The Year in Review: Employment Law Highlights Every Employer Should Know

Key Legal Changes in 2025

As we farewell 2025, there have been a number of notable changes to the laws governing the workplace, and landmark cases that will affect the way in which organisations conduct their business in 2026. This article will highlight key new laws and cases, and will identify the key learnings for employers as we enter the new year. Major changes include criminalisation of wage theft, extension of the right to disconnect for small businesses, employer rights regarding work from home requests and a trend towards the increasing damages awards in sexual harassment matters.

Criminalisation of Wage Theft

It has been nearly a year since the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 amending the Fair Work Act 2009 (Cth) (Act) took effect, imposing criminal penalties on intentional wage underpayments. Now a business can be found guilty of wage theft resulting in monetary fines, prison time, or both if:

1. the employer is required to pay an amount to the employee under the Act, an industrial instrument (modern award, enterprise agreement or workplace determination) and the employer fails to make the payment; and
2. the employer intentionally engaged in the act or omission and intended that it result in the failure to make payment.

Employers are able to rely on a defence of ignorance or mistake, however, only if they can show that they did not intend the act or omission to result in the underpayment. It is worthy to note that small businesses can be shielded from criminal liability if they comply with the Voluntary Small Business Wage Compliance Code.

This escalation in enforcement means employers must ensure they are upholding robust payroll compliance, complete regular wage audits and act with urgency if an underpayment is identified.

The Fair Work Ombudsman has been very active this year and has been successful in prosecuting a number of very high-profile businesses for underpayments. These proceedings have resulted in significant judgments and penalties, including combined liabilities of nearly $1 billion against Woolworths and Coles, as well as penalties of $640,000 against Bakers Delight, and many others.

Right to Disconnect for Small Businesses

Although the right to disconnect has been enforceable for non-small businesses since mid-2024, it only became equally applicable to small businesses on 26 August 2025. Now, all businesses are required to comply with the right to disconnect laws and should be aware that this right is enforceable.

As a reminder, the right to disconnect provides an employee with the right to reject requests to monitor, read or respond to contact from their employer, or another third-party contact, if it is work-related and outside of their contracted working hours. However, this right must be exercised within reason and there are instances in which employers can require employees to respond to communications outside of their usual working hours.

The Federal Court of Australia is currently facing the first public test of how this new right is to be interpreted and implemented, potentially setting a key precedent for how similar cases will be assessed in the future. The case involves a Queensland teacher who claims she was unfairly dismissed after exercising her right to disconnect by not responding to work-related communications, during a period she maintains constituted school holidays. The Queensland teacher is claiming $780,000 in damages, comprised of loss of future earnings relating to six years of income and $50,000 for emotional distress.

This matter is expected to pave the way for how future claims under the right to disconnect will be assessed by the courts. In addition to shaping the legal framework around this new workplace entitlement, many legal professionals anticipate that this case will provide much-needed clarity on several key considerations, for example, circumstances in which employees can refuse to respond to communication in period of leave.

Conversion from Casual to Permanent Employment

Employers should all be aware that eligible casual employees can request to change their status to permanent employment under a protected National Employment Standard (NES) pathway, commonly referred to as the ‘Employee Choice Pathway’. Eligible employees are able to write to their employer notifying them of their desire to change their employment status to that of permanent employment and employers can only refuse for specific defined reasons.

Eligible employees can provide written notice of their election to alter their employment to permanent employment if:

1. they have been employed for at least 6 months or 12 months if employed by a small business; and
2. they believe they no longer meet the requirements of the definition of a causal employee under the Act.

Employers are required to respond to all notices within 21 days of receiving it and must indicate whether they accept or reject the change. Notably, if the employer accepts the change the written response to the employee must include further information on the employment status (full-time or part-time), new hours of work and the effective date.

However, employers are able to reject requests for a conversion if:

1. the employee still falls within the definition of causal employee;
2. fair and reasonable grounds exist for the rejection; or
3. the conversion would consequently mean the employer is not complying with a recruitment or selection process required by law.

Stronger Anti-Bullying and Sexual Harassment Protections for NSW

The Industrial Relations and Other Legislation Amendment (Workplace Protections) Bill 2025 (NSW) (Workplace Protections Bill) was passed by the NSW Government on 27 June 2025 and assented to on 3 July 2025. The Workplace Protections Bill introduced major amendments to New South Wales’ work, health and safety laws. Notably, the Workplace Protections Bill created a dedicated jurisdiction in the NSW Industrial Relations Commission (IRC) for anti-bulling and sexual harassment. The Workplace Protections Bill also introduced major changes impacting businesses, unions, health safety representatives and persons conducting a business or undertaking (PCBUs).

