Welcome to Employment in Australia. In this topic, you will learn about:
- The types of business organisations and industry sectors in Australia
- The importance of employment law in the commercial sector
- The distinction between public-sector and private-sector employers
- The major features of government administration and public-sector employers
- The legal characteristics of both an employer and an employee
- The legal principles used to determine if an employer-employee relationship exists
- The impact that outsourcing and the use of labour-hire companies have on the employment relationship
- How to recognise the employment relationship as a contract and explain the elements of that contract
- The legal duties of employers and employees, both express and implied, and the sources of those duties
An important and distinctive component of Australian business law is employment and workplace relations law.
- Employment law primarily deals with the individual relationship between an employer and an employee—the employment contract.
- Workplace relations law concerns the broader legal framework that affects individual employment contracts, such as the systems and bodies that regulate wages and employment conditions.
Australian employees are governed by both the common law of employment and the Fair Work Act 2009 (Cwlth). To gain the benefits of the common law of employment and this Act, a person must be regarded as an employee. In some instances, it will be difficult to determine whether a person is an employee or an independent contractor. If the latter, this person will not gain the protections provided by the common law and the Fair Work Act.
The Fair Work Act establishes minimum terms and conditions for employees that are called the National Employment Standards. In addition, a series of Modern Awards are established for various industry groups. These awards specify minimum terms and conditions for those that fall within the ambit of the award. Certain employees have the capacity to negotiate their own terms and conditions. The resulting agreements are called ‘Enterprise Bargaining Agreements’. If applicable, a Modern Award will not apply as the Agreement will specify minimum terms and conditions.
The Fair Work Act establishes the Fair Work Ombudsman that has an important role to play in administering the legislation. The Fair Work Commission also plays an important role as a tribunal that resolves disputes arising from the Fair Work Act, such as unfair dismissal claims. In addition to the Fair Work Act, legislation has been enacted that provides protection for employees in relation to specific matters. For example, work, health and safety, workers compensation and superannuation guarantee legislation.
If a business wishes to trade internationally, it must comply with the workplace relations laws of the country in which a worker is employed. The International Labour Organization (ILO) is a body that seeks to protect workers globally by creating international labour standards.
The employer-employee relationship
The employer-employee relationship is recognised by law as being a contract of employment.The existence of this relationship is central to both employment law and workplace relations law with rules having been developed for establishing said relationship. The employer-employee relation can be distinguished from other legal relationships such as independent contractor who contracts for service and agents who make contracts on behalf of another with a third party.
Court-made rules to identify employment relationship
The following are court-made rules that identify an employment relationship:
This refers to the nature and degree of control able to be exercised by a person over the manner in which the work is to be performed by another.
This refers to the discretion of the service provider to delegate work to another party.
These are the commercial factors showing whether an individual is working on their own account or for someone else.
The integration test answers the question of whether the work being performed an integral part of the business operation of the person engaging the services of the worker?
Pragmatic tests are concerned with 'matter of fact issues' such as:
- ownership of tools, equipment or stationery
- method of remuneration
- payment of superannuation, insurance or workers’ compensation
- deduction of PAYG income tax
- use of business name or business structure
- ratio of money spent to money earned after deduction of expenses
- whether invoices must be submitted prior to payment
- responsibility for losses or for rectifying errors or mistakes in the quality of work done
- freedom to work for other people
- whether the work is simply an identifiable job for a specified period of time.
Statuory rules
In recent years, a number of statutes have gone beyond the court-made rules in distinguishing between employees and independent contractors. For employees, statutory compliance is required through:
- income tax laws
- superannuation guarantee laws
- workers’ compensation laws
- payroll tax laws
- workplace relations legislation
- work health and safety laws.
Read more information about WHS/OHS Acts, Regulations and Codes of Practice from the Australian Government website. Work, health and safety laws (previous called occupational, health and safety of OHS) impose obligations on employers to provide safe workplaces and systems of work. Obligations are owed to employees and anybody entering premises under the control of a person or business. WHS legislation in Australia is state-based, meaning that each state and territory has its own legislation. There are links to the relevant state and territory Acts on the Australian Government site.
Contractors have protection against unfair contracts
The following Acts provide protection to contractors:
The Independent Contractors Act 2006 (Cwlth) provides power to the court to strike down or vary contracts with independent contractors which are unfair, harsh or unconscionable.
