The shifting sands of employment law

It’s 5:29pm on a Friday afternoon. As you prepare to log off and close your laptop for the last time this week, you hear a blip, and you notice a little flash at the bottom of your screen. It’s an email from a client and you suddenly get a little flutter in your stomach. Do you ignore the email until Monday morning, or do you give in to temptation and open it, knowing you will not be able to finish work on time today?

As a lawyer, it is never an easy decision whether to open that email or to leave it until 9am on Monday morning. From 26 August this year, employees of small businesses have a legal right to disconnect, joining those in non-small businesses who received the right in 2024. 

There have been prolific changes to employment law in the past five years. From changes to sex-based harassment and sexual harassment, to job security, criminalisation of intentional wage underpayments, greater protection for gig workers, sham contracting and the right to disconnect provisions, there is a greater onus on both employers and employees to be aware of their obligations.

In an everchanging legal landscape, what is the best way for legal practitioners to help and guide their clients through the changes?

When it comes to the shifts that have occurred in the employment law space in the past decade, Melini Pillay, Principal at McCabes Lawyers says it’s difficult to know where to begin. “There have been significant changes both at law and from significant cases.

“We’ve had our safety legislation amended … psychosocial hazards and risks were defined in the regulations, and we have seen so much exposure and discussion on these matters … we’ve [also] had sweeping change to the Fair Work Act,” she says. 

Pillay observes that the most prevailing matters are around flexibility, working from home, pay and gender pay reporting. “Almost everything has changed in some way … other than our basic fundamentals around workplace behaviour expectations but even this had to be reviewed because of the introduction of the positive duty,” she says.

Successive legislative amendments: the most since Fair Work Act 2009 was introduced?

Legislative reforms have been introduced progressively since 2020. The Fair Work Act 2009 and the Sex Discrimination Act 1984 were amended by the Sex Discrimination and Fair Work (Respect at Work) Amendment Act 2021 (Respect@Work Act). The legislation clarified the meaning of ‘harassment on the ground of sex,’ provided powers to make orders to cease or stop bullying, and an additional paragraph was added to section 387 to make clear that sexual harassment of another person constitutes a ‘valid reason’ for the dismissal of the perpetrator.

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Secure Jobs, Better Pay Act) encouraged job security and gender equality. The amendments banned pay secrecy and workplace sexual harassment, and set out the requirements for employers when responding to requests for flexible working arrangements.

In 2023 and 2024, with the passage of the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Closing Loopholes) and the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Closing Loopholes No. 2), there were changes (and better protection) for casual employees, labour hire workers and independent contractors. The reforms created a legal right for employees to not respond outside of work hours, provided standards for workers and turned intentional wage underpayments into a criminal offence.

With successive legislative changes, it is not surprising that there has been an increase in the number of applications to the Fair Work Commission (FWC). According to the FWC’s 2024-25 annual report, it received 44,075 lodgments that financial year, which represents a 10 per cent increase compared with the previous year. The breakdown of the types of applications is particularly notable. 16,500 of the applications lodged with the FWC related to unfair dismissal, 1900 related to disputes, 6209 general protections applications involving dismissal, and 1220 applications related to workplace bullying and sexual harassment.

Review of workers compensation legislation in NSW

In New South Wales, the state of workers compensation is currently under the spotlight as the number of psychological claims has ballooned in recent years creating a heavy burden on the workers compensation system. There is currently a bill before parliament seeking to overhaul the workers compensation legislation in the state.

Under the proposed bill, the threshold for psychological injury will increase from 25 per cent to 31 per cent. The proposed bill has drawn criticism from various stakeholders as an increased threshold will make it even harder for injured workers to successfully make a claim for psychological injury.

According to the State Insurance Regulatory Authority’s (SIRA) 2023-24 annual report, both psychological and non-psychological injury claims have increased in numbers over the past four years. Psychological injury claims rose by 64 per cent, from 5,616 in 2019-20 to 9,195 in 2023-24. The report noted that workers with psychological injuries were ‘less likely’ to return to work than those with non-psychological injuries.

