Recent developments in employment law

The latest issues, decisions and proposed changes impacting business and workplace risk 13 min read

Post election: what's on the horizon for employment and industrial relations laws?

By Tarsha Gavin and Nathan Shannan

Labor's second term sets the stage for possible further workplace reform affecting employers

Employment and industrial relations issues were not front and centre of this year's election campaign. However, the re-election of the Labor Government will likely see further workplace reform that will impact Australian business.

Key takeaways

• While reforms are unlikely to match the scale of the Secure Jobs, Better Pay and Closing Loopholes changes following the 2022 Federal Election,¹ significant developments remain on the cards, including new limits on non-compete clauses and the legislation of penalty rates.
• With the Greens holding the balance of power in the Senate, employers should prepare for the possibility that more progressive employment policies, particularly in the area of leave entitlements and the prospect of a four-day working week, will become the focus of legislative debate in the coming term.

Restricting non-compete clauses

With the re-election of the Labor Party, the Federal Government's previously announced plan to ban non-compete clauses for employees below the high-income threshold will likely be legislated. It is anticipated that this reform will take effect from 2027 and apply prospectively. We expect that consultation with industry stakeholders will commence in the coming year and focus on the scope of permissible forms of post-employment restraints and transitional arrangements for existing contracts.

For further details about the proposed restriction on non-compete clauses, including its implications for employers, see our previous Insight.

Legislating penalty rates

As part of its re-election platform, the Labor Government announced it would legislate penalty rates contained in modern awards. While current details remain unclear, the proposed reform would prevent applications to the Fair Work Commission (FWC) that attempt to vary or remove penalty rate entitlements.

If implemented, the reform would mark a paradigm shift in how penalty rates are regulated, with the power to determine the quantum of penalty rates moving from the FWC to Parliament, entrenching those rates as legislated, non-negotiable minimums.

For employers, we expect that the change could limit further flexibility in how remuneration is structured, particularly where mechanisms such as annualised wage arrangements or variations to award entitlements are utilised.

Pursuing a real wage increase

In May, the Labor Government delivered on an election commitment by lodging a further submission to the FWC Expert Panel, recommending that it grant a real wage increase as part of the Annual Wage Review 2024-25. Following an initial submission made in April, if accepted by the Expert Panel, minimum and award wages would be lifted by more than the current rate of inflation, while remaining aligned with the Reserve Bank's target range.

Employers with workforces paid at or near award minimums should begin forward planning with respect to any cost implications from a real wage increase. The Expert Panel's decision will be announced before July.  

Closing the paid parental leave gap

During the election campaign, Labor committed to amending the Fair Work Act 2009 (Cth) (FW Act) to ensure that employees maintain access to their employer's paid parental leave (PPL) scheme in the event of a stillbirth or neonatal death. This amendment would align the private sector entitlement with the current Commonwealth PPL scheme.

Employers should ensure their existing PPL schemes are compliant with this upcoming change.

Negotiating workplace reform with the Greens

With the Greens holding 11 seats in the Senate, Labor will likely rely on the support of the Greens to pass its legislative agenda through Parliament. This was seen in the negotiation of the second tranche of Closing Loopholes reforms, with the Labor Government supporting the Greens in the now-legislated 'right to disconnect' reforms (see our previous Insight).

Workplace and industrial relations policies that are currently on the Greens' agenda include:

• Introducing a four-day work week: implementing trials across various industries through a newly created national institute. This would involve employees working 80% of their hours for 100% of their pay.
• Establishing an entitlement to reproductive leave: in March, the Greens introduced the Fair Work Amendment (Paid Reproductive Health Leave and Flexible Work Arrangements) Bill 2025. The Bill remains before Parliament and seeks to:
  • create a new national employment standard that entitles permanent and casual employees to 12 days of paid reproductive leave a year; and
  • allow employees experiencing symptoms of menopause or perimenopause to request flexible working arrangements.
• Expanding paid parental leave: doubling the Commonwealth's PPL scheme from 26 weeks to 52 weeks. The government would pay up to $100,000 of PPL, with employers covering the balance.
• Reducing the retirement age to 65: lowering the current retirement age from 67 to 65.

