The last several months have seen rapid changes in the employment and workplace health and safety space. With such dynamic movement, and then lots of commentary on each of these changes, it’s easy to view all these changes as one big jumble of puzzle pieces. And it can be hard to know what the whole jigsaw looks like.

As Chris Gardner and I mentioned last year in our blog post, HR and safety working together on the new positive duty, one of the corner pieces that keeps the picture in place, is having HR and WHS teams working together. What that looks like is different for each organisation: sharing physical locations, integrating these teams, formal meetings or processes, as needed communication between departments or specific individuals, or maybe an individual solution specific to your organisation. The fundamental point is sharing the crossover information, working together when multidisciplinary issues arise and doing so early. Regardless of how your team does it, it is clear that your workplace health and safety and human resources teams will be grappling with these changes together.

With the ever-increasing focus on psychosocial risks, employment and industrial relations decisions now need to be cognisant of workplace health and safety considerations.

The key takeaway is that it doesn’t matter how many jigsaw pieces there are, the jigsaw is showing an ever-increasing focus and attention on the workplace. In our view, this is going to see a consequential increase in regulatory attention, and possibly enforcement. Agree with them or disagree with them, the changes are coming.

Are you assembling the puzzle or lost amongst the pieces?

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Almost eight years ago, we wrote about some lessons that could be taken from The Simpsons episode ‘King-Size Homer’ (first broadcast in 1995). You will remember that Homer is so lazy that he sets up a “drinking bird” to automate pressing buttons on his home computer that is being used to monitor the Springfield nuclear reactor. What could go wrong?

Our blog raised some issues that we thought employers should consider when addressing the “emerging trends” of automation and working from home.

What a difference almost a decade makes! COVID has changed our lives in many ways, but one of the most significant was to force many employees to work at home for significant periods – with many employees wanting to continue to work from home for substantial portions of the week even after they were released from COVID-prison.

The recent changes made by the Federal Government to the Fair Work Act re-emphasise the need for businesses to think carefully about how flexible working can be managed for their workplaces. Under the “secure jobs, better pay” changes, some categories of employees in Australia, including those with responsibility for childcare, those over 55 and those who are pregnant, can make a “flexible working request” and, if the employer refuses, ask the Fair Work Commission to decide their claim.

These changes mean that employers will need to think even more carefully about whether they are prepared to allow employees to work flexibly, and what guardrails need to be in place if they (or the Commission!) allow them to do so. Employers will need to be able to stand up in front of a member of the Commission and explain their rationale for refusing to allow an employee to work in the way the employee wants to. Remember: flexible working requests aren’t just about working from home – they can include changes to start/finish times, changes to the working days in each week, job‑sharing arrangements and other changes.

If you are a sophisticated employer, this means that you will already be thinking about:

  • Whether you allow some employees to work from home permanently? Will doing so set a precedent or expectations? If so, how will you distinguish between different parts of your workforce when it comes to work from home?
  • How to accommodate employees with a disability;
  • Whether there are parts of every employee’s role that must be done in your workplace;
  • The appropriate controls around allowing employees to work flexibly, especially when working from home, such as systems to monitor and manage such employees – for instance, are regular daily video calls required? Is an ergonomic assessment required? Will you allow employees to work from home while they have responsibility for childcare? Will you require them to be in a quiet room?
  • The steps you need to take to manage your health and safety risks.

We will very likely get some guidance on some of these questions when the first cases filter through the Fair Work Commission – but until then, make sure you don’t knock over the “drinking bird”!

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

International Women’s Day for 2024 has the important theme of Count Her In: Invest in Women. The UN talks about the importance of empowering women and investing in women in a range of ways. This includes accelerating women’s economic empowerment by recognising that when women entrepreneurs are successful, this can lead to more benefits.

The topic of investing in women has been in the headlines in Australia, following the first release of employer-level pay gap data by the Workplace Gender Equality Agency (WGEA).

This is intended to spark, and has succeeded in sparking, conversations about pay gaps. Rightly (in our view), people are looking at where pay gaps exist. Some companies have been lauded for having no pay gap or small pay gaps. Some companies have been publicly criticised for their pay gap.

However, it is important to bear in mind that the WGEA pay gap data is limited in what it tells us about gender equality within any business:

  • The WGEA’s approach is (necessarily) broad-brush. As explained on its website, it compares the median remuneration of men and women within a company. Where there is a difference, this is reflected as a pay gap percentage or dollar figure.
  • The WGEA does not look at whether people receive equal pay for equal work. It uses broad occupational and manager categories for comparison purposes, does not consider differences in the actual jobs that people have, how skilled they are or assess why a gap might exist. It is not evaluating whether a pay gap is fair or not.

Knowing that there is a pay gap is a useful place to start a conversation. As the WGEA suggests, this can prompt questions about what’s driving a pay gap in order to start reflecting on the possible causes and (where needed) action to address them.

Some companies questioned about their pay gaps had substantive explanations. For example:

  • One primary care organisation was listed as having a pay gap of 73.1% in favour of men. However, the CEO explained that its workforce included a large number of casual doctors working in an after-hours service, on an average of one 4-hour shift per month. Half the male workforce are casual doctors meaning the median earnings are skewed high. Once this cohort of casual doctors was excluded from the data, the pay gap dropped to 2%.
  • Similarly, a women’s retail chain explained that it has a large female workforce of over 1400 women (most of whom are employed in retail stores), but a small group of male employees. Although 84% of its best-paid employee group are female and women occupy 89% of manager roles, the fact that 62 of its 65 male employees work in “head office” roles resulted in a median male salary being much higher than for its female employees. Other fashion brands made similar comments.