These significant changes to the Work, Health and Safety Act 2011 (NSW) include:

1. Codes of Practice approved by the Minister are mandatory and legally binding on PCBUs;
2. After consulting with SafeWork NSW, unions can initiate prosecutions;
3. Union official’s powers are extended to now include the ability to gather evidence such as measurements, photographs, videos and conduct tests in cases of a suspected WHS breach; and
4. SafeWork NSW is now able to share relevant information for WHS purposes with other agencies.

Additionally, new anti-bullying and sexual harassment regimes have been introduced as a preventive measure for NSW Government members. Damages up to $100,000, public apologies and specific stop orders can now be sought. This is a landmark change as the IRC’s new NSW Anti-Bullying and Sexual Harassment jurisdiction is the first in Australia to allow for the ordering of compensatory damages.

Public sector employers in NSW should also be aware that they can be held vicariously liable for acts of sexual harassment carried out in their workplace unless it can be shown that reasonable steps were taken to prevent and eliminate the conduct.

Landmark Cases of 2025

Westpac Work From Home (WFH) Case

In a landmark case, the Fair Work Commission (FWC) ordered that Westpac approve an employee’s WFH request, overruling the big-4 bank’s return to the office policy.

Karlene Chandler was employed on a part-time basis and had been a loyal employee since 2002. Ms Chandler moved to a regional town, approximately 70kms from the nearest Westpac corporate office. She had previously received approval from an acting senior manager to work two of her five days a week from a Westpac branch closer to her home. However, this decision was short lived when the employee she was covering for, returned from leave. Ms Chandler was directed to return to the office. She asked for her previously agreed arrangement to be continued or to be permitted to work from home entirely so she could care for her school aged children.

The Act requires that an employer engages with the requesting employee to reach an agreement to accommodate their request for flexible work arrangements (in this case work from home arrangement) and demonstrate “reasonable business grounds” if it refuses the request. Westpac cited company policy and a need for in-person collaboration as “reasonable business grounds” for refusing Ms Chandler’s request.

The FWC found in Ms Chandler’s favour noting that “reasonable business grounds” had not been adequately considered and that her work could be conducted entirely remotely. The case provides key takeaways for employers reminding them that, in responding to employee’s flexible work requests, they must provide detailed and specific refusal grounds, explain the potential detriment if the request is allowed and ensure each employee’s request is assessed on its individual merits.

It also serves as a cautionary note for employers who wish to mandate that all employees work from the office.

Fair Work Ombudsman v Woolworths and Coles [2025] FCA 1092 

This year we saw the biggest underpayment claim in Australian history, against Coles and Woolworths, highlighting the challenges now associated with the use of annualised salaries for award covered staff.

The case history in these proceedings is long, with it involving four separate proceedings being heard together. The case examines the operation of pay provisions in the General Retail Industry Award (2010) (Award) as they apply to employees earning an annualised salary. The main issue in question was whether Woolworths and Coles had underpaid thousands of their employees by relying on annual salaries to cover all award entitlements. Entitlements are derived from the Award and include overtime, penalty rates and allowances.

Both Woolworths and Coles had previously paid remediation payments totally over $307 million. However, despite these payments, the FWO and the class action applicants argued that Coles and Woolworths owed more because they had failed to pay the employees overtime when it fell due as required by the Award, and they were not permitted to rely on an annualised salary to set-off these amounts.

1. Set-off clauses

The core question was whether the set-off clauses in the employment contracts were effective to set-off an employee’s Award entitlements if calculated over a 26-week period. The Woolworths employment contracts noted that “as far as possible” remuneration paid per the contract was paid in satisfaction of the employees’ Award entitlements over a 26-week period. However, the employees were paid a fixed fortnightly pay based on an annual salary. Whilst Coles’ employment contracts had similar clauses, these did not include the 26-week “pooling” period.

The Court found that Woolworths and Coles were unable to rely on the annual salary and set-off clauses in the contract for periods extending beyond the pay period in which the overtime and penalties were accrued. As such, although employees may have been paid in excess of Award entitlements, this could only be measured from pay period to pay period.

2. Record Keeping

It is a requirement under the Act that employers fulfil their legal obligations to keep proper employment records. Woolworths and Coles argued that this obligation to keep time and attendance records, and overtime records applied to salaried employees.  The Court held that both Woolworths and Coles breached their compliance obligations under the Act, in failing to keep proper records of employees’ specific penalty rates, loadings and overtime hours.

The key implications for employers from this decision include:

1. Set-off clauses and annualised salaries in employment contracts may only be legally sound to cover Award entitlements, when used to set-off award entitlements within a single pay period. Notably, overpayments in one pay period are not able to be used to cover a shortfall in a following or previous pay period;
2. Employers must ensure they are keeping accurate and fulsome records of all employee hours worked. The information must be readily available for employees and third-party auditors to access. This is the case whether the employees receive an annual salary or not;
3. Employers are required to ensure employees understand what rights under their applicable industrial instrument they are foregoing. It is not sufficient to rely on policies to represent an agreement between employer and employee; and
4. Employers should now closely examine their contracts of employment in circumstances where they rely on annualised salaries to off-set award entitlements. They must ensure that the amount paid to the employee in each pay period is sufficient to cover all award entitlements accrued in that pay period. This means many employers will need to examine not only their record keeping practices but also their payroll and award compliance practices.

