Underpayments and payroll non-compliance will continue to be a major focus for the Fair Work Ombudsman (FWO) in 2025.
A high level of enforcement activity over the last year saw successful prosecutions against large banks and restaurant chains for employee underpayments. These businesses were ordered to pay penalties between $10 million - $15 million despite the quantum of actual underpayments varying significantly. We will continue to see prosecutions brought and penalties imposed even where companies carry out extensive remediation projects, consistent with the FWO’s announcement to favour prosecutions as its method of enforcement (over enforceable undertakings). Based on the FWO’s priority areas published in its 2024/25 Corporate Plan in August last year, we expect the FWO to target universities, large corporates, and employers in the fast food, and aged care and disability support services industries – this is based on the significant scale of, and public interest in, these industries, as well as the history of systemic non-compliance. Further guidance on the FWO’s remediation expectations and enforcement strategy will be published in 2025.
As of 1 January 2025, with the commencement of ‘wage theft’ laws, the FWO gained new investigative and referral powers to other criminal enforcement authorities. These laws introduced potential criminal liability for intentional underpayments and heightened civil penalties. The inclusion of ‘safe haven’ provisions are intended to encourage employers to self-report potential underpayments or non-compliance. However, the FWO retains discretion regarding when it enters into these agreements, and an agreement is unlikely to ward off civil proceedings and penalties.
Justice Perram’s long awaited decision in the Woolworths and Coles prosecutions is widely anticipated before mid-2025. The decision will provide critical guidance on key legal issues arising in the payroll context, including the interaction between set-off arrangements and annualised salaries. Whatever the outcome in this decision, we expect it will give the FWO a renewed focus on scrutinising employers’ approaches to set-off.
Finally, state regulators are expected to accelerate their focus in the underpayment space, particularly concerning the plethora of complex issues that arise in respect of employees’ long service leave entitlements.
Workplace health and safety - psychosocial safety will continue to be a key focus, and we expect an uptick in enforcement action (including prosecutions) by work health safety regulators across Australia.
October 2024 saw the first prosecution commenced by WorkSafe WA against a duty holder for alleged failings to address psychosocial risks and hazards. It is clear that regulators now expect that employers have ‘caught up’ with the slate of legislative changes that 2023 and 2024 had to offer.
Regulators are seeking notably higher penalties against offenders, and various enforceable undertakings to develop and deliver workplace health and safety materials and run safety campaigns across industry.
The Australian Work Health and Safety (WHS) Strategy 2023 – 2033 is prioritising targets for the increased capability of PCBUs, regulators and workers to manage psychosocial risks and hazards at work in order to strengthen compliance with this duty. The budget and other resources devoted to achieve these targets has increased exponentially in recent years and this focus is set to continue, supporting the continued growth in enforcement action, investigative and audit action, and other regulatory engagement with PCBUs.
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Compliance and enforcement – the continued rise of the regulator
Expectation of increasing sophistication in preventing workplace sexual harassment
Since December 2023, the Australian Human Right Commission (AHRC) has held powers to investigate employers’ compliance with the positive duty to take reasonable and proportionate measures to prevent sexual harassment in the workplace. In this time, we have seen our clients, and other large employers taking proactive steps to implement effective risk-management systems and controls to discharge the positive duty. So far, we are yet to observe the AHRC flexing its considerable new powers. However, the AHRC is still in its infancy as an empowered regulator, and it is likely just a matter of time before this occurs.
As the positive duty becomes more entrenched in everyday vernacular, workers are feeling more empowered to raise concerns about workplace behaviour. Organisations must continue to ensure that correct frameworks and escalation tools are in place and ready to assist those who come forward – while still taking steps to reduce the risk of future harm. We anticipate a continued rise in the number of complaints made internally, and externally to courts and tribunals, particularly given the recent cost reforms introduced into the AHRC Act 1986, which provide greater protection to claimants in respect of costs in discrimination proceedings.