These examples highlight the danger of jumping to conclusions and the way in which context is critical to assess why a pay gap exists and what action might best support pay equity in the future.

This is particularly important given the recent criticism that has been directed towards pay gaps in companies owned by women or marketed towards women. There may be good reasons to question a pay gap in a company that promotes itself as caring for or supporting women. However, in the spirit of IWD, we think reflecting on this point is important.

Should companies owned by or marketed to women should be held to a higher standard and singled out for special criticism (when compared to others)? Does this risk accidentally taking a step backwards? In our rush to respond to pay gap data and advocate for pay equity, are we looking at this in a way that could undermine female entrepreneurship?

These are important questions that have no right or wrong answer. But we look forward to continuing the conversation. After all, that’s the whole point.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

In our previous post celebrating the firm’s decade in Australia, our partners shared their insights into the most significant changes in employment and safety law that have affected leading employers. This post further explores our partners’ perspectives on the major changes and trends that they anticipate will have a major impact on Australian businesses in the next five to ten years.

What changes or trends do you foresee that will have a major impact on employers in the next 5-10 years?

“I think the regulatory changes introduced since the Labor government came to power will see their full impact play out over the medium term. The ramifications of the changes, and their likely impact on our workplaces and the economy, will be wide-reaching. This will require new skillsets and thinking for management and HR teams who, in many cases, are not ready and sufficiently resourced for what is coming.” – Rachel Bernasconi, Partner

“Compliance with the relatively new psychosocial risk laws will start to settle in, as well as potential new laws relating to reporting psychosocial risks and incidents.” – Paul Cutrone, Partner

“Psychosocial laws are in their infancy but they will continue to develop across the various jurisdictions. While there appears to be consensus on the ultimate aim of these laws, how we get there has been polarising. Given the intangibility of psychosocial health and the differing views of what compliance may look like, adapting risk management strategies will be a challenge for employers, particularly for those who are managing risks from a variety of working environments in a post-pandemic world.” – Marissa Dreher, Partner

“As technology advances and we see even more new ways of working (and society considers how to best take advantage of AI), we will see ongoing debate about how far workplace regulation should intrude. As the world recovers over the next 10 years from the impacts of COVID (including persistent inflation) and armed conflicts, employers will need to deal with the changing expectations of employees about what “work” means to them, and the role it plays in their lives. Employers will need to be open to adapting their business models to the demands of modern workers, including the “Three Fs”: flexibility, fulfilment and finance.” – Ben Dudley, Partner

“Workplaces will navigate the current Government’s extensive workplace changes. Multi-employer bargaining will emerge in industries where unions already operate in a de-facto pattern bargaining fashion. As economic fortunes wane, workplaces will again find ways to do more with less and a future Government will be under pressure to de-regulate in some areas. I wouldn’t rule out the return of a statute supported individual contract as frustration with collective bargaining mounts including amongst employees. AI will erode routine knowledge-based jobs. Lower employment will be a consequence of an inflexible regulatory environment. Large employers will find ways to better systemise workplace compliance with more solutions offered to them by the market.” – Chris Gardner, Partner

“After a period of relative stability under the Fair Work Act 2009, we are now heading into a period of instability. The Albanese Government’s broad reform agenda is pursuing fundamental changes which will affect the way businesses deal with their employees, contractors, labour hire providers and unions. These reforms affect almost every way of working. The full impact of the reforms will not be known until after any transitional periods when test cases start to run through courts and tribunals. This period of uncertainty will make employer decision making more difficult, and riskier, in the foreseeable future. Employers will have to carefully calibrate opportunity and risk. There is going to be a tradeoff between “playing it safe” and making decisions in the face of uncertainty that might best position the business in years to come (depending on how those test cases play out).” – Erin Hawthorne, Partner

“Running a business will be a different proposition in the next decade to what it was in 2010, or even 2020, from a people perspective. Employer duties and obligations to their people are broader and deeper, even as workforces de-centralise and evolve with the advent of better technology. Recent legislative reforms will entrench the focus on the protection of the individual and their health, safety and satisfaction at work.” – Justine Giuliani, Partner

“The multi-disciplinary approach needed by businesses to what have traditionally been ‘HR’ or ‘WHS’ issues which now need to be considered wholistically. This is occurring against the backdrop of an increasing enforcement environment, with greater criminal penalties for corporations and individuals.” – Sarah Goodhew, Partner

“With the new legislative changes introduced by the Federal Government, I anticipate that we are moving into a period of collective claims and disputes. This is a product of the focus on enterprise bargaining and union rights under the new legislation. In addition, we will also see an increased focus on diversity and inclusion as companies look to manage their new obligations with recent changes in WGEA reporting requirements, new obligations under the Respect@Work reforms and an increasingly tight labour market where companies are competing for talent (and candidates are closely considering policies and benefits which touch on diversity and inclusion such as flexibility and parental leave).” – Philippa Noakes, Partner

“Clearly one major trend will be how our legislative frameworks evolve to reflect changes in the nature of work, as technological change breaks down conventional models of employment. Another will be how employers engage with a revitalised union movement and much less favourable environment in our employment tribunals. There is an element of going back to the future here. My expectation is that we will start to see companies increasingly approaching their compliance with employment and safety laws, and ethical workplaces practices, become a key part of their approach to ESG.” – Darren Perry, Managing Partner

