Recent developments in employment law

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

Momentum continues to build regarding WFH laws

By: Sarah Lunny and Ally Gardiner  

WFH laws amended and cases on decreased productivity

The Victorian Government has amended its proposed work from home laws, and delayed commencement until 1 July 2027 (and 1 January 2028 for small businesses). The Fair Work Commission (the FWC) has also decided, on its own initiative, to vary the Clerks – Private Sector Award 2020 (the Clerks Award) to include a work from home term.

Recent FWC cases illustrate that decreased productivity associated with working from home can constitute a reasonable business ground for refusing an application for a flexible working arrangement under the Fair Work Act 2009 (Cth) (the FW Act).

Bill containing legislative right to work from home

In June 2026, the Victorian Government introduced the Equal Opportunity Amendment (Work from Home) Bill 2026 (the WFH Bill), which proposes to insert a new right to work from home into the Equal Opportunity Act 2010 (Vic). If passed, the laws will apply to all employees who reside in Victoria (with some limited exceptions). Following further amendments the Government proposed in September 2026, the notable features of the WFH Bill in its current form include:

• Right of request: full-time employees will have a right to work from home two days a week (pro rata for employees working less than 38 hours per week), unless it isn't reasonable for them to do so.
• Scope to refuse requests: when determining whether it is 'reasonable' for an employee to work from home, employers can only consider a range of specific factors related to the inherent requirements of the employee's role and the impact that the employee working from home would have on the employer.
• Requirement to pay reasonable costs: employers will be required to pay 'any reasonable costs necessary' to allow an employee to work from home, including those associated with essential equipment and secure access to the employer's information systems. Employers are not required to pay any costs for utilities or internet.
• Interaction with other entitlements: the right to work from home is not cumulative with any other work from home entitlements an employee may have, such as a flexible working arrangement under the FW Act.

The WFH Bill's second reading has been deferred until 20 October 2026, when the Select Committee is due to report back to the Legislative Council.

Work from home clause to be inserted into Clerks Award

On 27 August 2026, the FWC decided on its own initiative that it was necessary to vary the Clerks Award to add a term that enables employees to request, and employers to agree to, an arrangement allowing the employee to work from home. The FWC's rationale for the variation was to ensure that, in light of the widespread adoption of working from home arrangements, the Clerks Award continues to provide a 'fair and relevant minimum safety net'.¹

Under the terms of the draft determination published by the FWC, an employer and employee may agree to depart from certain existing award requirements that are inconsistent with the practical realities of working from home, including those relating to the continuous working of ordinary hours, employer control over when ordinary hours are performed, and the taking of rest and meal breaks.

The FWC declined to include a 'right to request' term requiring employers to permit employees to work from home in certain circumstances, expressing the view that there was no justification for the 'major regulatory intervention' that the relevant unions had suggested.

Submissions on the FWC's draft determination were due by 17 September 2026.

Recent FWC decisions regarding flexible working arrangements

Several recent FWC decisions have indicated that decreased productivity associated with working from home can constitute a reasonable business ground to justify an employer's refusal of a request for a flexible working arrangement under the FW Act. These include:

• In Rabin Gurung v Knauf Gypsum Pty Ltd,² the FWC found that an employer had reasonable business grounds to refuse a payroll officer's request to work from home to care for his two young children. It determined that because the employee's duties required 'uninterrupted focus', the high chance of interruption while caring for children meant there was a real risk of error and inefficiency when performing complicated work requiring precision.
• In Mele Taunisila v AGL Energy Limited,³ the FWC decided that there were reasonable business grounds to refuse a customer operations employee's request to work exclusively from home, including in connection with the employee's performance. Based on the available evidence, the FWC concluded that if the employee continued to work only from home, her unsatisfactory performance would continue and her productivity decline over time, negatively impacting her performance in delivering customer service.