Psychological injury can be caused by different factors including bullying and harassment in the workplace, as well as the imposition of excess work demands on an employee. Where a worker brings a claim to enforce their employment rights, employment lawyers are often cognisant of the fact that the employee may also have additional workers compensation entitlements.

So, what is a psychological injury? Lachlan Robison, barrister specialising in personal injury claims at State Chambers, explains that “injury per se is not a defined term. But certain things are included in the concept of injury which may not obviously be an injury including disease … or injury of gradual process … most psychiatric injuries would be in that nature…”

Robison explains that whilst defences are available to the employer, such as section 11A of the Workers Compensation Act, he describes it as a “toothless tiger,” which he predicts will change due to the current legislative reforms.

Section 11A provides that ‘no compensation is payable’ under the Act where the psychological injury was ‘wholly or predominantly’ caused by the ‘reasonable’ actions of the employer. Robison points out that there is a question mark over what falls within the ambit of ‘reasonable action.’

“[R]easonable action has to be within a certain range of defined behaviours … that is, conduct in relation to dismissal, performance appraisal and so on.

“The reason why that’s probably difficult for an employer is [that] by the time you do a performance appraisal, chances are the worker has already been having a tough time hence the performance appraisal and probably already has a psychiatric injury by the time that occurs…,” he says.

Joe Murphy, an employment lawyer at the Redfern Legal Centre, says employment lawyers are aware of the proposed changes and often work alongside workers compensation lawyers to ensure that both the employee’s rights under employment law and worker’s compensation entitlements are protected.

He says, “it’s very much a multidisciplinary approach that we’re often assisting clients within the context of disability discrimination claims and that often stems from an injury suffered at work.

“[G]enerally, that involves us being alert to the red flags associated with workers comp claims, which of course includes psychosocial, psychological injuries in the workplace as well.”

He continues, “[w]e’re generally … quite cautious in terms of ensuring that there’s no risk to a potential workers comp claim if we were to settle a matter that characterises a settlement sum as compensation for hurt, humiliation and ensuring that there’s no applicable injury … associated as well.”

As for the potential impact of the reforms, Dr Giuseppe Carabetta, Associate Professor of Workplace and Business law at the UTS Business School, points out that one of the proposed changes is to require a tribunal to make a finding that bullying existed before compensation is awarded. Whilst the purpose is to try to limit the rising costs of psychological injury claims, Carabetta believes this may create “procedural barriers” for employees who are legitimately injured.

As Carabetta explains, from a work, health and safety point of view, employers have a ‘non-delegable duty’ to provide a ‘psychologically safe workplace.’ This may include adopting anti-bullying policies, conducting risk assessments and providing diligent responses to complains or allegations. He points out that employers who fail to review and implement appropriate policies may ‘invite’ liability under workers compensation legislation and other areas as well.

Legal practitioners, insurers and regulators are eagerly awaiting the outcome of the bill and the impact of the proposed changes. 

As to whether a worker will be precluded from making a workers compensation claim while employment law proceedings are on foot, Robison says the remedies are not the same. “The remedies that might be available are one of the issues being looked at in the reforms at the moment, such as getting general damages for bullying.

“[O]ne wouldn’t directly affect the other except if there’s an essential fact resolved in one case, that fact couldn’t be resolved differently in the other case because the parties would be the same and you can’t have conflicting judgments involving the same parties,” he explains.

Robison points out that “it wouldn’t necessarily follow that winning one, you’d win the other,” he says. He gives the example of a bullying claim. If the Fair Work Commission determines that bullying hasn’t been proven, then that would not necessarily be detrimental to the personal injury claim. “[B]ecause you could perceive that you were bullied and that would be sufficient. “But I say that with the caveat that’s unlikely to be sufficient with the new legislation,” he says.

Working from home and the need for human interaction

Another significant area of change, particularly since the pandemic, has been the shift towards hybrid work.