“The title “Fair Work Act” has become a misnomer following recent changes. The “Worker Rights Act” would be a more suitable title. The next five years will be characterised by test cases to establish the boundaries of these new individual and collective rights. My fear is that the economic damage will be profound before the “pub-test” will provide a viable political pathway for reform. So, we need to plan for this environment to be here for a while….The comfort is that principled organisations with strong leadership know that they can drive effective workplaces and change notwithstanding the regulatory environment. Strategies to achieve and maintain alignment with at least a majority of employees will never be more important. So, I expect to see increasing sophistication and innovation from organisations to meet the challenges of the new landscape. Promisingly, this has already started to occur.” – Henry Skene, Partner

“A key driver of future success will be creating business models and practices that are resilient to regulatory change and can benefit from it. The ability for business to constantly evolve and use technology will be paramount. In terms of changes to the law, preparation is better than prediction. That said, there are likely to be aspects of change:

  • As the political winds change there will be an assessment of whether some aspects of the current changes and those that will occur in the short term are economically damaging or an over-correction; which may see some aspects wound back.
  • The fast development of AI, and all the good and bad that comes with it, will mean the intersection of employment laws, surveillance and other technology related laws will become a greater focus.” – Michael Tamvakologos, Partner

The perspectives offered by our partners on recent and anticipated changes serve to remind employers that employment and workplace safety laws are never static. Employers will need to proactively adapt to the evolving legal terrain, ensuring resilience and success amidst the challenges and opportunities on the horizon.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Seyfarth just celebrated ten years of service to leading employers in Australia. To mark the occasion, we invited some of our partners to share insights on the evolution of employment, industrial relations and workplace safety in Australia over the past ten years.

What have been the biggest changes in employment law, industrial relations and workplace safety over the previous ten years?

“In my view, one of the biggest changes has been the challenge for employers of all sizes to comply with increasingly complex employment laws and, more specifically, modern awards.” – Rachel Bernasconi, Partner

“The changing health and safety enforcement climate for organisations and individuals. The enforcement setting is shifting to a more assertive and higher stakes regulatory environment.” – Paul Cutrone, Partner

“An increased community awareness and engagement with respect to workplace safety, and with that, greater expectations on both organisations and the individuals within them. This change in community expectation has been reflected across Australia with the introduction of outcome-based industrial manslaughter laws, the increased use of reckless endangerment provisions (against both companies and senior managers), significantly increased maximum fines and, more recently, a heightened regulatory focus on psychosocial risk.” – Marissa Dreher, Partner

“The biggest changes have involved the courts and government grappling with what the concept of “employment” really means in modern society, and how far regulation should stray into the private relationships between parties in the 21st century. We have seen the High Court of Australia hand down decisions in relation to what “casual employment” means, as well as where the line is drawn between an employment relationship and an independent contracting relationship. And then the government has legislated to change the result of both of those cases.” – Ben Dudley, Partner

“Business leaders and HR have never been under more pressure when it comes to the workplace. A tight labour market combined with ever increasing regulation has underscored the difficulty. Related to this we’ve seen the bolstering of individual rights and a wellness zeitgeist as workplaces have never spoken more of resilience but seen less of it. The rise of the individual and a certain entitlement mentality has seemingly coincided with a decline in individual accountability with everything left to institutions (the employer being but one) to solve. For HR, “risk” has been the big theme.” – Chris Gardner, Partner

“Workplace issues have become significant business and brand risks, while increasing in complexity. Formerly, many businesses would have a siloed approach, with separate teams dealing with safety, HR, compliance, workers compensation and payroll issues. The issues that employers need to deal with have increasingly required a cross-disciplinary approach. To take some simple examples: workplace bullying and sexual harassment issues need input from HR and from safety teams. Award compliance increasingly requires legal and payroll teams to work closely together, often with external experts as well. We are also seeing a trend of claims that would previously have been addressed as employment grievances (e.g. performance management or organisational change concerns) lead to allegations of safety breaches and/or workers compensation claims.” – Erin Hawthorne, Partner

“Managing people is a first order priority for Boards and senior leaders. Employers are increasingly deploying risk-management based approaches in all facets of the employment relationship – whether ensuring their people are paid in accordance with applicable industrial instruments, meeting multi-layered work health and safety regulation, and discharging the positive legal duty introduced under the Respect@Work reforms. There is little latitude for error, with enhanced penalties for non-compliance and enforcement activity reinforcing the expectation that businesses will get it right the first time.” – Justine Giuliani, Partner

“The regulation of hazards and risks – psychosocial and sexual harassment being two examples – in the workplace that have traditionally been considered within business to be outside the ‘WHS’ sphere. And the introduction of industrial manslaughter as a consequence based offence into risk based legislation.” – Sarah Goodhew, Partner

“Ten years ago, employers were nervously anticipating the impact of new (typically, individual) claims introduced under the Fair Work Act 2009 (Cth) including general protections claims and applications for stop bullying orders. With that in mind, over the last ten years, employers have been very focused on managing individual claims, which has in turn led to a huge focus on workplace investigations. It is now very common to see employers skilling up their workforces (including HR and ER teams, and managers generally) to undertake robust investigation processes or seeking external investigation assistance for complex matters.” – Philippa Noakes, Partner

“For me, while so much has evolved, there are three major changes. The first is that compliance with employment obligations have emerged as a much higher order risk item for companies. This has been as a result of greater complexity in our laws, but also more active enforcement by regulators and the representatives of worker groups. Related to that, the second is that compliance with workplace obligations is a major reputational issue for company boards, much more so than a decade ago. Finally, we are seeing a significant lifting of the bar in the standards of behaviour expected in our workplaces, and a much greater preparedness for workers to assert their rights when these they feel these expectations have not been met.” – Darren Perry, Managing Partner

