The employment law and labour relations system in Australia is highly regulated and employers are required to deal with numerous overlapping layers of regulation.
Australia is a federation of six states (New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia) and each state has its own law-making parliament. There are also two mainland territories (Northern Territory and Australian Capital Territory) which also have their own parliaments. The Australian federal parliament, or “Commonwealth”, has law-making powers to the extent provided to it by the states in the Australian Constitution.
The principal employment law and labour relations legislation in Australia which covers most employers is the federal Fair Work Act 2009 (Cth) (Fair Work Act).
The common law and the contract of employment
The common law system applies in Australia and the contract of employment serves as the foundation of all employment relationships. Contractual obligations must be exercised subject to the requirements of any relevant legislation. In recent times, as some of the deep layers of regulation have been dismantled, the importance of contractual obligations and the instrument of the contract of employment have become more prominent.
In addition to the Fair Work Act there are numerous other state and federal laws which employers must comply with. For example, there are federal laws dealing with work health and safety, anti-discrimination, taxation and superannuation (pensions). Each state has laws dealing with workers compensation (a compulsory insurance scheme for injured workers), anti-discrimination and long service leave (paid leave provided to long-serving employees in addition to annual leave).
National Employment Standards
Minimum statutory requirements, known as the National Employment Standards (or NES) apply to all employees in Australia, regardless of their salary or position. The NES are contained within the Fair Work Act. Broadly, the NES deal with the following employee entitlements:
- maximum weekly hours (38 hours per week plus reasonable additional hours, in the case of a full time employee);
- requests for flexible working arrangements (which, if made by an employee who is entitled to make such a request, should only be refused on reasonable business grounds);
- parental leave and related entitlements – there is also separate legislation dealing with paid parental leave;
- annual leave (4 weeks per year for a full time employee);
- personal/carer’s leave (10 days paid leave per year for a full time employee) and unpaid carer’s leave and compassionate leave;
- community service leave (which is paid or unpaid depending on the reason it is taken and what is contained in any relevant industrial instrument or legislation);
- long service leave (paid) – although this is still mostly applied through State legislation;
- public holidays (paid);
- notice of termination (between 1 and 5 weeks) and redundancy pay; and
- Fair Work Information Statement (which must be given to all new employees before, or as soon as practicable after, commencement of employment).
There are over 120 modern awards (Awards) which apply to many, but not all, employers and employees along industry or occupational lines. Awards are enforceable instruments with statutory effect and are made by the Australian industrial relations tribunal, currently called the Fair Work Commission (Commission). Awards contain minimum rates of pay, overtime rates, penalty rates (i.e. premium rates of pay for working particular days / hours), allowances and other employee entitlements. Awards operate in addition to the NES and provide entitlements or benefits to employees that are above those provided in the NES.
Some employers also implement enterprise agreements which often include terms relevant to the particular site or organisation. For an enterprise agreement to be approved, the Commission must be satisfied that employees to be covered by it would be “better off overall” than they would be in accordance with the relevant underpinning Award. When an enterprise agreement is operative it temporarily displaces the otherwise applicable Award, unless the enterprise agreement specifically incorporates the terms of the Award. Employees can take protected industrial action (i.e. strike) in pursuit of an enterprise agreement.
The Commission sets minimum wages each year which are effective from 1 July. There are different minimum rates of pay in the various Awards. There is also a national minimum wage for employees not covered by an Award. The national minimum wage for the period 1 July 2015 – 30 June 2016 is AUD $656.90 per week for a 38 hour week, or $17.29 per hour. There are also minimum wages for junior employees, apprentices and trainees.
Where an employer commits a breach of the NES, another part of the Fair Work Act, an Award or enterprise agreement, penalties can be imposed against the employer and potentially, persons who are knowingly concerned in a contravention, such as the employer’s directors and / or senior managers.
Transfer of business
If a person acquires all of the shares in a business in Australia there will be no immediate legal change to the employment arrangement. The same employer will continue to employ the employees and the existing contracts of employment and other industrial instruments will continue to apply.
However, if a person acquires some or all of the assets of a business in Australia, the purchaser is not required to offer employment to the seller’s employees, and the seller’s employees are not obliged to accept employment with the purchaser. If the employees do become employed by the employer this will often result in a “transfer of business” under the Fair Work Act. There are two main effects of this. First, the transferring employees’ periods of continuous service with the seller must, subject to certain limited exceptions, be recognised by the purchaser. Secondly, if enterprise agreements apply to the employees in the seller’s business, those same agreements will continue to apply to the employees when they become employed by the purchaser. These “transferring instruments” can be prevented from transferring to the purchaser or terminated in limited circumstances.
Termination of employment
Employers and employees must give each other “notice” to terminate the employment. The statutory minimum period of notice is between 1 and 5 weeks depending on an employee’s period of continuous service. However, contracts of employment often provide for greater periods of notice. Where a written contract of employment does not specify a particular period of notice, a period of “reasonable notice” can be implied. In some cases, this can be many months. Where an employee’s position no longer exists they may be also be entitled to redundancy pay.
Many employees have a statutory right not to be unfairly dismissed, the effect being that their employer must have a valid reason for the termination and must follow a fair and reasonable process. All employees have the right not to be terminated for a prohibited reason such as exercising a protected workplace right (e.g. taking sick leave), or because of their race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
Jeremy Cousins is the Employment Law (Corporate) member of International Referral in Australia. For further information on Australian employment law and labour relations issues in Australia please contact:
Jeremy Cousins, Principal
Telephone: +61 (0)3 8605 4841
Fax: + 61 (0)3 8601 1180
Mobile: + 61 (0)428 041 272
Whitehall Workplace Law
Level 14, 330 Collins Street
Melbourne, Victoria 3000
This publication is intended to provide a general summary only and should not be relied on as a substitute for legal advice.