. More recent reforms of occupational health and safety law has had less success in creating a single national system. Accident compensation laws are dealt with on a State by State basis, and there are no proposals to change this. Discrimination statutes operate concurrently at both a Commonwealth and State/Territory level.

Policies about employment and industrial relations are one of the main areas of difference between the major political parties in Australia. A change in Federal Government between the two major political parties, the Liberal Party and the Australian Labor Party, usually results in major reforms in this field.

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Luke Gattuso
Macpherson Kelley


© 2021, Macpherson Kelley. All rights reserved by Macpherson Kelley as author and the owner of the copyright in this chapter. Macpherson Kelley has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021