The Nature of Workplace Law (HSC SSCE Legal Studies): Revision Notes

The Nature of Workplace Law

Development of workplace law

Workplace law primarily concerns employment – a contractual relationship where an employee receives payment and benefits in exchange for work. This differs from an independent contractor arrangement, where work is done under a contract for services without an employer-employee relationship.

Australian workplace laws originated from British industrial laws but have evolved significantly over the past century to reflect changing economic conditions, attitudes, technology, and trade union influence.

The Middle Ages

The earliest labour laws emerged in feudal England (approximately 800 to 1400 CE). Key characteristics included:

• Status-based regulation: Work arrangements were based on social status rather than contracts or negotiations
• Villeins/vassals: Most people worked on land, receiving no payment but gaining the right to live on the land and potential protection from the lord
• Limited rights: Workers had minimal choice and few legal protections
• Guild system: Medieval associations of craftsmen or merchants regulated product quality and working conditions, primarily to maintain quality standards rather than protect workers' rights
• Restrictive laws: Legislation prevented workers from making profits, leaving agricultural areas, or negotiating terms, as labour shortages from disease made control essential

Laws throughout the 14th and 15th centuries allowed legal action against lords who paid above-standard wages, forced people into work with penalties for refusal, and required parents to place children in work on lords' estates.

Early employment law

From medieval times through the 18th century, employment law remained limited. Some protections emerged gradually:

• The 1514 statute limited wages but also fixed working hours
• The Statute of Labourers (1562) punished refusal to work but aimed to protect workers from low wages
• Laws favoured wealthy, influential members of society focused on profit rather than employee welfare
• Poor Laws penalised beggars and vagrants, eventually evolving to provide relief for those genuinely unemployed

Guilds regulated craftsmen's working conditions but primarily to ensure product quality. For example, working on holidays was prohibited to prevent unfair competitive advantages rather than to protect workers. When conflicts arose between journeymen (qualified workers who had completed apprenticeships) and their masters, laws regulated guild formation to prevent excessive influence.

The Industrial Revolution

The Industrial Revolution (late 18th to early 19th centuries in Britain) transformed work fundamentally through powered machinery. This period saw:

Changes in work patterns:

• Shift from agriculture to industry-based employment
• Centralised factory production replacing home-based manufacturing
• Specialisation in specific production aspects rather than complete craftsmanship
• Mass urban migration to new industrial centres
• Changed employer-employee relationships based on wage labour

Initial legal responses favouring employers:

• Factory owners, often landed gentry with parliamentary influence, created laws protecting their profits
• The Combination Act of 1799 made trade union membership grounds for imprisonment
• Early union leaders faced execution for sedition (encouraging people to overthrow lawful government)
• Unions were finally legalised in 1832 with the Reform Act

Laissez-faire and state intervention

During industrialisation, factory owners held superior bargaining power. The prevailing philosophy was freedom of contract – individuals' freedom to negotiate contract terms without government restrictions. This concept underpinned laissez-faire capitalism, which regarded government intervention in economic activity as inappropriate.

Assumptions of laissez-faire:

• Individuals are the best judges of their own interests
• Parties should bargain freely without interference
• Parties have equal bargaining power

However, these assumptions proved false. Workers often accepted unfavourable terms to secure or maintain employment, while employers could easily replace troublesome workers.

Working conditions under laissez-faire:

• No meaningful minimum wage accounting for living costs
• Working days up to sixteen hours, seven days per week
• Children as young as seven worked in cotton mills and textile factories
• Identical conditions for adults and children but vastly different wages
• Factories were poorly ventilated, poorly lit, noisy, and dangerous
• No effective union representation

Beginning of state intervention: These substandard conditions prompted legislative intervention in 19th-century Britain, though not without significant suffering first:

• 1819 Act: Prohibited employment of children under nine; limited children's working hours to twelve per day
• Progressive legislation: Prohibited night work for children, limited underground mining employment, required ventilation and equipment, raised textile factory minimum age to ten
• 1901: Efforts to limit women's employment soon after childbirth