Technology has made it easier for businesses to operate, because everything is available online and can be accessed anywhere, anytime. Whilst there are data security and privacy considerations, there are obvious benefits. Data is easily accessible thereby giving employees more flexibility over the ‘where’ and ‘when’ they work.

While technology has made it easier for clients to reach lawyers, there is a tension between the employee being accessible while working from home and their right to ‘disconnect’ and switch off at the end of the workday.

While many businesses have moved to a hybrid work model, Pillay remembers a time before the pandemic when working from home was not as common.

“[B]usinesses, particularly professional services, predominantly had their people in the office and usually for long days unless you were very progressive … we didn’t know any different and we didn’t engage much with Teams, Zoom, Google Meet and the like. …

“[W]e were also operating ‘paper-based files’ pre-COVID too. We never even contemplated anything different really. [P]ost COVID, the world got a crash course in how we can still get much of our jobs done and not be in the office,” she says.

Whilst hybrid working has created opportunities and convenience for businesses and employees, it has also brought new challenges. Employers suddenly had to set procedures to manage remote working, including how to maintain collegiality and teamwork across different locations. There were questions about workers compensation and liability if workers injured themselves at home and how to maintain client and business confidentiality.

For early career lawyers, working from home created a barrier to learning and accessing more experienced lawyers compared with previous generations.

Reflecting on her career, Pillay says she’s grateful to have commenced her career at a time where people worked together in an office setting. “And I say that … not only because of the experience that I got, but I also say it because of the network and the friendships that I was able to establish from being in the office.

“I don’t think that you can sit at home at your dining room table and build that type of connection. That said, I appreciate the value of flexibility …”

Pillay believes working in the office creates opportunities for colleagues to build bonds. “[T]he incidental moments to connect [are] significant,” she says.

Pillay suspects the yearning and support for a right to disconnect arose out of the pandemic. She tells the Journal that the two are connected as the right to disconnect is about reclaiming time and drawing a line between the employees’ work and personal life. “[W]e haven’t seen it create a big issue yet but it’s likely to become another reason to lodge a general protection claim …”

From 26 August 2025, right to disconnect laws came into force for small business employers. Employees have the right to decline or say no to monitoring, reading or replying to contact outside of their work hours unless the refusal to do so is ‘unreasonable.’

While the legislation is still fairly new and there has yet to be any test cases in the Fair Work Commission or the courts, there are questions over the extent of the right to certain fields of work, such as medical professionals, trades and the legal profession, who have traditionally worked long hours.

The idea of a right to disconnect is not novel. As Carabetta points out, the concept of a right to disconnect was appropriated from European jurisdictions. He says it demonstrates a ‘cultural recalibration’ of the line between work and the personal lives of employees in Australia. While it’s still too early to tell how the laws will work in practice, he views them as “a legislative recognition of the psychological toll of digital presenteeism.”

Technology, AI and social media

With the evolution of technology, and the increasing popularity of social media, there is a growing need to balance the right of employees to use technology like artificial intelligence (AI) and social media, with the right of businesses to maintain privacy and confidentiality.

For businesses and lawyers, the use of AI has presented a different set of opportunities and challenges. While it can be a useful tool in summarising information and performing basic tasks, it can be prone to hallucination and errors. Use of AI without proper oversight by a legal practitioner creates additional work and costs for the parties involved and a burden on the courts. There have been numerous examples in Australia and abroad, where lawyers have sought to rely on ‘non-existent’ cases. Use of AI without proper oversight and verification  has drawn criticism from the courts and most jurisdictions have released practice directions and guidance.

Pillay has seen the way AI and tools such as ChatGPT are being used in  proceedings. “There are some great upsides to AI … however, I’m also seeing employees raise complaints and claims, particularly in the Fair Work Commission and it’s clear AI has assisted.