Whether Labor embraces any of these reforms, as it did with the 'right to disconnect', remains to be seen. In the meantime, employers should closely monitor developments in this space for any significant policy shifts.

Proposed reforms to NSW workers compensation regime

By Lawrence Mai and Anoushka Rastogi

NSW Government proposes key changes, including in relation to psychological injuries

On 27 May 2025, the Workers Compensation Legislation Amendment Bill 2025 (the Bill)² was introduced into NSW Parliament, marking the first phase of a broader reform agenda aimed at addressing the rise in workplace psychological injuries and the challenges associated with low return-to-work rates. The reform package is divided into two bills, with the second - focused on industrial relations changes - yet to be released as an exposure draft.

Key takeaways

• The Bill is currently scheduled for debate in the Legislative Assembly on 2 June 2025.
• The government has characterised the proposed changes as 'essential' in maintaining economic sustainability. While the government has stated that the proposed reforms are designed to address gaps in the current system, improve prevention and treatment of psychological injuries, and reduce the burden on NSW businesses, the actual impact, if implemented, remains to be seen.

Highlighting key proposed reform 

The Bill proposes several amendments to the existing workers compensation regime, with the main changes outlined below.

1. Introduction of psychological injury 'relevant events': under the Bill, to qualify for compensation for a primary psychological injury, the injury must result from one or more relevant events, including (but not limited to) being subjected to an act of violence or a threat of violence, being subjected to indictable criminal conduct, witnessing an incident that leads to death or serious injury (or the threat of death or serious injury), or experiencing vicarious trauma. 
   
   Under the exposure draft, which was released in early May, it was contemplated that another relevant event would include 'being subjected to conduct that a tribunal, court or commission has found is sexual harassment, racial harassment or bullying'. This would have meant employees had to first obtain a formal finding of sexual or racial harassment or bullying from a court, tribunal, or commission before becoming eligible for compensation for psychological injury. In response to significant stakeholder feedback in recent weeks, the NSW Government has removed this requirement in an effort to soften the proposed changes and improve access to the workers compensation process.
2. Stricter definitions: the proposed new statutory definitions for ‘psychological injury’ and ‘reasonable management action’ aim to clarify eligibility and the scope of psychological injury claims.
3. Connection to employment: the new regime will require that employment be the ‘main contributing factor’ to the psychological injury and that there is a 'real and direct' connection between the 'relevant event' (described above) and the worker's employment.
4. Expedited process for assessing psychological injury claims: the Bill also seeks to introduce a 42-day window for an insurer to determine whether it will accept the claim and commence weekly payments or whether it will dispute liability. Relevantly, if the insurer does not make a decision to accept the claim or dispute liability within the accelerated timeframe, the insurer is deemed to have accepted the claim. If a worker requests an internal review of the insurer's initial decision, the insurer must (within 14 days after the request is made) conduct a review and notify the worker of the reviewed decision.
5. Designated dispute process in the Industrial Relations Commission (IRC): if a claim (or an aspect of a claim) remains contested following the expedited process and internal review, there will be an option for workers to ventilate their claim in the IRC. At this stage, it is proposed that the IRC will have the power to resolve the dispute either through conciliation between the parties or by making a determination on liability.

Expanded prohibition against vilification in Victoria

By Chloe Wilton and Reuben Gregg-McQueen 

Key amendments to Victorian racial and religious vilification laws 

The Victorian Government has recently enacted the Justice Legislation Amendment (Anti-vilification and Social Cohesion) Act 2025 (Vic), which reforms the state's protections against vilification.