“Only 18 months ago, my top three would have been the ever increasing complexity of workplace regulation, the success of human resources and organisational leadership in response, and a commensurate weakening of union penetration and influence in most workplaces (with a few notable exceptions). Today, the answer is the four rounds of “Closing Loopholes” reforms. These changes dwarf anything that has happened in workplace relations since the introduction of enterprise bargaining in the early ‘90s. And those who remember (then) Minister Gillard proudly proclaiming in 2008 that the Fair Work Act shifted the “pendulum” back to the middle, should be aghast at just how far Minister Burke has managed to push it to one side. The reforms touch all points of the workplace: imposing increased regulation of engagement, individual rights to access arbitration, collective rights to commence bargaining and arbitration of actual conditions, new sector-wide bargaining and capacity to impose employment rights on contractors and labour hire workers, and universal workplace delegates rights to speak for both members and non-members. And you will not find anywhere in the reforms any new measures to improve productivity or even to require that it be taken into account.” – Henry Skene, Partner

“The introduction of industrial manslaughter for employers in most Australian jurisdictions signalled an increased focus by regulators on strengthening workplace safety and accountability. This legislative development underscores a critical shift towards prioritising the wellbeing of employees, demanding stricter adherence to safety protocols, and holding employers responsible for ensuring a secure work environment.” – Penny Stevens, Partner

“In my view, the biggest changes we’ve seen to the law are in areas where the law lagged social attitudes and has now caught up, namely:

  1. Compliance with workplace obligations and standards such as timely and correct payment is now a Board issue: Ten years ago, it would have been rare for a Board to spend time on this kind of issue. Now systemic underpayments attract a high level of scandal and can damage reputations – corporate and personal. As a result, organisations are spending much more on IT and auditing at the front end and litigation at the back end.
  2. Individuals and vulnerable individuals and groups empowered: Both generational shifts in thinking and social movements such as #MeToo have reset expectations about what is acceptable. In legal terms there is focus on practices such as confidentiality agreements to resolve harassment claims and many recommendations and changes that have come out of the Respect@Work report.
  3. Government intervention in IR: After decades of incremental or no reform, the Labor Government has shown a willingness to enter the IR landscape and make far reaching changes to the point of nearly prescribing outcomes. Companies in some industries are heavily impacted and succeeding with this level of regulatory risk and intervention requires a planned approach.” – Michael Tamvakologos, Partner

On behalf of the team, we would like to thank our valued clients. We are excited to continue working with you in 2024 and beyond.

In our next post, our partners look forward to sharing their insights on the changes and trends that are poised to significantly impact employers over the next five to ten years.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Seyfarth is pleased to announce the promotion of Marissa Dreher to the position of partner with the firm.

The appointment of Marissa brings the total partner promotions from within the team to five since the Australian offices of Seyfarth opened in Australia in 2013, in addition to a number of lateral partner hires. The appointment means that there are more women than men in Seyfarth’s Australian partnership team, highlighting the firm’s commitment to diversity and inclusion. Marissa joins Paul Cutrone, Sarah Goodhew and Penny Stevens as partners and leaders of Seyfarth’s workplace health and safety team, who all work collaboratively with Seyfarth’s nine employment partners. Nick Neil has been promoted to counsel in the workplace health and safety team.

Marissa joined Seyfarth as Counsel in 2020 from Dreher Legal, a boutique workplace safety practice that she established in 2013, having previously led the large safety practice of a national firm. Marissa is a highly experienced workplace safety lawyer, practising exclusively in this area for 20 years.

“Marissa is an outstanding lawyer who is an integral part of the success of Seyfarth’s workplace health and safety law team in Australia, and her promotion to partner recognises her standing with clients”, said Australia Managing Partner, Darren Perry. “Since the establishment of Seyfarth’s workplace health and safety practice in 2015, the team’s depth of expertise has continued to grow in response to this increasingly complex area of law.”

Clients come to Marissa for her sound business acumen, her strategic and pragmatic approach, and her ability to balance legal obligations with commercial and operational needs. Marissa has extensive experience defending prosecutions across a broad range of industries, as well as representing clients during regulatory investigations and coronial inquests following serious workplace incidents, and assisting them when responding to statutory notices.

Seyfarth is Australia’s only specialist labour, employment and workplace health and safety team with the backing of a global firm. The Australian team has received top rankings for its superb legal work and innovation in Chambers Asia-Pacific, The Legal 500, Doyle’s Guide and Best Lawyers.

It is worth noting that under the original timetable of the Hon Tony Burke MP for the Closing Loopholes Bill, it would have been passed as law this week.

Instead, in the face of Senate scrutiny, the Bill was pushed into Committee for examination until February 2024. In the time since, fundamental problems with the Bill have been identified (as have been extensively covered in this blog and media commentary).

This week, the Australian Government tabled proposed amendments aimed at a tidy up. But key amendments fail to resolve the issues they purport to address. And others introduce new significant measures not contemplated by the initial Bill. We explain below.

The tidy up is ineffective

For example, let’s look at the changes in relation to two of the hottest issues:

  1. “Regular” casuals: The Bill proposed wholesale amendments to the casual employment test (see our blog here) imposing a complicated multi-factorial test that had the potential to disrupt casual employees from working regular days. After a long negotiation with the AHA, the Government claimed it had reached agreement, such that casuals with regular patterns of work could remain casual. The proposed amendment to achieve this is: regular pattern will not “automatically” mean they are not casuals but does not mean that they are casuals. What does that mean?
  2. “Service-based” contractors: The labour hire provisions of the Bill introduced a new regime for determining when contractors (as opposed to employees) could be required to be paid the same rates as employees who perform like work. The test was inexplicably broad and immediately acknowledged by practically everyone, including Minister Burke, as going too far and risking capturing all sorts of service providers (see our blog here). The proposed amendment here makes things better, but remain obscure. On the one hand, it says that the Fair Work Commission (FWC) must not make orders where a work arrangement relates to the provision of service rather than the provision of labour, but on the other hand, it requires the FWC to have regard to a range of factors, not about the services being provided, but rather the “employment-like” arrangements in which work is performed. So, the test is aimed at an objective skewed by the lens through which it is assessed. Why is there not consideration of the services being performed?