Class action proceedings have also been commenced by plaintiff law firms against large corporates, in relation to allegations of sexual harassment and sex discrimination.
We are seeing a noticeable trend of greater board oversight in the management of sexual harassment and sex-based discrimination – including greater transparency and Board reporting, overhauling the approach to confidentiality clauses in release agreements, and more extensive training on workplace conduct and whistleblower protocols.
Investigations on the rise
Rising societal expectations regarding workplace conduct, combined with a heightened regulatory environment, have resulted in an increasing number of workplace investigations in recent years. Legislative and regulatory changes, such as the introduction of the Federal positive duty, the WHS focus on psychosocial hazards, and recent changes to whistleblowing laws, have further embedded workplace investigations, and cultural reviews, as a regular fixture in corporate Australia.
We expect employers to experience increased pressure to adopt robust investigation practices, including trauma-informed approaches to managing workplace misconduct. This will require employers to upskill its internal investigators and people leaders, and, recognise when it’s appropriate to:
seek help from external investigators;
obtain legal advice on next steps – particularly where these are whistleblower complaints; or
encourage appropriate reports to be made to law enforcement.
Our HSF team is expecting to assist more clients to navigate sensitive workplace and whistleblower investigations in 2025.
Diversity, Equity and Inclusion
In recent weeks, the Trump Administration has signed executive orders aimed at dismantling DEI initiatives within the US Federal Government, which has resulted in many US and global companies – such as Google, Meta, Pepsi, McDonald’s - reversing DEI programmes in the US.
We are already seeing the ripple effects in Australia, with global companies such as Accenture and Google announcing the end of DEI initiatives, including in Australia. But can we expect a pendulum swing against DEI in Australia of the same force as that in the US? We don’t think so.
This is because of differences in DEI programmes between the US and Australia, as well as differences in legal frameworks in each country. Namely:
Many US DEI programmes focus on “quotas”, whereas corporate Australia has generally adopted “softer” diversity targets, which are focussed on creating awareness and developing and retaining talent, whilst still emphasising merit as the prime criterion for hiring and promotion; and
In most Australian states there are legislative exceptions (such as “special measures”) to discrimination laws which permit discrimination where it is intended to address existing inequalities, and most Australian companies are required to report to the Workplace Gender Equality Agency on gender targets and related matters. In contrast, in the US, whilst legal exceptions for positive discrimination (or, “affirmative action”, as it is more commonly known in the US) exist, the threshold for accessing such exceptions is incredibly high, and can rarely be relied upon.
Because of these factors we do not expect these US developments to have the same impact in Australia. We’ve already seen Australian corporates – including Telstra and Fortescue, and some global businesses (PwC and KPMG), restating their commitment to diversity and inclusion.
That being said, the actions of companies such as Accenture and Google suggest that some impact is likely to be felt, not least given these global developments are likely to embolden those who may have already perceived Australia’s diversity and inclusion policies to be an “overreach”. The question that remains to be seen is how these reversals will operate alongside Australia’s positive duties to provide a safe working environment, including preventing sex discrimination and sexual harassment (with gender inequality having been identified as the key driver for sexual harassment in the 2020 Respect@Work report).
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Workplace culture, DEI and investigations
Same Job, Same Pay is a phrase that has been increasingly used in 2024 and this will continue in the coming year. The new laws regulating Regulated Labour Hire Arrangement Orders (RLHA Orders) commenced on 1 November 2024, and our team is assisting BHP in running a test case which is likely to clarify the scope and extent of the laws for both workers and employers. The new laws are targeted at increasing wages and secure forms of work, by effectively allowing labour hire workers (or the union) to seek an order from the Fair Work Commission (FWC) that they be paid no less than the full rate of pay to which the worker would have been entitled under the host’s enterprise agreement (had they been directly employed).