As is evident from this decision, the failure on the part of employers to take necessary steps (even if the employee over a 12-month period is paid more than what they would receive under the relevant award), may mean the employer is exposed to significant underpayments and potential civil penalties.

Sexual Harassment Damages Awards on Upwards Trend

In two recent sexual harassment cases, the Court awarded significantly high damages to emphasise the severity of such issues in the workplace and the harm caused. These cases are JF v Oishi Teppanyaki & Café Pty Ltd & Anor [2025] QIRC 209 (JF v Oishi case) and Magar v Khan [2025] FCA 874 (the Magar v Khan case).

In JF v Oishi, a young waitress was sexually assaulted in the workplace by her employer. Among other acts, the employer propositioned her asking for sex, inappropriately touched her and restricted her from leaving the work premises. The Queensland Industrial Relations Commission held that the conduct had a “profound and significant detrimental impact” on the waitress and that a degree of permanent impairment existed. Thus, the Commission awarded the waitress $140,000 in general damages, $10,000 in aggravated damages and two-thirds of her costs.

Similarly, in the Magar v Khan case, the Federal Court of Australia awarded $305,000 in damages to the applicant, making it a landmark case notable for being among the highest awards for a sexual harassment claim in Australia. Ms Magar was a vulnerable young immigrant, who was questioned by her co-worker, Mr Khan, about her sexual activity, isolated and shown pornographic material, touched with sex toys and invited to a hotel to watch pornography, among other things.

It is evident that the Court are taking very seriously employers’ positive duty obligations and imposing larger penalties where they have failed to protect employees.

What it Means to be Redundant – Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29

In Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, the High Court of Australia considered whether the Fair Work Commission could examine an employer’s decision to rely on contractors instead of redeploying existing staff in circumstances where the role of the employed individual is redundant. The case involved 22 employees whose positions were made redundant during a restructure at the Metropolitan Coal Mine operated by Helensburgh Coal Pty Ltd. The employees argued that their dismissals were not based on genuine redundancies under section 389 of the Fair Work Act, as it would have been reasonable to redeploy them into roles that were performed by contractors.

The High Court unanimously dismissed the employer’s appeal, affirming the Fair Work Commission’s finding that the dismissals were not genuine redundancies. The Court held that the Fair Work Commission was entitled to consider whether redeployment could have occurred if the employer had insourced work from contractors. This decision clarifies that employers cannot avoid redeployment obligations by outsourcing work to contractors, and must justify why insourcing was not a reasonable option.

For employees, this ruling strengthens protections against redundancy by ensuring that employers cannot circumvent redeployment obligations through extensive use of contractors. It opens the door to challenges where redundancies are implemented without genuine consideration of internal redeployment opportunities, particularly in workplaces that rely heavily on outsourced work.

Qantas Airways Limited v Transport Workers Union of Australia [2023] HCA 27

The Federal Court’s penalty decision against Qantas Airways Limited marked one of the largest financial penalties ever imposed in an employment law case in Australia. The Court ordered Qantas to pay $90 million in penalties for unlawful adverse action involving dismissal.

The case arose from Qantas’s decision in November 2020 to outsource its ground handling operations at ten Australian airports to third-party contractors. This move resulted in the dismissal of 1,820 employees, many of whom were members of the Transport Workers’ Union (TWU).

The TWU challenged this decision, arguing that the outsourcing constituted adverse action under section 340(1)(b) of the Act, which prohibits employers from taking action to prevent employees from exercising a workplace right. The Federal Court found in favour of the TWU, concluding that Qantas had unlawfully dismissed the employees to prevent them from engaging in protected industrial action and participating in enterprise bargaining.

The Court was scathing of Qantas’ conduct, finding that the airline had deliberately obscured its decision-making and failed to present key evidence. The judgment highlighted not only the devastating impact on affected workers but also the importance of transparency and good faith in redundancy processes.

This case demonstrates the risks employers face if redundancies are mishandled or shambolic. Financial penalties, reputational damage, and long running litigation can far outweigh any short-term savings.

End of Year Message

If you wish to discuss any aspect of this client alert, require specialist advice in relation to determining whether your business is affected by these amendments, or assistance reviewing current employment practices or processes, please do not hesitate to contact us.

We wish all our clients, readers and subscribers a very happy and safe festive season ahead and will recommence the publication of our client alert service in February 2026.