These are just two examples of the problems that have received most significant attention since the Bill was first tabled. Both these amendments are designed to achieve a simple outcome but fail to do so, leaving contestable issues and uncertainty. One could be forgiven for thinking that this is deliberate, as simple drafting of both measures would not be hard to achieve. A more detailed review of the legislation and the amendments reveals a longer list, which we will cover in future posts.

Bargaining determinations: all one way

The amendments include further significant changes to the bargaining regime introduced only last year.

Most concerning is the proposed amendment to the arbitration rules after the FWC determines that bargaining is intractable. A new provision will mean that that any term determined by the FWC must not be “less favourable” to each employee covered by the agreement and any union than the terms of any current enterprise agreement.

So there’s no give and take here – it’s all one way. Employees and the union must not go backwards from their position under any prior agreements. This is an extraordinary measure that fundamentally alters the dynamics of bargaining.

Intractable disputes are almost invariably about difficult issues. Employers commonly want to achieve changes to existing terms and conditions as part of any new deal. The objects of the Fair Work Act 2009 require a fair and flexible framework for collective agreement making to deliver productivity. How unfair that an employer, particularly one trapped by conditions in an outdated enterprise agreement, should ever be able to achieve any such reforms.

The effect of this provision is that militant unions can hold out in bargaining to prevent any such changes (all the while taking protected industrial action). And do so without any risk that an unreasonable position on their part could be rectified by the FWC (even where the FWC considered that it was otherwise fair and appropriate to make changes to existing terms of enterprise agreements). The reform would drive ambit claims and disincentivise any reasons for unions or employees to make concessions. There would now be no risk of them being imposed. The result for the employer: stuck with restrictions in current agreements with no mechanism to address them and where bargaining becomes about managing downside risk and cost.

Who is not listening to the umpire’s decision now? But why bother when it is so much easier to rig the game from the start so the umpire cannot decide against you. More to follow on this change and its impact.

Many Australian businesses use contractual restraints of trade to protect confidential information and customer relationships. In this update we answer frequently asked questions about the future of restraints of trade in Australia, and consider options available to companies in the event that some types of restraints are no longer available.

Are restraints of trade still allowed?  

Yes – in the sense that the rules that have applied for years still apply for the moment.

Restraints of trade can form part of an employment arrangement (usually in the employment contract or a deed) and sale of business agreements and will be valid and enforceable in certain situations.

There are a fairly complicated set of both rules and principles that Courts apply in determining whether a restraint will be valid, and warranting remedy, where it has been or might be breached. The basic rule is that a restraint will be unenforceable unless there are special circumstances where a restraint protects a legitimate interest recognised by law. This interest must be recognised by the law and deemed reasonable by the Court both as between those who agreed to it, and taking into account the public interest.

Generally, Courts take a more permissive approach to sale of business restraints (which typically restrain the vendor from accepting business from former clients of the business sold for a period of time). The idea is that sale of business restraints are a public good because they benefit trade. Courts typically need much more convincing that a restraint in an employment agreement is enforceable.

When is a restraint reasonable and enforceable?

This depends on the particular circumstances. A Court will consider the scope of the restraint (the activities – such as not competing or poaching staff), how long the restraint applies, and its geographical area.

For more detail, click here to receive a copy of my article in the Australian Business Law Journal.

Are employment restraints about to be banned in Australia?

Short answer is no, not yet, but their future looks uncertain.

Businesses that use restraints of trade to protect confidential information going to competitors when employees leave, or purchasers acquiring a business who want to protect goodwill will be keen to understand the future of restraints of trade in Australia. The Australian Competition and Consumer Commission (ACCC) is presently reviewing whether restraints will be banned in Australia following a referral from the Federal Government.

We’ve set out key information about the state of play below. If you see something important and need more insight, speak to any of our partners. We have had deep involvement in many of the most contentious and high stakes cases decided in Australia and have broad advisory expertise in this area.

Are there many types of restraint and which are being reviewed?

Yes, there are many different types of restraint. They include:

  • Non-competition restraints which forbid working for a particular company or in a particular industry.
  • Non-poaching restraints which forbid soliciting or encouraging staff or clients to leave one organisation and join another.
  • Sale of business restraints which are typically a form of non-competition restraint given by a vendor to the purchaser of a business promising not to set up in competition and take clients or staff away.

We understand that all of these types of restraints are under review.

If we were to speculate, what changes will the Government make?

It depends much on what recommendations the ACCC provides the Government with, and then, of course, whether the Government has the numbers in Parliament to implement any recommendations it accepts.

Judging by what has occurred in other countries, most notably the United Kingdom and the United States of America (who Australian politicians commonly look to for ideas), consideration will be given to:

  • banning non-competition restraints contained in employment contracts;
  • limiting non-solicitation of client or staff restraints to a short period of time, say three months maximum; and
  • only permitting enforcement of a restraint where there is specific and separate payment for the period the restraint operates.

It is likely that sale of business restraints will be left alone or subject to additional criteria. We do not anticipate them being banned altogether.

Restraints of trade have been in place for hundreds of years. Why is the Government reviewing them now?