There are exceptions to the use of the RLHA Orders however, and these are currently being tested before the Full Bench of the FWC. The key answers we are waiting for are:
Who is a labour hire provider, and when does the exception for the “provision of a service, rather than the supply of labour” arise?
What factors will the FWC consider in determining whether it is “fair and reasonable in the circumstances” to make a RHLA Order?
So far, all determined applications for RLHA Orders to date have been granted by the FWC. Once there is greater clarity on these key questions, the approach employers or “hosts” take to resisting such orders will undoubtedly pivot. The start of 2025 has seen an increasing number of employers (or hosts), consent to RHLA Orders being made with limited objections.
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Same Job, Same Pay
We expect to see a continued rise of bargaining and bargaining related disputes in 2025 particularly as employee representatives and employers become more familiar with the new legislation, and new strategies and tools to be used in bargaining.
Intractable bargaining
At the end of 2024 we saw a number of employers attempt a ‘final push’ to get their enterprise agreements voted up and approved by the FWC. Intractable bargaining orders allow parties to enterprise bargaining disputes to apply to the FWC for an arbitrated outcome (on contentious terms) where either bargaining has continued unsuccessfully for at least nine months, or, at least nine months have passed since the current agreement passed its nominal expiry date.
The FWC must be satisfied that there is no reasonable prospect of an agreement being reached. Already this year, the FWC rejected an application by Victoria Police to make an intractable bargaining declaration, finding that despite two months of protected industrial action and the parties remaining significantly apart, it was not improbable that an agreement could be reached.
Last year saw the first arbitrated outcome for Cleanaway, with the Full Bench of the FWC setting the agreement terms for wage increases.
This year we expect to help more employers with bargaining and intractable bargaining declaration applications. This includes by assisting in the preliminary phases of bargaining to proactively structure the negotiation process to ensure engagement with unions/employees ican deliver the most favourable outcomes.
Multi-employer bargaining
While the focus of last year seemed to be on ‘Same Job, Same Pay’, we expect multi-employer bargaining to be a key focus area for unions coming into the new year – particularly due to the difficulty of winding back any multi-employer agreement. The new reforms essentially force unwilling employers to the bargaining table.
Last year, we saw the Full Bench of the FWC order coal miners in New South Wales to engage in discussions for a multi-employer agreement for a previously non-agreement covered supervisory workgroup. This was the first contested multi-employer bargaining decision under the new reforms. It is yet to be seen how this will play out in practice.
The key takeaway is that no workforce is “immune” from being roped into multi-employer enterprise agreements. If anything, we expect to see more applications being made on behalf of workforces that have traditionally been agreement-free across a range of industries. Perhaps the best defence that an employer has is to have an in-term single enterprise agreement.
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Bargaining disputes – IR in focus
The sweeping reforms passed by the Labor Government in 2022 and 2023 saw the employment landscape fundamentally shift.
Employers and employees/unions are now increasingly familiar with the new tools they can draw on to seek preferable employment and IR outcomes.
We are already expecting to see a shift in focus of the Coalition towards small business employers and increasing productivity efficiencies. This is likely to see the announcement of proposed reforms that remove the red tape for small businesses, where the Labor Government’s industrial relations agenda have heightened compliance obligations.
Whether this means unravelling the recent reforms or introducing new regimes, we will have to wait and see.
Early signs suggest that the Federal Opposition’s reform agenda will not be as expansive as the Labor Government’s reforms. Despite this, the Liberal party has indicated their intention to review Same Job, Same Pay reforms, reintroduce the Australian Building and Construction Commission and simplify the definition of casual employees (in line with what was agreed at the time the employee was employed). Employer organisations have also been calling on the Liberal Party to repeal multi-employer bargaining if elected.
Undoubtedly, key Independent Senators and MPs (including the Teals) will have more and more say on IR and employment policies, particularly if the election heads towards a hung parliament. We’ll be continuing to watch the announcements closely.
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Federal election