Trade unions

A trade union is an association of wage earners formed to maintain and improve members' working conditions and pay. When British unions began forming in the late 1700s, the government initially outlawed them:

Legal development:

• Combination Acts of 1799 and 1800: Outlawed unions
• 1824: Second Act repealed, largely due to reformer Francis Place's lobbying
• 1825 Combination Act: Allowed unions to form but with severe restrictions – they could meet to bargain over wages and conditions but were prohibited from 'molesting', 'obstructing', or 'intimidating' others
• Until the 1870s: Any industrial action (strikes, slowdowns, refusal to work overtime, or doing minimum required work) was punished under criminal law
• Trade Union Act of 1871: Granted trade unions legal status for the first time in England

Industrial relations in Australia

Australian workers began organising into trade unions in the early 19th century. Significant developments included:

Eight-hour day campaign (1855-1856):

• First significant union campaign in Australia
• Achieved by stonemasons in Sydney (1855) and Melbourne (1856)
• First in the world, though only for some trades

Gold rush impact (1850s):

• Many workers left employment to seek gold
• Immigrant influx seeking fortune
• Increased demand for goods and services
• Employers forced to pay higher wages and improve conditions to attract workers
• Trade unions gained political influence and important workers' rights

Conciliation and arbitration system:

Conciliation involves resolving industrial disputes by mutual agreement ratified by a court or commission. Arbitration involves resolving disputes through legally enforceable orders, often after conciliation fails.

This system became central to Australian industrial relations:

• 1904: Conciliation and Arbitration Act 1904 (Cth) established the Conciliation and Arbitration Court, which could settle disputes by making awards and enforce them
• 1956: Court replaced by Commonwealth Conciliation and Arbitration Commission and Commonwealth Industrial Court following R v Kirby; Ex parte Boilermakers Society of Australia (1956) 94 CLR 254, which held that the doctrine of separation of powers prevented one body exercising both judicial and non-judicial arbitration powers
• 1977: Federal Court of Australia took over Industrial Court functions
• 1988: Australian Industrial Relations Commission replaced the Conciliation and Arbitration Commission

Contracts

Types of work contracts

Work contracts generally fall into two categories: contract of service (employment contract) or contract for services (independent contracting). Both are legally binding and may be written or oral, though written contracts are more easily enforced.

Contract of service (employment contract):

• Agreement between employer and employee
• Contains rights and obligations of both parties
• May be fixed-term or ongoing
• Fixed-term contracts generally cannot be terminated early unless the contract allows or one party breaches an essential term
• If employer continues accepting work after fixed term expires, the contract may convert to indefinite

Contract for services (independent contracting):

• Agreement to do specific tasks without employment relationship
• Example: Plumber agrees to unblock a sink and is paid upon completion
• No ongoing legal relationship once work is completed
• Contractor may have ongoing series of contracts with one client (e.g., freelance writer providing articles to one publication)

Distinguishing factors:

The most important factor is whether the employer has the right to control how work is performed. Other factors include:

Factor	Employee	Independent Contractor
Control over work method	Employer directs how tasks are performed	Contractor controls work methods
Equipment/tools	Employer provides necessary equipment	Contractor provides own tools
Payment method	Regular salary/wages with tax deducted and superannuation paid by employer	Fees charged per job; responsible for own taxes and retirement
Leave entitlements	Annual leave, sick leave, long service leave	No leave entitlements; must negotiate fees and schedules allowing time off

Vicarious liability:

The distinction matters for vicarious liability – an employer's legal responsibility for employees' wrongful acts. Employers can be held liable for employee conduct as long as the employee was acting "in the course of employment" (carrying out contracted duties). This is justified because employers benefit from employees' work and should bear risks of their behaviour at work.