“They reference enterprise agreements where the business doesn’t have one, or some ‘best practice’ that isn’t reflective of the industry they’re in … These things have always occurred to some extent in unrepresented matters; however, they now have more depth and sophistication in the writing.” 

As technology improves, AI’s ability to draft documents has also evolved. There is an increasing need for lawyers to be more alert to the possibility of AI being used to prepare documents or summarise legal arguments, particularly where case law is cited. Pillay acknowledges that “AI actually does write quite well, whether it makes sense is a different thing,” she says.

Pillay admits that where litigants, or workers, use AI to assist them to draft documents, it can often create additional work for the business and their lawyers. In a jurisdiction where parties generally pay for their own costs, lawyers are forced to spend time, energy and resources responding to documents that lack accuracy or sense.

“I recently had one that went on for about five pages, an expensive exercise to say ‘no, there’s nothing to see here.’

“There are very limited circumstances in which the Commission can order costs, so the employer is almost always out of pocket, which is even more frustrating when … the claim is withdrawn because the nonsense is so evident,” says Pillay.

When it comes to social media use in the workplace, the main concerns have been about privacy and client confidentiality. It was not uncommon for businesses, including law firms, to stipulate in internal policy documents and employment contracts, that employees should exercise caution when using social media and they were not to make comments either online or in public relating to their employer or clients. In extreme instances, breach of this rule would result in a warning or termination of employment.

With the changing times, there has been a shift in attitude towards social media use. 

“[It] has evolved rapidly in a way no one really predicted or planned for,” observes Pillay. 

“[F]ive years ago, we all had a social media policy that said, don’t refer to your workplace, don’t refer to your work … Whereas now, we’re living in the era where everyone’s an influencer, taking videos and selfies at work is the new norm. ‘Watch me do my morning emails,’ and ‘this is where I make my lunch,’ we’ve invited social media into our workplaces now in a very different way… 

“[N]ow we have to think about balancing this with saying, ‘actually, what you just posted on your social media was offensive to some of your colleagues and some of our clients. How do we tell our employees, ‘Can you not talk about this on your social media?’,” she says. 

Pillay attributes this to a difference in generation and explains that social media is often perceived as a tool for employees to exercise their freedom of speech, express their personal views, and a way for people to make a public statement on an issue they feel strongly about. 

Pillay does not believe employers can prohibit people from using social media. She explains that employers can’t tell their employees, “‘Don’t do it. Your phone is not welcome in our workplace,’ I think that there’s a world in which it’s actually favourable to employers. 

“The publicity might be favourable to the workplace … presuming they’re not showing themselves leaving the office at 10 o’clock at night.”

Changes to employee’s right to request flexible work arrangements

Another significant change brought about by the Secure Jobs, Better Pay Act, is the expansion of the circumstances which an employee may request flexible working arrangements.

What is a ‘reasonable’ ground for refusing such a request? At the time of writing, the Fair Work Commission had just published its decision in Chandler v Westpac Banking Corporation [2025] FWC 3115. In that case, the applicant had been working remotely for two years and had moved far away from the workplace to be closer to her children’s school.

The applicant made a flexible working arrangement request, which was denied by the employer on the basis that there was ‘a genuine and reasonable business need for the applicant to attend’ one of its offices. The FWC found in favour of the applicant as it found that the employer had allowed the employee to work remotely over an extended period and there were no issues with the employee’s performance. The FWC also considered a range of other factors, but the decision will no doubt prompt employers to be more cautious in their approach to requests for flexible working arrangements.

Murphy has observed how changes to flexible work arrangements have strengthened a worker’s ability to make lawful requests for them. He explains the onus is on the employer to respond to the request and provide a justification for their decision.

“So essentially, it seems to have empowered more people to make that request knowing that it’s not aspirational … the discretion is not solely on the employer to reject that request because they can’t accommodate it.

“They have to be able to demonstrate and illustrate that it can’t be accommodated if that’s the case and for that to be … reviewed … by the Fair Work Commission,” he says.