The Competition and Consumer Act 2010 (Cwlth) consist of:
- Section 51AE: industry codes mandatory
- ACL Section 22: unconscionable conduct in business transactions
Formation of the contract of employment
When preparing or forming a contract, the following must be considered:
- Intention to create legal relations
- Offer and acceptance
- Consideration
- Capacity of parties to enter into contract
- Reality of consent
- Legality of object and restraint of trade.
The Tandra team spoke with Managing Associate at Allens, Andrew Stirling. In this video he introduces Australian employment law.
Take the time to watch the next video which elaborates on some of the bullet points listed above including offer, acceptance and consideration. It is important to be comfortable with the terms and the information provided.
Employers and employees have legal duties which are expressed in the employment contract. Read more about these by selecting the following headings.
Express terms (spoken/written)
- Nature of work
- Location of work
- Wages Remuneration
- Hours of work
- Statement of duties/position description (employee responsibility).
Implied terms (from circumstance of offer and acceptance)
- To provide work
- To provide remuneration
- To not destroy or seriously damage the relationship of trust
- To ensure the safety of employees.
Implied terms (from circumstance of offer and acceptance)
- To work in a skilful and competent manner, and to exercise reasonable care
- To obey an employer’s lawful and reasonable directions
- To provide faithful service (also known as the duty of fidelity)
- To not prejudice an employer’s interests or act in a manner hostile to the employer’s interests
- To maintain confidentiality (e.g. not to disclose trade secrets)
- To account for moneys and property received on behalf of the employer
- To hand over inventions made during the course of employment
- To disclose to an employer information relevant to the business of the employer.
Terms of employment created by the workplace relations system
In addition to the common-law express and implied terms of the employment contract, there are other legally recognised terms of employment contracts. These are prescribed by the workplace relations system, which can take one of three forms:
- Terms set by statute
- Terms set by industrial bodies
- Terms set by employment agreements made under workplace relations legislation (statutory employment agreements).
Terms set by statute
Employment terms can be defined by federal or state legislation (statutes).
- Federal: Federal legislation includes Fair Work Act 2010 (Cwlth): National Employment Standards, freedom of association, rights on termination of employment, along with others.
- State: State legislation includes for example the Annual Holidays Act 1994 (NSW) and the Long Service Leave Act 1922 (Vic).
Terms set by industrial bodies
Standard terms set by industrial bodies such as Fair Work Australia include minimum wage rates, classifications and leave entitlements.
Terms set by employment agreements
The following section lists standard terms used in employment agreements and information about termination of employment and dismissal.
Lawful termination
Reasons for lawful termination of a contract can include:
- Termination by death
- Termination by dissolution or bankruptcy of the employer
- Termination by sale of business by the employer
- Termination by frustration of contract
- Termination by abandonment of contract
- Termination by breach of contract
- Termination by notice
- Termination without notice
- Redundancy
- Suspension of employees.
Unlawful dismissal
Unlawful dismissal under the Fair Work Act 2010 (Cwlth) includes the following prohibited reasons:
- Temporary absence from work because of illness or injury (of a kind set out in the relevant regulations)
- Trade union membership or activities, or non-membership
- Acting, or seeking to act, as a representative of employees
- Filing a complaint or participating in proceedings against an employer
- Engaging in legally protected industrial action or refusing to engage in industrial action
- Seeking to conduct a secret ballot of employees
- Being entitled to the benefit of an industrial instrument or order
- Temporary absence due to voluntary emergency management duties
- Temporary absence due to carer’s responsibilities
- Race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin (unless the reason for termination is based on the inherent requirements of the job or the employee is a member of the staff of a particular religion and the termination is made in good faith to avoid injury to that religion)
- Absence from work during maternity or parental leave.
Remedies for unlawful dismissal may include order for reinstatement or compensation.
Unfair dismissal
Unfair dismissal provisions allow a dismissed employee to seek independent review of the reason or method of dismissal. The provisions addresses the question 'Is the dismissal 'harsh, unjust or unreasonable‘? This assessment is based on an objective analysis of all circumstances applicable to employer and employee, using the 'reasonable person test’ which is based on contemporary standards of industrial fairness.
