Recent developments in employment law

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

New financial year, new obligations

By: Tarsha Gavin and Sophie Bell

Key employment changes taking effect from 1 July

The start of the new financial year marks the commencement of a number of changes to pay rates, superannuation, parental leave and non-disclosure agreements (NDAs). We explain the key changes employers need to be aware of.

National minimum wage and award rate increases

Following the Fair Work Commission's 2026 Annual Wage Review, from the first full pay period on or after 1 July 2026:

• the national minimum wage has increased by 6% to $1,004.90 per week or $26.44 per hour; and
• minimum rates under modern awards have increased by 4.75%.

Increase to high income threshold and compensation cap

A number of key monetary thresholds have increased on 1 July 2026, including:

• The high income threshold has increased from $183,100 to $190,100. The threshold is relevant when determining whether certain employees can access unfair dismissal protections and also affects the operation of guarantees of annual earnings.
• The maximum compensation available in an unfair dismissal claim increased to $95,050, reflecting the increase to the high income threshold.

Payday Super has commenced

The long-awaited Payday Super reforms have now commenced. From 1 July 2026, employers are required to make Superannuation Guarantee (SG) contributions each pay cycle, replacing the previous quarterly payment framework. Employers must generally ensure SG contributions are received by an employee's superannuation fund within seven business days of a qualifying earnings payment being made.

The reforms have significant payroll and compliance implications, and employers should ensure their payroll systems, superannuation clearing arrangements and internal reporting processes have been updated to align with the new requirements.

For further information, see our November 2025 Insight  and February 2026 Insight.

Greater parental leave entitlements

For children born or adopted on or after 1 July 2026, the total period of government-funded paid parental leave has now increased from 24 weeks to 26. In addition, eligible partners now have access to 20 days of government-funded paid parental leave, up from 15 days previously.

For further information on these reforms, see our February 2026 Insight.

Victorian restrictions on NDAs now in force

Victoria has introduced, from 1 July 2026, restrictions on the use of NDAs in workplace sexual harassment matters. Under the new regime, confidentiality obligations relating to workplace sexual harassment will generally only be enforceable where the complainant has requested them and prescribed statutory requirements are satisfied. These requirements include mandatory information and review periods, as well as safeguards against pressure or undue influence.

Employers operating in Victoria should review settlement agreement templates and complaint handling processes to ensure they comply with the new requirements.

For further information, please see our February 2026 Insight.

Key findings from Closing Loopholes review

By: Tegan Ayling, Phoebe Drake and Genevieve Kuan  

Closing Loopholes here to stay but some tweaks may be needed

The Minister for Employment and Workplace Relations engaged a former Fair Work Commissioner to review the 'Closing Loopholes' amendments made to the Fair Work Act 2009 (Cth) (the FW Act) in 2023 and 2024 (the Review). The draft report was released in May 2026 for stakeholder comment, with the final report pending release.

Key takeaways

• The reforms are here to stay—Despite employer feedback that the Closing Loopholes Laws have increased regulatory complexity, the Review found they are operating as intended. Rather than winding back obligations, the Review recommended the Government develop further guidance—including tools to classify workers, identify applicable awards and calculate lawful pay—to help employers comply.
• Watch this space—The Review recommended further reviews, in two to three years, of several measures it considered too new to fully assess, including the right to disconnect, multi-enterprise agreement transitions, delegates' rights, and the Fair Work Commission's (the FWC) new unfair contract terms jurisdiction.

Further refinement of Closing Loopholes Laws recommended

The Review assessed whether the Closing Loopholes Laws are operating in practice as intended.

The verdict? They are largely operating as intended to enhance workers' rights. Of the 52 recommendations, we outline the key points below.

• Unfair deactivation—The Review heard stakeholder feedback expressing concerns about the potentially high evidentiary threshold that businesses need to satisfy when defending an unfair deactivation application, particularly where serious misconduct is alleged. Given that the unfair deactivation framework is still in its early phases of enforcement, no firm conclusion was reached regarding the overall effectiveness of its operation. However, it was recommended that the Government urgently address the management of unfair deactivation matters involving serious misconduct allegations, including potential legislative clarification on the evidentiary threshold required under the framework.
• Intractable bargaining—The draft report recommended that the FW Act be amended to introduce legislated guardrails the FWC must consider before making an intractable bargaining declaration, and to ensure mandatory terms in a workplace determination are no less favourable to employees than the corresponding enterprise agreement term.
• Contractor high income threshold—The FW Act should be amended to clarify that contractor operating costs are excluded from 'earnings' for the purposes of the high income threshold.
• Family and domestic violence leave—To increase uptake of this form of leave, the draft report recommended that employees only need to establish they are unable to work due to family and domestic violence, without disclosing details. The legislation should also recognise a broader cohort of perpetrators, including extended family members; former immediate family members (including the victim–survivor and their former spouse or de facto partner); family relationships based on ethnic, religious or cultural kinship rules; and former members of a person's household.