As Murphy explains, the right to request flexible working arrangements overlaps with general protection claims as it is an exercise of workplace rights, and there may be discrimination elements if the worker has additional family or carer responsibilities.

Murphy believes the law has some way to go on the issue of discrimination for those with family or carer responsibilities. “[T]here appears to be this strong [emphasis on the] operational needs of the company and the overlap with people being made redundant …

“In cases where employees are made redundant after making a request for flexible working arrangement, employees may hold limited information about an employer’s restructures or operational changes which could challenge a discrimination or adverse action claim.” Murphy acknowledges this “tension” continues to present as a challenge for workers.

In terms of employment law trends, Carabetta observes that flexible work arrangements have shifted from being a discretionary option to being entrenched as a ‘statutory right.’ He explains that as a statutory right, employees can seek a remedy in the Fair Work Commission, which includes a right to proceed to arbitration to test the “reasonableness” of the request and the “nexus” behind a request or refusal.

Pay compliance, gig workers and sham contracting

With the rise of technology and increase in the use of apps to order everything from food to groceries, the number of workers in this area has increased, prompting moves to protect those who work in the ‘gig economy.’ Division 3 of the Closing Loopholes No 2 legislation introduced, among other things, definitions and protections for ‘regulated workers’ (or gig workers).

Carabetta says “[t]he gig economy exposed a regulatory blind spot. “Many gig workers were functionally/operationally dependent on platforms but legally excluded from employment protections because, technically, they were not employees … and were excluded from protections like unfair dismissal, minimum wage protections, insurance and leave entitlements.”

The legislative reforms have acted as a catalyst for employers and employees to re-evaluate their obligations. Carabetta acknowledges that with the waves of legislative reforms, there has also been increased compliance complexity and legal risk for employers. He points out that for employers to keep on top of their legal obligations, they should evaluate their internal systems and processes, and be “updating contracts, policies and …  and hopefully, training programs.”

Similarly, Murphy has observed a change in the way lawyers practice and how they provide advice to their clients, particularly when it comes to advising employees on sham contracting arrangements. Murphy acknowledges that whilst sham contracting itself is not a new legal issue, the way lawyers approach the issues has evolved.

“We now can refer to the meaning of an employee and use that as a tool to assess whether this person, who was told that they were a contractor … genuinely is one,” he says.

With the introduction of new contraventions, the changes to the scope to bring these types of claims boils down to the definition of an “employee,” says Murphy. He explains that lawyers previously had to rely on two decisions of the High Court which stated that the contract is the main indicator of whether a person is, or isn’t, an employee. “It was quite limiting. Someone who had all the characteristics of an employee may not have been able to bring a claim or rely on sham contracting provisions or penalties,” he says. 

As for how the changes have affected the way lawyers can help workers, Murphy says lawyers are able to advise a greater class of people who may be entitled to bring a claim as a result of the way they have been treated. “[M]ore people can bring a claim under those jurisdictions where there is unfair dismissal, or general protections dismissal and … discrimination laws as well. 

“So, it expands the option for a client who previously may not have had jurisdiction to bring a dismissal claim or may have faced a greater risk that claim would be dismissed on the basis that … you don’t appear to be an employee for the purposes of that definition …,” he says.

For Carabetta, the most significant change has been to the requisite standard for sham contracting arrangements. “[T]he sham contracting provisions now reflect a ‘recklessness’ standard, lowering the evidentiary burden for regulators and increasing exposure for employers,” he says.

Experts’ predictions for the future

As legislative changes shift the onus of both employers and employees, Carabetta predicts greater compliance complexity and legal risk for employers. This has created a need for more ‘proactive governance’ such as updating internal policies, agreements and training. At the same time, it has created opportunities for those able to embrace change.

Carabetta acknowledges that from the employee’s perspective, the legislative reforms have improved procedural and substantive protections, especially for carers, gig workers, casuals and those suffering from psychosocial harm.   