Case study: Hollis v Vabu Pty Ltd (2001) 207 CLR 21

Mr Hollis was injured when struck by a bicycle courier unlawfully riding on the footpath. The courier wore a jacket reading 'Crisis Couriers', a business operated by Vabu Pty Ltd. The couriers:

• Were required to be available during certain hours daily
• Had to take allocated jobs
• Had to wear Vabu-issued uniforms
• Received fixed pay rates with no room for negotiation
• Provided their own bikes and bore maintenance costs
• Received no annual or sick leave
• Were taxed as independent contractors
• Had insurance contributions deducted from pay

The High Court held the couriers were employees rather than independent contractors, making Vabu vicariously liable for the courier's negligence. The judgment considered all relationship factors, including contract terms and work practices. The couriers had little control over work performance, hours, or pay, and only had to provide a bicycle (usable for other purposes). The court noted different conclusions might result where contractors invest more in equipment or require greater specialised skills and training.

Terms of a contract of employment

All employment contracts contain express terms and implied terms.

Express terms:

Express terms are specifically stated and agreed by both parties when the contract is made, either in writing or orally. They cover key employment relationship elements:

• Position description
• Whether ongoing or fixed-term
• Whether full-time, part-time, or casual employment (employment 'as needed' on irregular basis with no set schedule or guarantee of ongoing employment, generally paid at hourly rate)
• Hours of work
• Pay
• Work location
• Leave provisions

Both employers and employees have duties to satisfy express terms and rights to expect the other party will do so.

Implied terms:

Implied terms are not recorded in writing and may not have been discussed. These terms may arise from:

• Common law
• Current practice or custom
• Specific state or federal legislative requirements
• Where parties clearly would have included the term if they had considered it

Criteria for implied terms:

• Must be reasonable and fair
• Must be necessary to ensure the contract works effectively
• Must be so obvious it 'goes without saying'
• Must be capable of clear expression
• Must not contradict any express term

Duties arising from implied terms:

Duties of employers:

• Provide work for employment purposes. Where pay depends on work done, the employer must ensure work and necessary materials are available, or still pay the agreed wage. Employers must also provide work for employees whose skills would diminish without it (e.g., hospital must provide surgeon with enough surgery to maintain skills)
• Provide a safe working environment. This duty is now largely imposed and regulated through legislation. Contracts requiring employees to work in dangerous conditions cannot be enforced
• Pay reasonable wages. While actual amounts are set by awards or agreements and usually written as express terms, what is 'reasonable' can be determined by usual amounts for that occupation type

Duties of employees:

• Obey lawful directions given by the employer
• Exercise reasonable care in carrying out work and meet certain work standards
• Duty of fidelity (faithfulness or loyalty) to the employer, including:
  • Not stealing from employer or damaging equipment
  • Not disclosing confidential information (e.g., trade secrets to other companies)
  • Not acting to undermine company profitability
  • Not using employer's time for own self-serving purposes

Mutual duties of employers and employees:

Implied duties of mutual trust and confidence and good faith have been found in some recent state cases. For example, in Russell v The Trustees of the Roman Catholic Church [2007] NSWSC 104, the NSW Supreme Court held that the employment relationship creates parties' obligations to:

• Exercise rights or duties honestly and reasonably with 'prudence, caution and diligence'
• Act to minimise adverse consequences to each other
• Not act in a manner likely to damage the relationship of confidence and trust

For example, how an employer conducts disciplinary investigations into alleged employee misconduct would be subject to such an implied duty.

However, other courts have held this implied term will not be found if the employee is adequately protected against unfair employer decisions by legislation or awards. Until a High Court ruling is rendered, the existence of an employer's implied duty of good faith has not been conclusively established.

Awards and agreements

Background

Australia's conciliation and arbitration system included an independent tribunal with powers to conciliate and, where necessary, settle industrial disputes through arbitration.

An industrial award is an order of an industrial commission, tribunal or arbitrator made to settle a dispute. Today, the term usually refers to a legally binding document, approved by an industrial commission, setting out minimum terms and conditions for employees in a particular industry, type of work, or those employed by particular employers.

