The Fair Work Act 2009 (Cth) (FW Act) is the principal source of industrial relations regulation for companies operating in Australia, and applies to all employees in private sector employment (with the exception of Western Australia, where it applies to all employees employed by companies).

The FW Act contains ten minimum employment conditions known as the National Employment Standards (NES) which apply to all employees (including executives) in respect of matters such as paid leave (annual, personal and long service leave), unpaid parental leave, notice of termination and redundancy pay, reasonable maximum working hours and flexible working arrangements. The NES are minimum standards, and cannot be excluded by the terms of a modern award, enterprise agreement or common law contract. There are also statutory provisions dealing with paid parental leave.

Supplementing the NES is a system of modern awards that covers employers and employees in certain industries and occupations. For example, there are specific modern awards which cover the mining industry, road transport and manufacturing. Modern awards are intended to only cover those employees who have traditionally been regulated by awards, which in most contexts excludes managers or senior employees. Modern awards contain a number of further minimum employment conditions including, minimum wages, hours of work, overtime, allowances and leave.

A further layer of industrial regulation is enterprise agreements. Enterprise agreements are collective agreements made with employees. In most instances agreements are made by `single business' employers, although there is scope for the making of single business agreements involving joint venturers or related corporations, and for multi-employer agreements.

If an enterprise agreement does not cover all employees of the employer, it must be shown to cover a "fairly chosen" group of employees taking into account whether the group is geographically, operationally or organisationally distinct.

The FW Act promotes bargaining for enterprise agreements, and reinforces the role of trade unions in that process. In particular:

  • employers may be required collectively to bargain for an enterprise agreement with their employees where the majority of their employees wish to do so;
  • employees have the right to appoint a bargaining representative (including themselves) to undertake bargaining. A union is the default bargaining representative for its members, although they can be disendorsed by a member if they so choose; and
  • employers and trade union or employee representatives are required to bargain "in good faith", and there are a broader range of "tools" that parties to a bargaining process may use when a dispute arises in the bargaining process.

An enterprise agreement may contain terms relating to the employment relationship and the relationship between an employer and a union. An employee must generally be "better off overall" under an enterprise agreement when compared to the otherwise applicable modern award. Once approved by the employees to whom it will apply, and by the Fair Work Commission (FWC) an enterprise agreement will exclude the application of a modern award in relation to the employees to whom it applies. As noted above, however, an enterprise agreement cannot exclude the NES although it can improve upon them.

Employers establishing a new business in Australia may be able to enter into an agreement with one or more unions prior to employing employees needed to conduct the business. This type of enterprise agreement is known as a "greenfields agreement".

Enterprise agreements must specify a `nominal expiry date' which must not be more than four years after commencement. Importantly, however, enterprise agreements continue to operate after their expiry, unless or until formally terminated or replaced.

During negotiations for an enterprise agreement (other than a greenfields or multi-employer agreement), employees may take `protected industrial action' in support of claims for the proposed agreement. Their capacity to do so is subject to meeting a range of procedural and substantive requirements, including securing approval for the proposed action in a secret ballot.

Employers who are faced with unprotected industrial action can obtain orders from the FWC to require that the action cease or not occur. Such orders can be enforced through the courts. Employers may also be able to obtain injunctions and damages at common law or under statute in respect of unprotected industrial action.

Officials of unions that are eligible to represent the industrial interests of employees in a workplace have the right to enter that workplace to hold discussions with employees, to investigate suspected breaches of legislation or awards or agreements, and to deal with work health and safety (WHS) issues. There are strict requirements that need to be observed where a union official seek to exercise his or her “right of entry”.

The FW Act provides protection from unfair dismissal in certain circumstances, including if a modern award or enterprise agreement covers the employee and the employee has over six months’ service (12 months’ service if the employer has fewer than 15 employees). Executive employees, or high income earners, generally cannot access remedies for unfair dismissal, unless they are covered by an enterprise agreement or modern award.

 ‘Unfairness’ in this context will be assessed by reference to whether the employer had reason to terminate the employee’s employment on grounds of performance or conduct, and whether the employer observed appropriate standards of procedural fairness in deciding to terminate the employment. 

The FW Act also contains a range of protections relating to taking ‘adverse action’ against employees and others (including prospective employees and independent contractors) because of a person’s workplace rights (which is broadly defined and includes the capacity to make (or not make) an enterprise agreement or a complaint in relation to employment); industrial activity (including union membership or non-membership); and a broad range of discriminatory grounds (including race, ethnicity, gender, religion, political affiliation). Prohibitions on discrimination in employment are also to be found in other Federal and State legislation.

The FW Act contains rules relating to situations where there is a “transfer of business” such as when there is an asset transfer between the old employer and new employer. Generally speaking, if there is a transfer of business, the industrial instruments that applied to an employee who transfers his or her employment will continue to apply to the employee and bind the new employer, although this can be subject an order from the FWC on application by an employer, employee or union.

WHS is largely regulated by State legislation, although the Commonwealth and all States and Territories apart from Victoria and Western Australia have now adopted harmonised laws which provide an extensive degree of uniformity as between the participating jurisdictions. Generally speaking, WHS legislation requires employers (and certain other persons) to take all reasonably practicable measures to protect the health, safety and welfare of their workers and other persons whose health, safety or welfare may be affected by the conduct of their business. The legislation provides significant penalties (including fines or imprisonment) for non-complying companies and their “officers” (such as directors and managers).

All employers must provide workers’ compensation insurance coverage for their employees. They must also make superannuation contributions for their employees and, in some circumstances, independent contractors. Unlike some European countries, the social security system in Australia is funded out of general revenue, rather than employer and/or employee contributions.