In recent years, there have been media reports of employees acting inappropriately in the workplace or at work related events or functions. Experts like Carabetta agree that employers can, to some extent, be responsible for the conduct of their employees outside the workplace. “Employers can be vicariously or indirectly liable for misconduct at work-related events, particularly where alcohol (etc) fuelled misconduct is involved, where there is inadequate supervision and/or codes of conduct [that] are not properly or consistently enforced.

“The key legal test for vicarious liability is whether the conduct occurred ‘in the course of employment,’ which the courts tend to interpret broadly,” says Carabetta. 

He acknowledges that there may also be cultural or practical factors at play, however employers, including law firms, should take “proactive steps: enforce codes of conduct, limit alcohol service, and ensure senior staff model appropriate behaviour,” he says. 

Carabetta points to decisions, such as Keenan v Leighton Boral Almey NSW P/L [2015] FWC 3156, which communicates a ‘clear message’ for employers. Those who fail to adequately supervise or get involved “may be held liable for off-site, or ‘off-duty’ misconduct,” he says.

Another recent reform has been the legalisation of certain drugs to treat psychological conditions. While psilocybin and other drugs have been legalised to treat severe mental illness including PTSD, it poses a unique challenge for employers. “This is a complex area. While these substances are now Schedule 8 drugs, their use is tightly controlled and medically supervised.

“Employers must balance WHS obligations with anti-discrimination protections…,” says Carabetta.

Looking ahead, he identifies a number of key opportunities and challenges including the need to regulate AI, algorithmic management and compliance in the workplace, ESG compliance, and the need to manage the various psychosocial risks within the confines of changing WHS frameworks.

Carabetta also identifies a need to balance “flexibility with practicalities in hybrid and remote work models.” He acknowledges that this will depend on the industry and says there is also a need to balance “political opinion as a protected employee right, and other forms of protection, with the employer’s legitimate reputational interests, workplace health and safety and other legal obligations.”

In an everchanging legal landscape, Carabetta also identifies various opportunities, such as adopting diversity and inclusion into legal compliance, using technology for “proactive compliance” and balancing the relationship between employers and employees in a way that is “both flexible and fair.”

Pillay predicts that in the professional services space, there will be an increase in the number of claims involving the right to disconnect, as a general protection. “[I] think it will probably be linked back [to] … ‘I’m entitled to a safe workplace’ and you keep contacting me outside of these hours or forcing me to do things outside of reasonable hours…

“I suspect we’re going to continue to see wage compliance matters. It’s about people’s pay at a time when the economy is really challenging,” she says. 

Pillay points out that the workforce now consists of five generations of workers and she acknowledges that the newer generations are more cognisant of (and more willing to enforce) their rights and entitlements than previous generations. 

Resource to help law practices

The Law Society of NSW has updated its ‘Workplace Guide and Model Discrimination and Harassment Policies’ (guide and model policies). The 2025 version, which is expected to be released later this year, replaces the previous version published in May 2021. The changes reflect the legislative amendments since 2021, particularly in relation to Respect@Work and psychosocial hazards.

Like its predecessor, the 2025 version of the guide and model policies clearly sets out the relevant provisions, helpful explanations of how the provisions may apply to legal practitioners and law firms, and useful examples. It also sets out the responsibilities of legal practitioners as individuals and the vicarious liability of employers.

The 2021 version contained model policies and procedures for firms to consider when developing their own policies and procedures. These include equal opportunity and anti-harassment policies, grievance handling procedure and checklists for employers. The 2025 version is expected to contain an updated and more comprehensive set of model policies and procedures for firms to ensure that they are compliant with the law. 

This will be particularly useful for sole practitioners and boutique sized firms who may lack the resources to develop their own set of policies and procedures. For employers and employees, successive legislative reforms have offered greater protection, creating more obligations than ever before. While the FWC has not had an opportunity to test how far the right to disconnect provisions operate, most experts agree that it is only a matter of time. As to whether to open that email or message at 5:29pm on a Friday afternoon, the power is in your hands.