The catalyst for the review in Australia was a 2023 decision by the Federal Trade Commission (FTC) in the United States of America (similar to Australia’s ACCC which enforces competition laws) to issue a rule that all employment non-compete agreements (but not sale of business agreements) be banned, and even existing non-compete agreements be rescinded.

Although this FTC rule is not in effect whilst consultation about the proposal is occurring, the proposed change has unleashed quite the energetic backlash with more than 11,000 submissions being filed with the FTC about the proposals, with plenty of media making the case both for and against restraints. This is mostly due to US legislative activity expanding to impose restrictions on confidentiality and non-disparagement agreements following a separate decision from the National Labour Relations Board which found an increase in corporate suppression of misconduct and ill-treatment of shareholders, consumers and employees.

Interestingly, other employment restrictions including non-disclosure and non-solicitation agreements are exempt from the ban. The affected ability for employers to include confidentiality and non-disparagement clauses in separate agreements has been proposed in conjunction with the ban on non-compete clauses on the basis that these provisions provide an unfair method of competition. In the past, employees have been found to be best positioned to reveal employer misconduct as a result of their access to private, in-house information. This has in turn, attributed to a growing concern for employer abuse in the implementation of strategic confidentiality provisions and contractual clauses aimed at preventing an employee from exercising workplace rights and disclosing misconduct and wrongdoing.  

The criticisms of the FTC proposal are many and varied, including that:

  • The FTC does not take into account the many positive reasons for non-compete agreements, such as promoting innovation and giving companies a better chance to protect confidential information;
  • The FTC does not have congressional authority to make the rule banning non-competes that it proposes – this issue will be determined through litigation in 2023 and 2024; and
  • The reasons given by the FTC for banning non-competes lack substance. For example, the FTC cites the overuse of non-competes to restrict the mobility of low-earning employees, but does not explain why senior employees who have confidential and commercially sensitive information and move from a company to a direct competitor should not be subject to such restraints.

A number of States in the U.S. including California, North Dakota, Oklahoma, and Minnesota have now proposed State legislation to ban non-competes. Other States in the U.S. including Washington, Oregon, Nevada, Colorado, Illinois, Maine, Massachusetts, Rhode Island, Maryland, Virginia, and the District of Columbia have enacted legislation which is restraint friendly or unfriendly. You can find a State-by-State comparison prepared by our United States colleagues here.

The UK government appears to have followed suit shortly after the FTC’s announcement in proposing a statutory limit on the length of non-compete clauses of three months. The UK’s position aims to boost flexibility in the labour market and unleash greater competition and innovation. It is unclear from the UK’s proposal how this is to affect current in-place non-compete clauses.

In the case of Europe, no major jurisdictions have banned non-competes completely. They remain enforceable, given the commonality for employers to opt to embed non-compete clauses in employment agreements of essential employees. Many jurisdictions have a limit of 12 months on non-compete periods, requiring some non-compete periods to be paid fully or partly as is the case in France, Spain, Italy, Belgium, Denmark, Poland, Norway, Portugal, and Germany.

There is specific legislation in New South Wales that helps companies enforce restraints. Will that be changed?

We can only speculate at this point. If the Federal Government changes the law concerning restraints (for example, by placing a strict cap on the duration of employment restraints), it is likely the change in law will apply uniformly across the country, which will alter the position in New South Wales.

We are common users of restraints of trade in our business. What can we do now to put ourselves in a good position in case employment restraints are not available in the future?

Restraints are very common in some industries and professions. In the only Australian study examining the prevalence of restraints, Chia and Ramsay (2016, Australian Journal of Labour Law) found that restraints are most commonly used in financial services, professional services, technology, real estate, recruitment and in wholesale and consumer products businesses.

Although a good restraint of trade can offer important benefits to a business if it is well drafted and used for the right reasons, it is important to bear in mind that there are other means to protect confidential information. Sections 182 and 183 of the Corporations Act 2001 (Cth) prohibit directors and employees improperly misusing information obtained through their employment. Further, equitable rules regarding the misuse of confidential information, agreed contractual provisions, legislation protected trade secrets and common law protected intellectual property all ensure the security of privileged information.

The issue is that none of the means described above offer the same protection that a good restraint of trade does. For example, assuming a valid restraint has been agreed upon, a top salesperson who leaves to join a competitor can be restrained for a reasonable period to (a) enable the former employer to replace them, and (b) provide a replacement salesperson with a chance to meet clients and form customer connections. Absent a restraint, there are no strong legal protections that deal with this kind of situation.

In terms of what can be done to protect business assets, such as confidential information or critical customer connections in the face of a potential ban on restraints, we can take some guidance from what companies have done in some U.S. States, such as California, where restraints were banned years ago. Over time, a number of legal and economic instruments have been developed and deployed including:

  • Use of choice-of-forum clauses (where there are differences between States) that may enable the law of a different forum to regulate the contract;
  • Stronger drafting of confidential information protection contained in the employment contract or Non-Disclosure Agreement clauses (which can be used throughout the employment not just at the start);
  • In industries where this solution is appropriate, invention assignment agreements (typically used in technology companies and universities) where the employee agrees in advance that any inventions developed in the course of the employment belong to the employer;
  • Use of deferred compensation mechanisms to encourage employees to stay with a firm or to leave on terms which protect confidential information and customer relationships; and
  • Increased use of legislation protecting trade secrets and confidential information.

Other novel solutions also exist in particular industries and professions.

Is there merit in the criticism of restraints of trade, that they suppress wages and trap employees in jobs they don’t like?

This is a contentious topic, and there is no straightforward answer. Much depends on the stance taken on some philosophical issues such as whether employees should ever be in a situation where they cannot freely move around in a labour market and pursue their own best interests.