Key takeaways

• The current prohibitions against racial and religious vilification will be replaced with prohibitions against a broader range of conduct, which protect a wider range of protected attributes, including disability, gender identity and sex.
• An employer may be vicariously liable for any conduct constituting vilification engaged in by their employee, unless the employer can demonstrate that it took reasonable precautions to prevent the employee engaging in that conduct.
• Employers should update their workplace behaviour policies and training to ensure all employees are aware of the prohibition against vilification.

Expanded prohibition against vilification 

The Racial and Religious Tolerance Act 2001 (Vic) (Racial and Religious Tolerance Act) currently prohibits conduct that incites hatred against, serious contempt for, or revulsion or severe ridicule of, a person on the ground of the person's race or religious belief or activity.

From 30 June 2026 (unless otherwise proclaimed by the Governor), the Racial and Religious Tolerance Act will be repealed and the Equal Opportunity Act 2010 (Vic) (Equal Opportunity Act) will be amended to include new prohibitions on engaging in public conduct:

• that is engaged in because of a protected attribute of another person or a group of persons and that would, in all the circumstances, be reasonably likely to be considered by a reasonable person with the protected attribute to be hateful or seriously contemptuous of, or reviling or severely ridiculing, the other person or group of persons; or
• that is likely to incite hatred against, serious contempt for, revulsion towards or severe ridicule of, another person or a group of persons on the ground of a protected attribute of that other person or group of persons.

The public conduct (including any form of written or verbal communication, actions and gestures, including at a workplace) may be constituted by a single occasion or by a number of occasions over a period of time and may occur in or outside Victoria.

The protected attributes for the purposes of the new vilification offences will include disability, gender identity, race, religious belief or activity, sex, sex characteristics, sexual orientation and personal association with a person with any of these attributes.

The provisions of the Equal Opportunity Act regarding victimisation, accessory liability and vicarious liability will also be amended to include the new vilification offences.

In addition to the new offences under the Equal Opportunity Act, the Crimes Act 1958 (Vic) will be amended (on or before 20 September 2025) to include offences related to incitement or threatening physical harm or property damage on the grounds of these protected attributes.

Recent decisions on flexible working arrangements

By Tegan Ayling and Leila Zraika  

Understanding flexible working arrangements 

Two recent Fair Work Commission (FWC) decisions have provided guidance on flexible working arrangement requests, including on the validity of reasons for refusing a request.

Key takeaways

• If refusing a request for a flexible working arrangement, employers should ensure that, along with other required details, their consideration of the consequences for the employee of the refusal are documented in the written reasons provided to the employee.
• While the relevant decision is subject to appeal, the FWC has put into question whether an employer can validly refuse a flexible working arrangement request on the basis that it is inconsistent with an enterprise agreement.

Elizabeth Naden v Catholic Schools Broken Bay Limited as Trustee for the Catholic Schools Broken Bay Trust³

Ms Naden, a primary school teacher, requested to work part-time after returning from parental leave. Ms Naden had held an executive role before going on leave. The school refused her request unless she agreed to return as a classroom teacher and not in the executive role until she returned full-time. Ms Naden applied to the FWC to deal with a dispute under the applicable enterprise agreement. The agreement required that flexible working arrangement requests be dealt with as set out in the Fair Work Act 2009 (Cth) (FW Act).

After the FWC agreed with the school that Ms Naden could initially return as a classroom teacher and then to the executive role when she returned to full-time, Ms Naden appealed the decision. While not all of the grounds of appeal were accepted, the Full Bench of the FWC decided that the school was not entitled to refuse the request because it did not properly consider the consequences of the refusal for Ms Naden. As a result, the school was required to implement Ms Nadan's requested working arrangement.

The Full Bench emphasised that the FW Act only permits an employer to refuse a flexible working arrangement request in certain circumstances. One of those is that an employer must have had regard to the consequences of the refusal for the employee. Based on the evidence, the school was aware of the consequences for Ms Naden, but did not sufficiently consider them because it did not discuss them or include them in its written reasons for refusing the request. In its written response, the employer is expected to provide details about those consequences and how it has had regard to them.