The Fair Work Act applies the principle of ‘fair go all round’. It also provides a structure for considering reasons for dismissal, procedural fairness and guides constructive dismissals.
Remedies for unfair dismissals
Conditions and remedies for unfair dismissal under the Fair Work Act 2010 (Cwlth) include the following:
- Employee must be within included categories
- Employee must have been employed for at least six months or 12 months if employed in a small business. (Note: Small Business Fair Dismissal Code)
- The dismissed employee must apply to Fair Work Australia within 14 days of the alleged unfair dismissal
- Outlines process of conciliation and arbitration if necessary
- If successful, employee(s) may be re-employed in the same or alternative position, or receive paid compensation.
Remedies for breach of the employment contract
Remedies for a breach of the contract of employment can sit with the employer or the employee.
Employer’s remedies
Remedies open to an employer include:
- termination of employment
- damages
- injunctions and specific performance
- suspension of an employee
- orders by an industrial tribunal
- retraining
- disciplinary procedures
- contract negotiation
- private mediation
- withdrawal of discretionary benefits
- reallocation of duties or hours of work.
Employee’s remedies
Remedies open to an employee include:
- resignation
- damages
- injunctions and specific performance
- unfair dismissal proceedings
- unlawful termination claim
- claims for sums due
- orders by an industrial tribunal.
Liabilities and rights of employers and employees to third parties
Click on the headings below to read more about the liabilities and rights of employers and employees to third parties.
This is where the employer is liable to a third party for negligent acts or omissions of an employee, carried out in the course of employment, where these acts or omissions cause loss or damage to a third party.
This refers to when the employer is liable for contracts entered into by an employee as agent of employer. The employee is liable for contracts if they act outside of authority given by employer.
Criminal acts of employee conducted in course of employment in strict liability cases without intention to commit the act results in vicarious liability.
- Employer liable: where at direction of employer
- Employee liable: no employer direction but intention to commit the acts.
Some examples of statutory regulation of employment relationship include:
- Workers’ compensation
- Work health and safety
- Discrimination and equal opportunity legislation
- Occupational superannuation
- Workplace privacy.
In the following information we explore workers compensation in terms of what it is, what it covers, the benefits and obligations of both the employee and employer.
Workers’ compensation
Workers’ compensation is covered by federal and state legislation which provides wage and salary maintenance and prescribed benefits for injured workers for example, pensions, lump sums and medical expenses.
Coverage
Coverage includes work-related injuries for 'workers' as defined by legislation. It also provides for insurance obligation on behalf of the employer; mandatory workers’ compensation insurance required by employers with 'WorkCover’.
Employee benefits
Key benefits provided by workers compensation to an employee include weekly benefits for initial period and coverage of medical and hospital benefits. It also covers economic and non-economic losses (usually based on impairment levels or estimated future earning capacity of the employee) and retirement provisions.
Employer obligations
The employer is obliged to cooperate with rehabilitation programs developed for the employee, keep the employee’s position open for a specified period and provide suitable alternative employment where practicable. Workers compensation also requires the employer to keep accurate records.
Employee obligations
The key obligation for the employee under workers' compensations is to make reasonable efforts to return to work.
Safety is an important aspect of every workplace. See below for information on work health and safety (WHS) and duty of care.
Work health and safety (WHS) - (previously OHS)
At common law, employers have an implied duty to protect the health and safety of employees. In other words, employer owes a duty of care to employees. These laws have been supplemented by specific work health and safety legislation that expands the common-law obligations. Duty of care is the responsibility of everyone within the workplace, however there are established resonsibilited for employers and employees.
Employers
Employers must maintain a safe working environment which includes ensuring safe plant and equipment. Employers must also provide, and take part in, training and instruction to employees regarding workplace safety, and provide supervision of employees. Employers are also required to maintain safe systems of work for employees, contractors and visitors.
Employees
Employees also have responsibilities. For example they must wear safety equipment supplied by the employer and follow lawful and reasonable safety policies determined by the employer. Employees must also take reasonable care to prevent injuries to fellow employees
Discrimination and equal opportunity legislation
Federal legislation includes:
- Human Rights and Equal Opportunity Commission Act 1986
- Equal Employment Opportunity for Women in the Workplace Act 1999
- Racial Discrimination Act 1975
- Sex Discrimination Act 1984
- Disability Discrimination Act 1992
- Workplace Relations Act 1996.