The Harvester case:

In 1907, a landmark case came before the Conciliation and Arbitration Court. An Act designed to provide better pay to workers created an excise tax on locally made machinery, which could be waived if the manufacturer's workers were paid 'fair and reasonable' wages. H.V. McKay, a Melbourne manufacturer and owner of the Harvester Company, applied to waive the excise tax. McKay's company was not known for fair treatment of employees, and the workers' union opposed the application.

Ex parte H.V. McKay (1907) 2 CAR 1 was the first time an industrial tribunal set wage levels for workers rather than allowing individual employers to set them. Justice Henry Bourne Higgins ruled McKay was obliged to pay employees a 'fair and reasonable wage', defining this as an amount sufficient to 'support the wage earner in reasonable and frugal comfort'. He took evidence about housing, food, and clothing costs in Melbourne for a man with a non-working wife and two children to establish the cost of living. The decision applied to over 1000 workers at the Harvester Company working in various jobs. It is regarded as momentous, paving the way for workers' entitlement to a basic living wage.

Industrial awards

By 1920, there were 96 federal awards in force, and all states plus the Commonwealth had adopted conciliation and arbitration systems. The Australian Industrial Relations Commission (AIRC) eventually created federal awards covering a wide range of industries. State Industrial Relations Commissions created state awards.

Federal awards resulted from settling interstate industrial disputes, while disputes within a state were governed by state awards.

Changes under the Workplace Relations Act 1996 (Cth):

• In 1996, Victoria became the first state to refer industrial powers to the Commonwealth, abolishing state awards and creating limited statutory entitlements, leaving employees to negotiate other terms with employers
• The Act aimed to simplify and streamline awards, containing only 20 'allowable award matters'
• Terms not among allowable matters would not be enforced
• Allowable matters included: hours of work (including rest breaks), pay rates, annual leave, parental leave, personal carer's leave, penalty rates, and dispute settling procedures

WorkChoices amendments (2006):

• Further limited awards throughout Australia, combining federal and many state awards into a national system
• State awards could only apply to unincorporated employers, with transitional provisions allowing them to continue for three years for those already covered
• No new awards could be made
• Federal awards were further simplified, reducing content to even fewer allowable matters
• Some matters (notice of termination, jury service, long service leave, superannuation) were removed as they were covered by other legislation
• The 14 protected award conditions could be excluded or modified by an Australian Workplace Agreement (AWA) – an individual workplace agreement between employer and employee that would override any award or collective agreement

Fair Work Act 2009 (Cth):

• Replaced WorkChoices in late 2009
• All states except Western Australia referred industrial powers to the Commonwealth
• All employers and employees previously covered by state systems moved into the federal Fair Work system in 2010
• Existing state awards were replaced by federal 'modern awards'
• State awards covering employees of organisations that are not constitutional corporations (corporations to which s 51(xx) of the Australian Constitution applies, including foreign corporations and companies incorporated under Australian law engaging in financial activities and buying and selling) – such as sole traders, partnerships, and unincorporated associations – were permitted to remain for a transitional period of 12 months from 1 January 2010 before replacement by modern awards
• Some federal awards created before 2006 may continue but only if they apply to a single enterprise

Agreements

Enterprise agreements:

In 1991, enterprise bargaining (negotiation of an agreement about wages and working conditions by an employer and its employees or the trade union representing them) was introduced as an alternative to awards. Enterprise agreements (legally binding agreements between employees of a corporation, non-profit organisation or government body and their employer, setting employment relationship terms and conditions) became the primary means of setting wages and conditions in 1993.

This created a more 'flexible' system where agreements could be tailored to a particular enterprise (business or company), whereas awards covered whole industries or occupations nationwide or within a state. While negotiation at individual workplace level can result in different conditions or wages for people in the same occupation, awards were retained to set a minimum 'safety net'. The system included a 'no disadvantage test' – a requirement that enterprise agreements would not be approved by the AIRC if they put employees at an overall disadvantage compared to the applicable award.

Under the Workplace Relations Act 1996 (Cth), prior to WorkChoices amendments, enterprise agreements were also known as 'certified agreements' if registered and certified by federal or state Industrial Relations Commissions. 'Collective agreements' referred specifically to enterprise agreements reached between an employer and a trade union representing employees. Enterprise agreements could be union-negotiated or not.