FWC sharpens its approach to AI

By: Lawrence Mai and Daniel Ferlazzo  

AI use in employment claims to be closely monitored

The Fair Work Commission (the FWC) has moved decisively on artificial intelligence (AI) in 2026, combining a systemic policy response with some case-level warnings about the consequences of over-reliance on AI-generated material. The FWC's total workload increased by over 70% in three years to the end of FY2025–26, a rise not explained by labour market conditions and that it attributes principally to litigants' increasing use of AI tools.⁴

Key takeaways

• From 20 October 2026, all FWC forms in individual rights matters (eg unfair dismissals, general protections, stop bullying) will require parties (including respondent employers) to disclose AI use, and declare that they have checked the accuracy of facts, case citations and quotes.
• Poor-quality AI-generated correspondence can itself damage a party's position—the FWC has been openly critical of it in at least one recent decision.
• Continuing a claim on the strength of AI-generated legal analysis, after being clearly told why it's wrong, can expose an unsuccessful applicant to a costs order.

Guidance Note on 'Use of generative artificial intelligence in Commission cases'

Following an exposure draft released in March 2026, on 24 August 2026, the FWC published its final AI Guidance Note (Use of generative artificial intelligence in Commission cases),⁵ and confirmed that modified forms incorporating AI disclosure and declaration requirements will take effect on 20 October 2026.

The Guidance Note imposes three core requirements:

• Parties must disclose whether and how AI was used.
• Parties must check and confirm that all facts, evidence, case citations, legislation and quotations in the document are accurate and genuinely exist.
• For witness statements, the maker must confirm the statement reflects the maker's own knowledge and words. Professional representatives must additionally hyperlink all cited cases.

Recent case law: costs and credibility consequences

Two recent decisions illustrate the practical stakes for both employees and employers, indicating that the FWC is now prepared to treat AI use as a live case-management and evidentiary issue.

In Khan v Aldi Pty Ltd,⁶ the FWC ordered a self-represented applicant who had relied heavily on AI to pay some of his employer's costs, after he continued an unfair dismissal claim that was unlikely to succeed because he hadn't served the minimum employment period. The applicant's AI-generated submissions repeatedly focused on the wrong statutory date under section 383 of the Fair Work Act 2009 (Cth) (the FW Act), even after the FWC wrote to him explaining the correct test and inviting discontinuance. It found this conduct unreasonable within the meaning of s400A of the FW Act, noting that publicly available FWC guidance also stated the correct test.

In Application by De Bruyn,⁷ the FWC made stop bullying orders in the applicant's favour but separately criticised correspondence her husband sent on her behalf, observing it 'appears to have been prepared with the use of an artificial intelligence tool', and was 'lengthy, wide-ranging, replete with generalisations, repetitive, and often couched in accusatory language', which contributed to the other party disengaging rather than addressing legitimate concerns raised within it. As a result, the FWC ordered that the parties cease using AI in the preparation of future correspondence between them, and to respond to issues raised 'in a meaningful way'.⁸

New Fair Work Court: what to expect

By: Eden Sweeney and Genevieve Kuan  

Federal Government to establish Fair Work Court that operates 'fairly and efficiently for workers and employers'.

This proposal for a new Fair Work Court comes 30 years after the last industrial relations court was abolished. In this Insight, we explain what we currently know about the proposal, what's still to be determined and what it means for employers.

Key takeaways

• The Fair Work Court is intended to sit alongside the Fair Work Commission (the FWC), and improve access and outcome timeframes for employees making employment-related claims.
• The court's design is to be determined through consultation to occur this year.
• In the meantime, employers should prepare for a potential further increase in employment-related claims if the court reduces the barriers to access. Given the court is intended to make it easier and less costly for workers to bring claims alleging underpayment of wages—including those that are relatively small and may not otherwise be commercially viable—employers may wish to consider assessing their payroll compliance to resolve any issues that may give rise to claims.

What we know

In its statement, the Federal Government confirmed that the Fair Work Court will be a specialist forum for resolving workplace relations disputes, staffed with specialist workplace relations judges. The court would work alongside the FWC, with the objective of providing 'simpler, fairer and faster justice for working Australians'. The Workplace Relations Minister has spotlighted industrial relations as an area in which specialist expertise is especially important, and suggested that dual appointments between the FWC and the court would be unlikely due to constitutional barriers. The Prime Minister has emphasised the court's intended role in resolving underpayment disputes.

An interdepartmental taskforce has been set up to support the consultation regarding the court's design and its subsequent implementation arrangements.