The types of discrimination are specified in the below categories:
- Race
- Disability
- Sex
- Physical impairment
- Marital status
- Intellectual impairment
- Pregnancy
- Age
- Sexuality
- Family responsibiltiies
- Political or religious belief
- Prohibition against sexual harassment.
Affirmative action
Affirmative action is covered under the Equal Employment Opportunity for Women Act 1999 (Cwlth). Employers with 100 or more employees must:
- develop and implement an equal opportunity program
- take measures to promote equal opportunity for women in employment matters
- regularly report to a statutory office holder on the development of these programs.
Age discrimination
In July 2004 the Commonwealth Parliament enacted the Age Discrimination Act 2004 (Cwlth) which outlaws both direct and indirect discrimination in employment on the grounds of age. There are important qualifications and exemptions.
Superannuation
Superannuation is intended to fund and maintain living standards for an ageing population in the future. It requires employers to make superannuation contributions on behalf of their employees at a prescribed percentage of the employee’s wage or salary, as defined by the legislation, to a complying fund. The rate since 2002–03 is 9%.
Workplace privacy
In December 2001, Commonwealth laws came into operation that imposes privacy obligations on private sector organisations. These laws regulate the manner in which private sector organisations (including employers) handle ‘personal information’ and ensure that collection, security and disclosure processes are compliant.
The International Labour Organization
What happens if a business wishes to trade internationally? It must comply with the workplace relations laws of the country in which a worker is employed. This poses a number of challenges for the business. Firstly, what are the relevant laws that need to be complied with? Secondly, what obligations do these laws impose on a business?
The International Labour Organization (ILO) seeks to protect workers globally by creating international labour standards. One of the challenges of conducting business internationally, as identified in previous topics, is how to locate the applicable law. The Labour law international which is part of the ILO website is a comprehensive database that provides access to information on the labour laws of all countries. This resource will assist you locate applicable laws if you or your organisation is conducting business in other countries.
The world of work is being severely affected by the global virus pandemic. In the following video actor Joaquín Furriel talks about the harsh realities of modern slavery.
Sources of workplace relations law
Australian workplace relations systems are created by statute, not the courts. All states (except Victoria) and the Commonwealth have their own statutory workplace regulation systems. Victoria has referred its powers to the Commonwealth.
National workplace relations system
From 1 January 2010, New South Wales, Queensland, South Australia and Tasmania referred law-making power with respect to industrial relations to the federal parliament to create a national workplace relations system, with the foundation of the Australian workplace relations system being the Fair Work Act 2009 (Cwlth), however, some state industrial relations legislation still exists and covers a minority of employees.
Features
Australian workplace relations law includes the following features:
- Legislation establishes the system
- Legislation has industrial, social and economic objectives
- Mandatory minimum terms, relating to both wages and conditions of employment are imposed on common law contracts by statue or by industrial awards made by industrial tribunals.
- Creation of industrial tribunals with power to make industrial awards on defined matters, and to varying degrees, compulsorily conciliate and arbitrate industrial disputes.
- Regulation of the role of trade unions and employer associations
- Recognition, to varying degrees, of the right to enterprise bargaining
- Protection, to varying degrees, freedom of association (that is, voluntary unionism)
- Creation of specific rights and obligations concerning the termination of employment
- Provisions relating to compliance, remedies and enforcement of rights and obligations in workplace relations.
Objectives
The objectives of the Australian workplace relations law include:
- to provide rights and obligations not available at common law
- to codify and expand the common law
- to provide rights and obligations across the workforce
- to redress what is regarded as unequal bargaining power in contractual negotiations between an employer and an employee
- to continually change in response to developments in economic, global, political, technological, workplace and industry conditions.
The Fair Work Act 2009 (Cwlth) is the primary workplace relations legislation in Australia. Its application provides a single set of national laws that govern workplace relations across Australia. Employees covered are those employed:
- by a constitutional corporation
- in Victoria, Northern Territory or Australian Capital Territory
- by sole traders, partnerships, other unincorporated entities and non-trading corporations in New South Wales, Queensland, South Australia and Tasmania
- by the Commonwealth or a Commonwealth authority
- as waterside, maritime or flight crew employees in connection with overseas trade or commerce.