Individual agreements:

The Workplace Relations Act 1996 (Cth), especially the WorkChoices amendments, aimed at shifting workers from collective to individual employment contracts. An employer could make signing an AWA a condition of hiring someone; under WorkChoices, this did not constitute duress (coercion or pressure used to influence someone). Employees had no statutory right to collective bargaining, and while an AWA was in operation, it overrode any award or collective agreement.

WorkChoices introduced five minimum statutory entitlements, replacing the 'no disadvantage' test. Prior to amendments, both collective agreements and AWAs had to pass this test to ensure employees would be no worse off under the agreement than under the relevant award.

Under the Fair Work Act 2009 (Cth), there are no longer any legislative provisions for individual agreements. Through 2009, Individual Transitional Employment Agreements (which replaced AWAs) could still be made, but after 1 January 2010, it was no longer possible to register individual agreements of any kind.

Statutory framework

Federal legislation

The main features of the Fair Work Act 2009 (Cth) are:

• A legislative safety net of 10 National Employment Standards (NES)
• New 'modern awards'
• New enterprise bargaining arrangements
• Improved mechanisms to protect industrial rights, including protection against discrimination and unfair dismissal
• Creation of new national industrial relations organisations: Fair Work Australia (FWA) and the Fair Work Ombudsman

National Employment Standards

The National Employment Standards (NES) are set out in the Fair Work Act, comprising 10 minimum standards for employees' pay and conditions. All awards, agreements, and employment contracts in the national industrial system must meet these minimum standards.

These standards include:

• Maximum hours of work
• Flexible working arrangements for parents
• Leave entitlements (sick leave, parental leave, annual leave)
• Termination and redundancy pay
• Requirement that a 'Fair Work Information Statement' must be provided by employers to all new employees, explaining all elements of the new system (NES, modern awards, all rights and entitlements under legislation, including union rights of entry and dispute resolution mechanisms)

Only some NES entitlements apply to casual employees.

In addition to the NES, further employment conditions can come from:

• Modern awards
• Agreements
• Transitional instruments containing provisions from awards or agreements made under previous legislation
• Minimum wage orders
• State or federal laws

Modern awards

The second half of the 'safety net' is the modern award. Modern awards were created to establish a single set of minimum conditions for people working in the same industries or jobs across Australia.

The 'modernisation' process involved:

• Updating previous awards to reflect current work environments
• In many cases, broadening coverage
• Replacement of previously applicable awards by modern awards

Modern awards can be made and varied by Fair Work Australia. Most contain transitional provisions allowing wages higher or lower than previous ones to be progressively introduced in five annual instalments from 1 July 2010.

Modern award contents:

Modern awards can contain terms setting out:

• Minimum pay (including overtime and penalty rates)
• Annual wage or salary
• Leave and leave loading
• Superannuation
• Redundancy scheme specific to an industry
• Procedures regarding consultation and dispute settlement processes

All modern awards must have a 'flexibility term' allowing employees and employers to negotiate changes to the award to accommodate individual workplace circumstances.

Take-home pay orders:

If an employee's take-home pay has been reduced by award modernisation, an application can be made to Fair Work Australia by the employee or their union. A take-home pay order can be made to ensure the person earns no less while remaining in the same job. However, such orders will not be made if Fair Work Australia finds workers under the award have been adequately compensated in other ways for the reduction.

Coverage:

Modern awards only cover employees in jobs historically covered by awards. Terms of more senior positions have traditionally been contained in other instruments. Employers can exclude employees earning a guaranteed income of more than $108,300 per year (indexed annually) from modern award coverage.

The modern awards will be reviewed by Fair Work Australia every four years, with minimum wage provisions reviewed annually.

Enterprise agreements under the Fair Work Act 2009 (Cth)

There is no distinction between union and non-union agreements under the Fair Work Act 2009 (Cth). The current process is characterised as 'collective bargaining at the enterprise level'.