Anthony May v Paper Australia Pty Ltd⁴

Mr May was working for Paper Australia in accordance with an existing informal flexible working arrangement from 2011 to July 2024, which varied his start and finish times to accommodate his parental responsibilities. After Paper Australia ended the informal arrangement, Mr May requested a flexible working arrangement under the FW Act. That request was rejected on the basis that the arrangement would be inconsistent with the rostering provisions in the applicable enterprise agreement and so exposed Paper Australia to a potential penalty.

Mr May applied to the FWC to resolve the dispute, which centred on whether Paper Australia's refusal of his request was based on reasonable business grounds. In its decision, the FWC emphasised that the right to request a flexible working arrangement is a national employment standard (NES) that cannot be displaced by an enterprise agreement. The FWC decided that inconsistency with the enterprise agreement did not constitute a reasonable business ground to refuse Mr May's request. The prescribed rostering arrangement in the enterprise agreement could not override the request to vary start and finish times under a flexible working arrangement because that would result in the enterprise agreement limiting Mr May's minimum entitlement under the NES.

Paper Australia has appealed this decision, flagging the potential impact on other employers with enterprise agreements in place. Most recently, Paper Australia's application to stay the operation of this decision, pending the outcome of the appeal, was refused.

Employee awarded more than $380k in successful general protections claim 

By Tarsha Gavin, Lawrence Mai and Angelina Sporer

Significant compensation and penalties awarded in general protections 

The Federal Court of Australia (Federal Court) has ordered that an employer pay compensation and pecuniary penalties to a former employee for multiple contraventions of the Fair Work Act 2009 (Cth) (FW Act).⁵

Key takeaways

• Where unlawful adverse action has been taken against an employee, employers may be liable not only for compensation (including with respect to past and future economic loss, out-of-pocket expenses and general damages) but also pecuniary penalties.
• Serious contraventions of the general protection provisions of the FW Act may warrant the imposition of substantial pecuniary penalties for the purposes of specific and general deterrence.

Background

An employee of St Basil's Homes had been engaged as a registered nurse at the employer's aged care facility. In January 2020, the employee's employment was terminated by the employer and the employee subsequently challenged the termination of her employment in the Federal Court, asserting that she was truly dismissed because of her Chinese ethnicity and for making complaints in respect of workplace bullying.

During earlier proceedings on the question of liability, the Federal Court heard evidence that the employee had made complaints in relation to various workplace concerns, including allegations of racial discrimination and bullying conduct. Instead of investigating those complaints, the employer 'turned the tables' by using the employee's complaint to form allegations against her professional conduct, which ultimately led to the termination of her employment. The Federal Court decided that the employer was liable for contravening the general protections provisions of the FW Act as it found that the employer had terminated the employee's employment on the basis of racial discrimination and because she had exercised her workplace right to make a complaint or inquiry in relation to her employment (both of which are protected matters under the general protections regime).  

Consideration of compensation and penalties

In the recent proceedings, the Federal Court considered whether compensation and pecuniary penalties should be ordered based on the liability decision.

In determining that compensation should be awarded, the Federal Court considered the causal connection between the loss suffered by the former employee and the specific contraventions by the employer, ordering that $175,000 was payable by the employer for past economic loss; $61,559 for future economic loss, $75,000 for general damages and $10,000 future out-of-pocket expenses.

In respect of pecuniary penalties, the Federal Court considered a number of matters including the 'objectively serious' nature of the employer's contraventions of the FW Act and determined that these matters were of 'considerable gravity' that warranted the imposition of penalties to achieve a general deterrence purpose. For these reasons, the Federal Court ordered the respondent to pay $45,000 in penalties in respect of contravening the protections against racial discrimination, and $15,000 in respect of contravening the protections against the exercise of workplace rights.