Employers invited to consult on design

With consultation set to occur this year, employers, workers, and other stakeholders are invited to consult on how the court would work. We expect this to include matters such as:

• the scope of the court's jurisdiction, given that the Federal Circuit and Family Court of Australia (the FCFCOA) already has jurisdiction to hear small claims for underpayments up to $100,000 and broader workplace matters including general protections claims;
• how matters will move between the FWC, the court and the FCFCOA;
• the avenues for appeal; and
• whether it will be a specialist division of an existing court or a standalone court.

Employers may also take the opportunity to express any concerns, such as whether the court will adequately represent business interests generally, and whether it will add complexity or expose them to more disputes.

Right to disconnect clarified in recent decisions

By: Anthony Hallal and Karie Mayman

Clarification of prohibition against preventing employees from exercising their right to disconnect

In August 2026, the South Australian Employment Court delivered some of the first decisions concerning the prohibition in modern awards against preventing an employee from exercising their right to disconnect under section 333M of the Fair Work Act 2009 (Cth) (the FW Act).

Key takeaways

• These decisions clarify the approach to determining whether an employer has contravened a modern award clause prohibiting employers from directly or indirectly preventing employees from exercising their right to disconnect under the FW Act.
• In determining whether the modern award term has been breached, the key issue will be whether there's evidence that the employer prevented the employee from exercising their right to disconnect.

Background

The right to disconnect under the FW Act permits an employee to refuse to respond to contact, or attempted contact, from their employer or third parties about work outside the employee's working hours unless the employee's refusal to do so is unreasonable. Modern awards were updated in 2024 to include terms preventing employers from directly or indirectly preventing an employee from exercising their right to disconnect under the FW Act. (Our February 2024 Insight has further details on this.)

In Kalleske v Mcguire⁹ and Elliot v Mcguire,¹⁰ Ms Kalleske and Ms Elliot, apprentice hairdressers in Adelaide, brought claims against their employer for multiple contraventions of the Hair and Beauty Industry Award (the Award), including claims that their employer had prevented the exercise of their right to disconnect, in breach of the Award.

Ms Kalleske claimed that she was expected to read and respond to work-related communications that were not urgent or reasonable, 'including on days off, during trade school, and while unwell or on leave'.

Ms Elliot claimed that the employer would frequently contact her outside of work by sending TikTok and Snapchat videos concerning her social life, contacted her about non-urgent work matters, and required her to take the salon mobile phone home. Ms Elliot claimed that if she didn't respond to the contact before returning to work, the employer would 'be in a bad mood and would ignore her'.

The decisions

In Kalleske, the court found that the respondent 'unreasonably and regularly contacted the applicant out of hours about work and unrelated matters', and accepted that Ms Kalleske found the contact unpleasant and intrusive, and felt pressure to respond. However, she wasn't subject to any consequence for not responding, and there was no other evidence that the employer attempted to prevent her from not responding.

In Elliot, the court found that while the employer responded with 'apparent disapproval' when her messages went unanswered, and this 'put some pressure' on the employee, there was no other consequence, and she was able to resist a request to monitor a work phone without consequence or repetition.

In both cases, the court concluded the conduct fell short of breaching clause 14A of the Award because the employer didn't prevent the exercise of the right to disconnect.

Contractor and customer found personally liable for sexual harassment of worker

By: Sayomi Ariyawansa and Olivia Mueller

'It really does not matter' who the perpetrator is

A recent decision¹¹ demonstrates how a customer or contractor of a business may be held liable for engaging in the sexual harassment of a worker in that business under the Fair Work Act 2009 (Cth) (the FW Act). The Federal Circuit and Family Court of Australia (the FCFCOA) decided that 'it really does not matter' who the perpetrator is, as long as the person subjected to the harassment is a worker, and the harassment itself occurs in connection with that person being a worker.

Key takeaways

• The prohibition against sexual harassment in connection with work under section 527D of the FW Act can apply to anyone who sexually harasses a worker if that harassment occurs in connection with that person being a worker.
• The objective of deterrence may justify a high pecuniary penalty, particularly where the conduct is considered abhorrent in the workplace and no remorse is shown.
• While the applicant in this case chose to discontinue his claim against the employer, employers must remain aware of their potential exposure in similar circumstances, and ensure that complaints employees make regarding others' conduct in the workplace (including that of customers and contractors) are properly dealt with.

