Recent developments in employment law

The latest issues, decisions and proposed changes impacting business and workplace risk 10 min read

Fair Work amendment to protect penalty and overtime rates becomes law

By Eden Sweeney and Annabelle Elliott  

Legislation passed to safeguard penalty and overtime entitlements in modern awards

The Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 (the Bill) was introduced to Federal Parliament by the Federal Government on 24 July 2024 and passed in both houses of parliament on 28 August 2025. The Bill seeks to prevent the Fair Work Commission (FWC) from reducing penalty and overtime rates in modern awards when they are made, varied or revoked.

Key takeaways

• The Bill has the effect of preventing the FWC from reducing existing penalty or overtime rates in modern awards, including by allowing employers to combine penalty and overtime rates into a single pay rate if it would result in any employee being worse off, even if this approach would reduce the administrative burden on employers.
• The changes apply only to the FWC's powers to make, vary or revoke awards, including in relation to applications that have been lodged prior to the Bill's commencement.

What is changing?

Under the Fair Work Act 2009 (Cth) (the FW Act), the FWC has the power to make, amend or vary modern awards, including upon application by an employee, employer or union. The Bill introduces a new section 135A into the FW Act requiring the FWC, when exercising its powers to make, vary or revoke a modern award, to ensure:

• penalty or overtime rates are not reduced; and
• no terms are included that substitute these entitlements where this would reduce the additional remuneration any employee would otherwise receive.

In effect, the amendment prohibits the inclusion of any terms that seek to substitute penalty and overtime rates with 'rolled up' or exemption arrangements with employers, where there is evidence that even one employee would be worse off.

This new requirement is intended to operate alongside the existing modern awards objective in section 134(1)(da) of the FW Act, which requires the FWC to consider the need for additional remuneration under awards for work performed outside ordinary hours, including overtime, weekends, public holidays and shift work.

What is not changing?

The Bill will not affect:

• the operation of individual flexibility arrangements;
• the existing enterprise bargaining framework, with the Explanatory Memorandum for the Bill reaffirming that collective bargaining remains the forum for negotiating arrangements such as 'all up' rates; and
• the existing legal position on annualised wage arrangements in awards or contracts that utilise offsetting mechanisms.

Record sexual harassment payout in test case on sex-based harassment

By Sarah Lunny and Isabel Horsley

Testing the limits of the new protections against sex-based harassment 

The Federal Court of Australia (Federal Court) has handed down its first ruling on Australia's new sex-based harassment laws, awarding $305,000 to an employee who was sexually harassed by her manager.

Key takeaways

• As part of the Respect@Work legislative reforms, the Sex Discrimination Act 1984 (Cth) (SD Act) was amended in 2022 to prohibit harassment on the ground of sex, or 'sex-based harassment'.
• 'Sex-based harassment' is defined as unwelcome conduct of a demeaning nature towards a person harassed by reason of their sex, in circumstances where a reasonable person would anticipate that the other person would be offended, humiliated or intimidated. The amendment was designed to capture harassing conduct based on sex that is not necessarily sexual in nature.
• In the first case considering these provisions, the Federal Court found an employee was not subjected to sex-based harassment, but was subject to sexual harassment and victimisation, and accordingly awarded a record damages payment.

Background

The employee worked as a shift supervisor at Mexicali Enterprises Pty Ltd (Mexicali), a Mad Mex franchise which was owned and managed by the owner. The employee alleged that during her employment at Mexicali:

• the owner sexually harassed her, including by asking intrusive questions about her sex life, sharing sexually explicit images and making inappropriate sexual remarks; and
• the owner and other Mexicali employees harassed her on the ground of sex, including by commenting on the bodies and sexuality of other Mexicali staff and female customers.

Following these events, the employee suffered psychological injury and was no longer able to attend work at Mexicali or engage in any other paid work.

In December 2023, the employee commenced proceedings arguing the owner breached the SD Act by sexually harassing her and harassing her on the ground of sex. She also alleged that the owner had victimised her by threatening defamation proceedings after she complained about the harassment.  

Decision

The Federal Court was satisfied that the owner sexually harassed the employee during her employment. Highlighting the significant power imbalance between the employee and the owner arising from their differences in seniority, experience, age, and influence over the workplace, the Federal Court accepted that a reasonable person would have anticipated the possibility – or 'indeed virtual certainty' – that the employee would be offended, humiliated or intimidated by the owner's conduct. The Federal Court also accepted that the owner victimised the employee by threatening defamation proceedings to deter her from making a complaint.

However, the Federal Court was not satisfied that the behaviour of the owner and the other employees met the definition of harassment on the ground of sex. Although accepting that the alleged conduct occurred, the Federal Court found that it did not occur 'in relation to' the employee, as required under the SD Act, because the relevant comments were not directed at the employee. Despite this, the Federal Court noted the 'sexist and boorish behaviour' in the workplace fostered a workplace culture that was tolerant of, and even conducive towards, sexualised behaviour towards women.