National Employment Standards (NES)
The National Employment Standards is a safety net of ten enforceable minimum employment terms and conditions applicable from 1 January 2010 and cannot be altered by an employer. Together with pay rates in modern awards and minimum wages provide guaranteed minimum employment terms and conditions. The ten minimum entitlements of the National Employment Standards are:
- Maximum weekly hours of work
- Requests for flexible working arrangements
- Parental leave and related entitlements
- Annual leave
- Personal/carer’s leave and compassionate leave
- Community service leave
- Long service leave
- Public holidays
- Notice of termination and redundancy pay
- Provision of Fair Work Information Statement.
The following video from Small and Medium Enterprise (SME) Television provides a good explanation of the contents of the ten National Employment Standards (NES). Note, that these standards cannot be amended to reduce the benefits to employees. They establish minimum terms and conditions regarding hours of work, annual leave and sick leave. The video also addresses the consequences of non-compliance with the NES and note the heavy fines that can apply. The Fair Work Information Statement is discussed, and you can view this in the next resource.
The Fair Work Information Statement from the Australian Government website provides new employees with information about their conditions of employment. You can also view an overview of the National Employment Standards (NES) from this link.
Regulation of working conditions is done through documents that set out minimal terms and conditions such as industrial awards and modern awards and agreements.
Industrial awards
An industrial award is a legally binding order relating to industrial matters, including both wages and conditions of employment made by an industrial tribunal.
Modern awards
A modern award is an industry or occupation-based set of minimum employment standards made by Fair Work Australia. Following simplification and reduction of existing federal awards, there are now 122 modern awards. Modern awards cover all employers and employees working in industries/occupations covered by a modern award who earn less than $108 300 per annum.
The following table provides further details related to modern awards including how they are made and who is bound by them.
| Aspect | Description |
|---|---|
| Making of awards |
|
| Parties bound by awards |
Award coverage attaches to the type and place of work, and to employees and employers within:
|
| Duration and cancellation of awards |
|
| Variation of award | By the industrial tribunal that made it |
| Interpretation of awards | By federal and state courts |
| Award test cases | Allow general rulings of principle to be laid down |
Common-law contracts
In 2010 individual statutory agreement-making was prohibited. This refers to previously Australian Workplace Agreements or Individual Transitional Employment Agreements. The agreement reflects rationale that employees in this income bracket do not require the protection of awards as may be required by more vulnerable workers.
Enterprise agreements
Enterprise agreements include collective agreements that must be made by a group of employees and the employer/s and not by an individual employee and employer. Such agreements should be the product of negotiation. Three (3) types of agreement under the Fair Work Act include:
- Single-enterprise agreements: These agreemnts are made between a single employer and group of employees
- Multi-enterprise agreements: These agreements are made between two or more employers and groups of their employees
- Greenfields agreements: Greenfields agreements include single or multi-enterprise agreements relating to genuinely new enterprises before any employees covered by the agreement are employed
Following notification, negotiation and voting processes, an enterprise agreement must be lodged with Fair Work Australia for approval. Fair Work Australia must be satisfied that the agreement meets the ‘better off overall test’ which means that all affected employees will be better off than under the relevant modern award. The Fair Work Act imposes an obligation on anyone involved in the bargaining process to act ‘in good faith’. Bargaining representatives may include unions, employee consultative groups or other agents.
State statutory employment agreements
All state workplace relations systems recognise employment agreements under their legislative schemes, but with varying characteristics. The Fair Work Act provides that a modern award or enterprise agreement prevails over a law of a state or territory. This is subject to exceptions in work health and safety, workers’ compensation and training arrangements.
Registered organisations
The Fair Work (Registered Organisations) Act 2009 (Cwlth) deals with the registration and accountability of unions and employer associations in the national system. When a trade union or employer association is registered by Fair Work Australia it is known as a registered organisation and obtains certain statutory rights and obligations under the national system. Registered organisations must comply with statutory requirements in relation to financial affairs, compliance with its rules and elections and ballots for members. Freedom of association is specifically upheld by the provisions of the Fair Work Act (the choice as to whether to belong to an organisation or not). The Fair Work Act provides injunctions and heavy penalties for conduct by employers, employees, independent contractors, employer associations or trade unions which breach the freedom of association provisions.