Provisions found to be working as intended

The Review found the following amendments are operating appropriately:

• Wage theft offence—The absence of prosecutions was stated to be reflective of it being in the early stages of implementation, and the complexity of criminal enforcement, not a failure of the regime.
• Definition of 'employee'—The totality-of-the-relationship test prioritises fairness and supports correct classification by focusing on practical realities. The Review stated the complexity and uncertainty that stakeholders flagged is not an unintended consequence—it is the point.
• Definition of 'casual employment'—While operating as intended, the Review recommended that the Fair Work Ombudsman's guidance is needed on the 'firm advance commitment' test and the impact that regular rostering may have on the assessment of whether an employee is a casual employee.
• Intractable bargaining 'no less favourable' test—The draft report commented that the framework constrains the FWC's capacity to reduce existing conditions in the context of intractable bargaining, which is consistent with the legislative intention of ensuring that terms for employees and employee organisations cannot go backwards under an intractable bargaining workplace determination.

The Review's final report was due to the Minister by 15 June 2026, but has not been published as of the date of this Insight.  

First judgment awarding damages and penalties under new sexual harassment provisions

By: Eden Sweeney and Karie Mayman

$50,000 damages awarded in case involving vulnerable worker

The Federal Circuit and Family Court of Australia delivered, on 26 March 2026, the first judgment under the new sexual harassment provisions introduced through the 2023 amendments to the Fair Work Act 2009 (Cth) (the FW Act), prohibiting sexual harassment in connection with work.¹ 

Key takeaways

• This case demonstrates the potential for employees to seek financial compensation against individual perpetrators of sexual harassment in the workplace, and the employers of those perpetrators who have been involved in any contravention.
• Subjective factors such as vulnerability of the worker, power dynamics and remorse are important factors in determining compensation for sexual harassment under the amended FW Act.

Prohibition against sexual harassment

On 6 March 2023, the FW Act was amended to include provisions prohibiting sexual harassment in the workplace. These changes were implemented as a result of the 2020 Respect@Work: Sexual Harassment National Inquiry Report. Broadly, the amended FW Act prohibits sexual harassment against workers in connection with work, with the definition of 'worker' being broad and inclusive.

Background

In Mejia v Capital City Cafe-Bar, the applicant had commenced working at a café as a casual waitress. Her claim alleged that she was concerned she was being underpaid and, on 29 June 2024, attempted to raise this with the manager and owner, who was the second respondent to the proceedings (the owner). After the café closed later that day, and the owner and applicant were alone, the owner pressed himself to the applicant, pinning her arms and waving money in her face while telling her to 'take the money'. He then kissed her on the lips. She left the café ten minutes later and did not return to work.

The applicant filed underpayment and sexual harassment claims. The owner initially disputed the allegations. On the day of the hearing, he made a full admission as to the sexual harassment allegation, leaving only compensation and penalties to be determined at hearing.

The decision

The conduct in this case was found to be severe for the following reasons, which contributed to the Court's decision on the quantum of compensation and pecuniary penalties:

• The applicant was vulnerable. She was young, female, a recent migrant to Australia, and had limited financial and social resources. These things were easily observed, if not known, by the owner.
• The owner was in a position of authority over the applicant and engaged in the conduct for personal gratification.
• His expressions of remorse were motivated by him not wanting his wife to find out about the incident and not wanting the café to be short-staffed.

The Court acknowledged that the incident had caused the applicant significant hurt, distress and humiliation. She was successful in her claim, and awarded $50,000 compensation for non-economic loss and $9,390 in pecuniary penalties.

Employment termination payment or genuine redundancy payment? The Full Federal Court weighs in

By: Veronica Siow, Craig Milner, Jon Wenham, Lawrence Mai and Sophie Baxter

Commissioner of Taxation v Baya Casal

The Full Court of the Federal Court earlier this year dismissed an appeal by the Commissioner of Taxation (the Commissioner),² finding that the payment made to an early learning centre assistant who ceased employment constituted a 'genuine redundancy payment' for tax purposes and therefore attracted more favourable tax treatment.

Key takeaways

• The Full Federal Court has concluded that the effect of a significant reduction of hours (and remuneration) resulted in a position being made genuinely redundant for tax purposes. However, its judgment emphasised that redundancy cannot be determined as a simple mathematical exercise. The Court was at pains to explain that the result turned on a holistic assessment of the 'facts and circumstances'.
• In our view, the judgment shines a light on the complexity that can arise when dealing with 'redundancy'-type payments, particularly to part-time or casual employees, and especially where they are paid hourly. However, the judgment is not a material change in the law, reinterpretation or finding of new principles in applying the statutory test.
• While the result was favourable to the individual taxpayer in this instance, we would caution against employers and employees alike seeking to draw principles of general application to other individual cases. We think that would risk misinterpreting the judgment's implications.