Background

The applicant worked as a site manager for a storage business trading as Storage King. From late 2024, a customer (who the applicant's employer later engaged as a contractor) began making homophobic and sexualised statements to the applicant, and engaged in unwanted physical contact such as bumping or shoving him. A second customer later joined in, and together they continued to make highly sexualised, homophobic and other derogatory comments to the applicant at his workplace.

The applicant brought proceedings against the contractor, the customer and his employer. However, he discontinued the proceedings against his employer after the company filed a defence stating that it never employed the contractor or customer. The contractor and customer didn't participate in the proceedings at all. The judgment was made in default.

The decision

The FCFCOA found that both the contractor and the customer breached s527D of the FW Act. Significantly, it didn't matter that the contractor and customer weren't employees of the business where the conduct occurred. Section 527D of the FW Act was engaged because the applicant was a worker, and the harassment occurred in connection with him being a worker.

The FCFCOA awarded the applicant $90,000 in compensation, payable jointly, to reflect the psychological harm suffered (including a diagnosed anxiety and depressive disorder), and also ordered each respondent to pay a $13,000 penalty. This penalty amount was higher than the applicant sought, but the FCFCOA found that a lower amount wouldn't adequately deter such abhorrent conduct in circumstances where neither respondent showed any remorse or engaged with the court process at all.

Discretionary benefits found to count towards high income threshold

By: Virginia Dore and Georgia Perry

Reimbursements for commuting expenses affect unfair dismissal eligibility

In a recent unfair dismissal case, the Fair Work Commission (the FWC) decided that reimbursements of a former employee's commuting costs under a discretionary policy should be included when assessing whether the high income threshold had been met at the time of dismissal.¹²

Key takeaways

• Discretionary benefits may be counted in assessing whether the high income threshold applies and impact employees' eligibility to bring unfair dismissal claims.
• The FWC is willing to estimate a discretionary benefit's monetary value, particularly if it's a substantial benefit.

Background

The applicant commenced an unfair dismissal claim in the FWC against his former employer, after he was dismissed in January 2026. The employer challenged the claim, arguing that he had exceeded the high income threshold of $183,000 (as it was) at the time of dismissal, and accordingly was not protected from unfair dismissal.

The sum of the applicant's base salary, signing bonus, life insurance and salary continuance premiums at the time of dismissal amounted to $181,137.83.

In the 12 months before dismissal, he had also received $4,645 in reimbursements for travel to and from work. The payments were made in accordance with a discretionary policy that provided for a monthly reimbursement of up to $370 for employees' parking and public transport costs (the Commuter Benefit). The employer claimed that the Commuter Benefit amounts the applicant received should be included in the calculation because they constituted either:

• 'earnings', on the basis that they were amounts applied or dealt with on the applicant's behalf; or
• a benefit other than payment of money in accordance with the Fair Work Regulations 2009 (Cth) (the Regulations).

The decision

The FWC ultimately decided that the Commuter Benefit should be taken into account in assessing whether the high income threshold applied.

It was satisfied that the Commuter Benefit didn't constitute earnings because the payment amount couldn't be determined in advance, given that it was both discretionary and contingent (as the applicant had to both incur the expense and claim for the Commuter Benefit).

However, the FWC was satisfied that the Commuter Benefit should be taken into account in assessing whether the high income threshold applied under the Regulations. It considered a number of factors, including:

• While the Commuter Benefit was discretionary, it was substantial.
• The applicant had actually received it in accordance with an agreement between him and the employer, as he had applied for the Commuter Benefit under the policy, and the employer agreed to pay it by approving and paying the claim.
• The Commuter Benefit wasn't an entitlement to a payment of money or a non-monetary benefit, because the payment was discretionary. Additionally, it was a reimbursement of private expenses and not payable in return for the performance of work.
• Its monetary value couldn't be said to have been agreed in advance, given that it was subject to a $370 monthly cap, contingent on actual expenditure, and entirely discretionary.
• The FWC was able to estimate the Commuter Benefit's monetary value, being the $4,645 the applicant had actually been reimbursed in the 12 months before dismissal.

As a result, the applicant was not eligible for protection from unfair dismissal and the claim was dismissed.