Rights of registered organisations
The rights of a registered organisation are listed below:
- The right to initiate proceedings in industrial tribunals such as dispute notification and resolution.
- The right to be a bargaining representative when negotiating enterprise agreements.
- The right to initiate some legal proceedings on behalf of members.
- The right to engage in protected industrial action.
- Rights of entry for trade union officials under specific limited conditions to enter workplaces and inspect employment records and the work environment.
Statutory workplace relations bodies include:
- conciliation and arbitration bodies (such as industrial tribunals including Fair Work Australia)
- bodies with specific powers to approve agreements or investigate complaints (such as the Office of the Fair Work Ombudsman)
- courts with power to enforce rights (such as the Federal Court of Australia).
Fair Work Australia
Fair Work Australia replaced and assumed most of the functions of the Australian Industrial Relations Commission as the principal conciliation and arbitration body in the national workplace relations system. As part of its key function, Fair Work Australia:
- has responsibility for minimum wages in the national workplace relations system
- deals with cases of unfair and unlawful dismissal
- deals with the resolution of industrial disputes and applications for protected industrial action
- makes and deals with modern awards
Decisions made by Fair Work Australia must take into account public interest including the state of the national economy.
Office of the Fair Work Ombudsman
The Office of the Fair Work Ombudsman is an independent statutory agency created by the Fair Work Act. According to the website, its role is to ‘promote harmonious, productive and cooperative workplace relations and to monitor, enquire into, investigate and enforce compliance with relevant Commonwealth laws’. Fair Work inspectors investigate and enforce compliance with federal workplace laws. Fair Work inspectors may:
- conduct education campaigns
- conduct compliance audits
- investigate workplace complaints
- investigate suspected contraventions of federal workplace relations law
- take steps to enforce relevant workplace law through the courts.
There are two forms of industrial action:
- By employees: Industrial action by employees includes picket lines, work bans, work-to-rule campaigns.
- By employers: Industrial action by an employer typically includes lock-outs.
Lawfulness of industrial action
Specific law that applies to industrial action includes contract law, law of torts and statute law. These are brioefly described in the following table.
| Type of law | Description |
|---|---|
| Contract law | Legally and forceable because it meets the requirements/approval of the law |
| Law of torts |
Law of torts includes:
|
| Statute law |
Industrial action may be in breach of:
|
Protected industrial action
Protected industrial action means the party taking the action is immune from civil liability to the other party and the industrial action is:
- allowed while negotiating employment agreements
- undertaken by parties to negotiations and not third parties
- preceded by written notice of intended protected action at least three working days prior to action being undertaken
- preceded by genuine attempts for agreement
- protected for specified period of time.
The bargaining period can be suspended or terminated by Fair Work Australia. Where the bargaining period has been terminated, Fair Work Australia is only able to arbitrate the dispute in very limited circumstances.
Industrial action and enforcement
Industrial action and enforcement include strike pay, orders preventing industrial actions, remedies for unlawful industrial action and secondary boycotts.
- Strike pay: Strike pay is the payment of wages to employees engaged in industrial action is unlawful unless the action is caused by genuine health and safety issues.
- Orders preventing industrial action: Fair Work Australia can make orders against unions, individual employees or employers to stop or prevent industrial action which orders are enforceable by the Federal Court of Australia.
- Remedies for unlawful industrial action include damages, injunctions and specific performance.
- Secondary boycotts: Secondary boycotts refers to industrial action taken that involve action directed at an innocent third party, with whom the target employer is dealing unlawfully under the Competition and Consumer Act 2010 (Cwlth).
End of topic forum
There are forum activities for this topic:
- National Employment Standards: This activity allows students to familiarise themselves with the contents of the National Employment Standards and the obligations an employer owes to inform new employees of these standards. You may need to work your way through a sequence of questions online.
- Modern Awards: This activity allows students to familiarise themselves with the list of Modern Awards that apply to Australian workers. You will need to work your way through a sequence of five (5) questions online.
- Labour laws in your chosen country: This activity requires students to access the legal research guide from the ILO website to find the applicable labour laws for the country you have chosen. A short summary is required.
Please select the ‘Forum’ at the end of your module (which can be found within your navigation menu) and follow the instructions for each question pertaining to Topic 11 within the forum.