The meaning of genuine redundancy

Although expressed slightly differently, both the Fair Work Act 2009 (Cth) (the FW Act) and Income Tax Assessment Act 1997 (Cth) (the Tax Act)³ apply a definition of 'genuine redundancy' as meaning, in part, that a person's employer no longer requires their job to be performed by anyone. However, the meaning of redundancy will depend on the statutory and factual context. Decisions based on employment or industrial laws, although they may be instructive, will not necessarily be directly relevant for tax purposes, and vice versa.

In the tax context, the courts have considered the determination of whether a position has become genuinely redundant, generally emphasising the importance of 'facts and circumstances' by reference to certain relevant factors. In this case, the relevant factors included changes (reductions) to hours worked and an employee's remuneration.

Background

Ms Casal was employed as an early learning centre assistant at Ivanhoe Grammar School. Her employment ended after she rejected an offer to be redeployed following a restructure undertaken by the school in 2021. In this regard, it offered Ms Casal redeployment opportunities involving similar work but with substantially (either 20% (at best) or 40% (at worst)) fewer working hours across different days. The changes would have the effect of materially reducing her remuneration, as she was paid hourly. Ms Casal declined the alternative roles, ended her employment and received payments from the school at that time.

The school treated the payments not as 'genuine redundancy payments' for tax purposes (which attract a tax-free amount calculated as a fixed sum and variable sum per year of service), but instead as 'employment termination payments', which attract less generous concessional tax treatment.

Ms Casal applied to the Commissioner for a private ruling—a process under the tax laws to obtain a binding view, by way of the Commissioner's opinion about how 'a tax law applies to the applicant in respect of a specified scheme for a specified period'. As the Court explained, when 'making a private ruling the Commissioner does not make findings of fact, but simply identifies facts and then states his opinion about the way in which the relevant tax laws apply to the applicant in relation to those identified facts.'

Based on the facts in Ms Casal's application, the Commissioner rejected her argument that the payments should be treated as 'genuine redundancy payments' for tax purposes. She objected to the private ruling decision. On review, the Commissioner disallowed the objection and, as was her right, Ms Casal sought review of this in the Federal Court. She was successful at first instance, leading the Commissioner to appeal to the Full Federal Court.

The judgment

The Court rejected the Commissioner's appeal and upheld the primary judge's finding that Ms Casal's employment ended as a result of a 'genuine redundancy' for tax purposes. The Full Court identified several relevant principles, including:

• The term 'genuinely redundant' is not defined under the Tax Act. There is no bright line or mathematical test that can be applied, and the term must be interpreted in the context of the Tax Act, and with reference to all of the relevant facts and circumstances. Decisions based on employment or industrial laws may be helpful but will not necessarily be directly relevant.
• It is the 'position' that must become genuinely redundant, not the employee. Determining whether a genuine redundancy has occurred involves a comparative analysis. The first step is to identify the position's collective functions, duties and terms, and the second step is to make an assessment of whether changes to those matters have the effect of making that position This involves making a judgment based on a 'holistic analysis' of various factors or attributes.
• In considering the effect of changes, no attribute is necessarily excluded, although the relevance and significance of any one factor will vary from case to case. The hours worked in a particular position can be a relevant factor in that assessment, particularly for an employee remunerated by performing work on an hourly basis. A significant reduction in the hours of work, which reduces remuneration, can reflect a change to the scope of the responsibilities or duties to be performed, or the scale of the tasks to be carried out, in a particular position.
• The Court found that, in these specific circumstances and on the limited facts available (as confined to the arrangement in the private ruling application), the reduction in hours was a sufficiently substantial change to Ms Casal's position to amount to a redundancy because it would have 'diminished to a point where for practical purposes her position had become redundant'. The Court emphasised that it did not reach this conclusion as a simple mathematical exercise.
• The Court cautioned against purported analogies with factual circumstances of past decided cases; prospectively, one of the justices took the unusual step of specifically stating that the parties' designation of the matter as a 'test case' in reality 'may not be an apt description'.
• Another reason for caution is the unique way that the issue proceeded as a dispute, which was as an objection to a private ruling decision of the Commissioner. As the Court observed, the decision is limited to evidence of the facts as submitted in the private ruling application, which was 'far from ideal for the purposes of determining a question of fact and degree'.

The ATO's response

The Australian Taxation Office (the ATO) recently issued a Decision Impact Statement, consultation on which closed 26 June 2026.

The ATO acknowledges the Full Federal Court's explanation, and accepts that material reductions in hours worked, and, consequently, remuneration, may be relevant factors in making an assessment of genuine redundancy but will not be determinative in all cases.

It is reviewing the comprehensive public ruling on the meaning of genuine redundancy payments for tax purposes, Taxation Ruling TR 2009/2 Income tax: genuine redundancy payments. It is therefore possible that updates will be made to this taxation ruling in due course.