If it is accepted that there is a trade-off to be struck between labour mobility and the protection of company interests, such as confidential and commercially sensitive information or investment in staff and clients, the issue is where the appropriate trade-off should be.

Various overseas studies have looked closely at this issue from different perspectives include a macro whole of economy perspective, a business level perspective and an individual employee perspective. For example:

  • Ronald Gilson from Columbia Law School emphasised that the success of Silicon Valley in California is in large part attributable to the State ban on restraints. Knowledge spillovers between firms, so the argument goes, allow ideas to spread to where they are most likely to be commercialised – which accelerates innovation and is good for the economy and society.
  • By analysing a large volume of patent and other data, Agrawal, Cockburn and McHale (2006, Journal of Economic Geography) noted that it is social ties between people that results in idea and information flows. These researchers found that even after an inventor had moved companies or geographies, knowledge flow at the old location was 50% higher than when they had lived and worked there. This indicates that personal relationships endure over time, space and organisational boundaries. These researchers would not consider restraints a major variable impacting idea and information flows.
  • In a thorough and long paper, Posner, George Triantis and Alexander Triantis (2004, Olin Working Paper No. 137, University of Chicago Law & Economics) considered the issue from an economic efficiency perspective (that is, what is the correct balance point between labour mobility and employer investment in human capital), and concluded that the choice and drafting of a restraint can deal with these tensions, although there are economic incentives for both contracting parties to agree to excessively broad restraints upfront which can be a problem if they cannot be renegotiated at a later date.
  • Arup, Dent, Howe and Van Caenegem (2013, University of New South Wales Law Journal) considered the impact of legal practice (that is, how the law works in practice) upon the enforceability of restraints of trade, and found that when an employee leaves and hard bargaining occurs under circumstances of uncertainty concerning whether the restraint will be enforced, often the former employee is at a financial and expertise disadvantage unless the new employer is willing to become involved and to provide financial and legal support.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

In his press club speech on 31 August 2023, just days before the public release of the Closing Loopholes Bill, Minister for Employment and Workplace Relations the Hon Tony Burke MP described the problem of the labour hire loophole as follows:

But if you have an enterprise agreement in place, the labour hire loophole is where the employer has agreed for particular tasks, particular classifications, that there’ll be a particular rate of pay. And then, having agreed to it, having had it registered, says, “But I’m now going to use someone who’s technically a different employer,” and those rules instantly disappear, and now we go right back down to the award again. That’s a loophole. It’s not what’s intended. It’s currently legal for the companies that are doing it.

And later:

…labour hire shouldn’t be used as a device to undercut what’s been registered and agreed to.

The Minister defiantly stated, “for anyone who does want to stop us closing the loopholes – defend them. Because so far, no-one has defended any of the loopholes I’ve described”.

The invitation to examine the problem, the policy to deal with it, the implementation of the policy, and even the politics is accepted.

Let’s start with agreeing on the problem. The Minister claims labour hire can be used as a device where a company agrees to a rate of pay in an enterprise agreement and then avoid that agreement by shifting the work to a different employer which pays an inferior rate. This is the “loophole” that allows companies to circumvent how the current law is intended to work. Notice the language used of a “device”. The Minister apparently now sees a device, a trick, a scam that has been taking place for 14 years under the Gillard Government legislation enacted in 2009.

So, is there a loophole that allows companies to circumvent the way the current law is intended to work? To answer that question, let’s examine how the current system deals with this problem.

First, outsourcing work because your employees have entitlements under an enterprise agreement is not lawful. Not under this legislation or previous versions of it. So, the loophole claim does not get off the runway.

Second, employees of the labour hire company working alongside employees earning more have a fairly simple path to higher wages. It is the same path that the host employer’s employees took – that is, to use the system to make an enterprise agreement that contains a higher rate of pay. They would have all the industrial weapons afforded by the legislation, including protected industrial action. This is the premise of enterprise bargaining which underpins the legislation and has done so since 1993, but now staff have the benefit of new options like seeking to engage in multi-employer bargaining, and in many cases, to initiate bargaining simply by requesting that the employer do so.

Third, even the Minister acknowledges there are good reasons for labour hire. So, which are good and which are a device? Read the Bill and see if you come away any wiser.

The reality is that describing this problem as a loophole is wrong. It is a standard issue industrial problem which the legislation already deals with. There is no policy or legal vacuum that needs to be filled.

That’s the problem and the policy – what about implementation?

This is where the Bill has the capacity to create serious distortions.

Consider the situation where a labour hire company has negotiated its own enterprise agreement with its employees. As with any enterprise agreement, the terms and conditions agreed are a mix of swings and roundabouts. That might mean a higher rate of pay than at other enterprises in return for other conditions being changed or reduced, but it may also mean a lower rate of pay in exchange for other benefits such as additional leave. The point of enterprise agreements is that they are negotiated at an enterprise level and are right for that business at that time. The way the system will work if the Bill passes is that those employees can take the high-water mark of the rate of pay in their own agreement or the rate of pay of the “host employer” plus all other conditions provided by the direct employer. The integrity of the agreement making system suffers in return for a pick and choose approach to pay rates.

There are other issues. As mentioned above, the Bill makes no distinction between the use of labour hire as a so-called device and its integrous and proper use. There is a long list of factors that the Tribunal must take into account (if the parties raise them) in deciding whether the legislative bias towards making an order is displaced, but it can also take into account any other factors it considers relevant in ultimately deciding what is “fair and reasonable” – about as vague and amorphous as it gets. Different Tribunal members, each deciding the matter diligently and in line with the legislation, can come to different conclusions because the standard adopted is discretionary and impressionistic. What it does supply, though, is a great political defence – who can argue against a law that is directed to achieving a “fair and reasonable” outcome?