Process:

• Enterprise agreement made between employer and some or all employees
• Employers must notify employees of their right to be represented in the bargaining process
• Employees can choose who will represent them
• Union members are automatically represented by their union unless they choose otherwise

Enterprise agreements may include a broader range of matters than modern awards. Like awards, agreements must provide entitlements at least as favourable as the NES (e.g., minimum four weeks paid leave per year).

Approval process:

1. Enterprise agreements must be approved by a majority of employees before submission to Fair Work Australia (FWA)
2. Once parties are satisfied with the draft, the employer ensures employees have been informed of its terms and consequences, and of the voting time, place, and procedure
3. A ballot is held to approve the agreement

Types of enterprise agreements:

• Single-enterprise agreements: Apply to workers in a specific workplace
• Multi-enterprise agreements: Apply at an industry level. Require majority endorsement by employees of at least one employer. FWA can help certain low-paid employees (child care, aged care, community services, cleaning, security workers) and their employers negotiate multi-enterprise agreements if in the public interest, as these workers often lack bargaining power at single-enterprise level
• Greenfields agreements: Cover future employees of a new enterprise to be established by one or more employers. Made when endorsed by each employer and by the trade union(s) covering prospective employees

FWA approval conditions:

Once approved by parties, agreements are submitted to FWA by the employer or a bargaining representative. To be approved, they must meet certain conditions:

• Parties have come to a genuine agreement
• Agreement has a specified expiry date, not more than four years after FWA approval
• Agreement contains:
  • A dispute settlement procedure
  • A flexibility term
  • A term outlining consultation procedure for employer decisions to make major changes affecting employees
• Agreement passes the 'better off overall test' (BOOT) – a criterion requiring that employees are better off overall than under the relevant modern award. BOOT replaced the 'no disadvantage' test

New South Wales arrangements

NSW enterprise agreements were introduced under the Industrial Relations Act 1996 (NSW). Following the state's referral of industrial powers to the Commonwealth in 2009, that Act no longer applies to private sector employers and employees in NSW. From 1 January 2010, all employees of sole traders, partnerships, and constitutional corporations were covered by the federal industrial relations system.

The Industrial Relations (Commonwealth Powers) Act 2009 (NSW) effected the referral. Section 9B of the Industrial Relations Act 1996 (NSW) states: 'this Act is subject to the Fair Work Act 2009 of the Commonwealth, including provisions of that Act that have effect in this State because of the referral of matters relating to workplace relations to the Commonwealth Parliament'.

Other state laws dealing with workplace health and safety, anti-discrimination provisions, and workplace surveillance (an employer's use of technology such as cameras, computers and tracking devices to monitor employees) continue to operate.

Transitional instruments called Notional Agreements Preserving State Awards (NAPSAs) preserved terms and conditions of state awards and some state legislation that applied to employees of constitutional corporations prior to 2006. These were largely replaced by modern awards in 2010. If parties fail to apply to FWA to convert a NAPSA into a modern award, the NAPSA ceases to operate on 31 December 2013.

State and local government employees:

The referral of powers does not include powers regarding state and local government employers. Section 9A of the Industrial Relations Act 1996 (NSW) declares those employers not to be national system employers. Awards and collective agreements in place continued to apply.

Different awards and agreements apply to various departments and agencies within state and local government. The NSW Industrial Relations Commission continues to have jurisdiction over employment terms and conditions for state and local government employees.

Requirements for enterprise agreement approval:

Similar requirements to the Fair Work Act 2009 (Cth) operate:

• Majority of employees must vote for the agreement
• Agreement must comply with relevant state legislation (e.g., occupational health and safety and anti-discrimination laws)
• Must pass the 'no net detriment' test – similar to BOOT, the agreement must not put employees at a disadvantage compared to state or federal awards that would otherwise apply. Employees cannot make agreements removing or reducing award conditions (e.g., lower pay or fewer annual leave days than provided by the relevant award)

The Commission must also ensure parties understand the agreement's effect and that no duress was involved in signing it.