In respect of the Federal Court's findings that the employee had been subjected to sexual harassment and victimisation, the court ordered the owner pay $305,000, comprising $175,000 in general and aggravated damages and $130,000 for past and future economic loss. This is the highest compensation award made in an Australian sexual harassment claim to date.  

Employment class action risk: a midyear snapshot

By Jaime McKenzie, Kelly Roberts and Aman Dhingra

Employment class actions top the chart for the first half of 2025

The first half of 2025 saw a surge in class action filings, with 36 new actions filed during the period—nearly double the average for this period over the past four years. Employment-related class actions dominated, accounting for 56% of the new filings. This is a sharp rise from the recent historical average of employment class actions comprising around 15% of all new class action filings annually.

But the numbers don't tell the full story.

Sector-wide class action filings

The surge was largely driven by 19 near-identical underpayment claims brought by junior doctors against various health districts across Victoria. The filings were quickly followed by a sector-wide settlement involving 36 health districts across Victoria, following judgment in a similar claim last year. The proposed $175m settlement is awaiting court approval, with a hearing scheduled for September 2025. Excluding these junior doctor claims, overall activity in employment class actions – and class actions more broadly – was somewhat subdued in the first half of 2025 compared to previous years.

So, in short, while the volume of filings has jumped, our view is that the underlying risk landscape for employers remains broadly unchanged.

Class action updates more broadly

In terms of class action risk more broadly, together with employment class actions, consumer and shareholder class actions remain dominant. A wide range of sectors are facing class action risk, including healthcare (as a result of the junior doctor class actions); banking and financial services; government; mining, oil and gas; infrastructure; power and utilities; retail; and hospitality.

In other class action news, the recent judgment from the High Court of Australia¹ confirming that the Federal Court does not have jurisdiction to make solicitor common fund orders (permitting solicitors to 'take a cut' of a class action judgment or settlement) may see the Supreme Court of Victoria continue to increase in popularity for new class action filings – although it still trails the Federal Court as the jurisdiction of choice.

For more insights on class action risk, read our Class action risk 2025 report here, our midyear class actions update here and our update on the recent High Court decision on solicitor CFO's here.

Workplace rights require an 'anchored' legal entitlement

By Emma Gillman and Jared Simonis

Why draft contracts don’t confer workplace rights

The Federal Circuit and Family Court of Australia (Federal Circuit Court) has recently dismissed a claim by the Australasian Meat Industry Employees Union (AMIEU) that a prospective employer took unlawful adverse action against a prospective employee by withdrawing a job offer made to the prospective employee.² The prospective employer's withdrawal of the offer came after the AMIEU made inquiries about the offer on the prospective employee's behalf.

Key takeaways

• Workplace rights must be anchored in existing legal entitlements. The 'instrumental or other source' of the right (eg an employment contract or modern award) must be established.
• A prospective employee will not have any workplace rights arising from a draft or proposed employment contract. This is because a prospective employee is taken to have the workplace rights that they would have if they had already been employed by the prospective employer. A draft or proposed contract confers no such rights.

Background

A number of meat inspectors were retrenched from Hardwicks Meatworks Pty Ltd (Hardwicks) after it outsourced their roles to Meat Inspectors Pty Ltd (Meat Inspectors). Meat Inspectors then made offers of employment to some of the inspectors who had been retrenched, including the prospective employee. Upon receipt of his offer, the prospective employee sought assistance from the AMIEU to review its terms and conditions. The AMIEU then made various inquiries to Meat Inspectors on behalf of the prospective employee, to which Meat Inspectors responded. The prospective employee did not accept the offer during the several weeks that followed. Given the prospective employer's need to fill the position, the offer was then formally withdrawn from the prospective employee.

The AMIEU alleged that Meat Inspectors' withdrawal of the offer and refusal to employ the prospective employee was adverse action on the basis that the prospective employee and/or the union representative had exercised a workplace right by making an inquiry in relation to the offer, or that the prospective employee had engaged in industrial activity by seeking to be represented by a union.

The decision

The Federal Circuit Court dismissed the AMIEU's claim that Meat Inspectors took unlawful adverse action against the prospective employee.

In relation to the workplace rights claim, the Federal Circuit Court found that the AMIEU did not establish any 'instrumental or other source' of the prospective employee's ability to make the inquiries – for example, an employment contract or modern award – which the court regarded as a necessary precondition for the exercise of a workplace right. The court remarked that at a minimum, the inquiry made must relate to a subject matter for which a contract of employment (or other instrument) makes provision. The court also remarked that because a prospective employee is taken to have the workplace rights they would have if they had already been employed by the prospective employer, a draft or proposed employment contract does not confer any such rights on a prospective employee. In relation to the industrial activity claim, the court found that the AMIEU did not specifically plead conduct which demonstrated that the prospective employee had engaged in industrial activity by seeking to be represented by a union. In this regard, the court remarked that while there may have been evidence to establish that the prospective employee had engaged in industrial activity, 'it is not the function of the court to fill the gaps in the applicant’s pleaded case'.

The Federal Circuit Court ultimately concluded that the 'only operative reason' for the prospective employer's decision to withdraw the offer was the operational need to fill the role and the fact that the prospective employee had not accepted the offer.