In addition, rather than specialised services labour hire being permissible – as was promised to be the case – it is just one factor that goes into a long shopping list of factors before a result gets spat out. There is no reason why this would necessarily result in an order not being made. Indeed, the default position with specialised labour hire is the same as for any other case – an order must issue unless the employer convinces the Commission it would not be “fair and reasonable”.

The new provisions also jar with other parts of the system. The transfer of business provisions permit the Commission to make an order to stop an enterprise agreement (and its rates of pay) from moving with employees to a new employer in some cases, including outsourcing scenarios. Such an order is the result of a judgment call by the Commission that it’s not appropriate for that instrument – including sometimes a higher rate of pay – to transfer. That outcome could be undermined by the subsequent making of a protected rate of pay order that imports a host employer’s rate of pay where those employees later provide services to the host employer. Again, the system is, by design, weighted towards that outcome.

This legislation is not, however, ill conceived. Not in the real politik sense. It is there for a reason – just not the reason stated. It is not closing a loophole or preventing the use of a device to undercut agreements. If it were really about closing a loophole, then it manifestly goes further than its intended aim. If the government is really targeting a narrow range of abuses, it is obvious that its scope must be narrowed now. As noted, English Parliamentary Draftsman Stephen Laws CB has warned, Acts of Parliament “… cannot be steered to the right target: they have to have been well aimed before having been launched. If an Act misses its target, it may take at least a couple of years to put things right. In the meantime, the government’s policy will not be delivered, and the law may be producing the wrong result in case after case”.

So why make this change to the law when its scope and effects so clearly exceed its stated purpose? One can readily speculate that the real issue is distaste for developments at workplaces that have moved us away from centralised negotiations, usually with one or more powerful unions, that would implement a single set of rules for a workplace or business.  A dispersal of work across different providers, who compete with each other on factors including labour costs and have their own sets of conditions, does not fit that mould, and in turn, reduces unions’ influence and the attraction of membership. This change seeks to reverse those trends, or at least buck the trend.

What we see here is a workplace-level implementation of the same centralising impulse that drove the government’s earlier amendments, allowing employers to be dragged into multi-employer bargaining, and indeed permitting employers to be added against their will to the coverage of enterprise agreements they had no role in negotiating.   

Now, we can debate whether these macro system changes are good or bad. There are complex policy debates to be had here – but we cannot have them if these changes are positioned as ‘closing a loophole’ to cover for their real purpose.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

So, the business needs to cut costs. It might want to outsource. Redundancies look inevitable. But you need to be sure: so here comes a high-priced management consultant.

Things are getting expensive. Everything is on the table. There’s an enterprise agreement or two driving costs. You could get maintenance cheaper elsewhere. Or how about the supply chain? A 3PL solution can work. The numbers stack up. Your hunch is right – the consultants have confirmed it. Post redundancy costs will be amortised in three years. You press the “go” button and on sound advice. You send in the commercial lawyers to make sure all is in order. This is a commercial issue, after all. Safe hands.

Then HR is handed the task of implementation. But wait, there’s the law of workplace change.

Neither the consultants nor the commercial team have considered consultation or the potential for a dispute or litigation.  The employment costs are on the due diligence list, but implementation risks are not on the radar (or, at least, not until now when you raise them at the first implementation meeting).

Now, the union wants to see documents. There has been much talk about the consultants. Their work is no secret.  The union claims this is all about avoiding the industrial instruments and the next bargaining round. A court claim is imminent….

Two potential scenarios follow:

  • First, your outsourcing is stopped in its tracks by a Court injunction. This is until a final hearing can deal with it, about 6 -12 months down the track. And there are to be no redundancies in the meantime. Unfortunately, recent developments mean that this might actually be the best scenario.
  • The second sees the outsourcing going ahead. But then the damages claims follow. A claim by the union that it’s lost membership dues. A claim by employees who have lost jobs and, therefore, income. Add to these claims for “pain and suffering”. And this latter claim will take years, not months, to resolve, all the while potential liability continues to accrue, and uncertainty hangs over every step the business takes like a looming storm cloud.

The law of workplace change is not new. It’s basically this: any workplace change negatively impacting employees must not be for specific unlawful reasons: the existence of an enterprise agreement, the right to bargain for an enterprise agreement, union membership, and certain union activity being just some examples. It’s been heavily litigated over the years. And it remains difficult to navigate even where the reasons are commercially driven, as is most often the case.

That’s because the law has blurred the lines. Are redundancies to save costs because of the enterprise agreement? Or are they to save money? To save money, of course – but the saving comes by “avoiding” the enterprise agreement, or so the argument goes. At a trial, a judge must unpack the various arguments about the reasons for the decision and their underlying cause. Notes of internal meetings, the consultant’s brief and analysis, who said what and to whom internally will all be picked over. Any mention of the enterprise agreement gives the union its gotcha moments.

If the employer cannot positively prove in this contest of competing so-called “reasons”, that the enterprise agreement or other workplace rights did not play any part in their consideration, the court can find that the business has not discharged the reverse onus. The business goes down and substantial damages can follow, defeating the cost-savings and more. And, of course, the senior management are obliged to turn their minds to the industrial arrangements in order to discharge their duties to the business and its shareholders.

So, we run the risk that you are damned if you do and damned if you don’t. This “trip wire” is not new. But following the High Court developments last month, it’s now more opaque than it has been for 20 years. And about to get some renewed focus by union lawyers keen to put the brakes on any workplace change.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.