If 2025 taught us anything, it’s that Australian employment law is no longer evolving at the margins. From flexible work disputes to criminal wage underpayment and tighter scrutiny of internal processes, the year marked a decisive recalibration of employer obligations, with regulators and courts signalling less tolerance for ‘good intentions’ unsupported by systems, evidence and training.
Here are some of the key lessons to take into 2026:
Flexibility is no longer discretionary
Flexible work arrangement disputes increased in 2025, particularly following the Fair Work Commission’s decision in Karlene Chandler v Westpac Banking Corporation. The Commission made it clear that employers must genuinely consult and can only refuse requests on demonstrably reasonable business grounds, not policy discretion or assumptions about care responsibilities.
With over 300 flexible work disputes lodged last year and the proposed Fair Work Amendment (Right to Work from Home) Bill 2025 currently before a Senate inquiry, employers should assume that refusals will face increasing scrutiny (Please note: submissions for the inquiry close on 12 February 2026). Accordingly, flexibility decisions are fast becoming high-risk compliance events.
Wage compliance now carries criminal risk
From 1 January 2025, intentional wage underpayment moved from regulatory risk to criminal exposure under the Fair Work Act 2009 (Cth).
With the Fair Work Ombudsman empowered to investigate and refer matters for prosecution, payroll governance is no longer something to ‘get around to’.
Awards became more rigid
The Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 received royal assent in August 2025 and reinforced that penalty and overtime rates cannot be reduced or substituted through rolled-up arrangements in modern awards.
While enterprise bargaining and flexibility remain available, it is clear that award safety nets are being fortified, not softened. Accordingly, any current assumptions that employers have implemented about ‘absorption’ of penalty and overtime rates in salaries, and salary set-offs need revisiting urgently.
Courts are looking closely at what’s happening in practice
Two decisions shaped employer risk in 2025, including:
- Helensburgh Coal Pty Ltd v Bartley, where the High Court raised the bar on what constitutes a genuine redundancy, particularly around redeployment obligations.
- Fair Work Ombudsman v Woolworths Group Limited, the Federal Court clarified the limits of annualised salaries and reinforced strict record-keeping obligations.
These decisions made it clear that processes matter as much as outcomes, and courts are reading policies closely.
Culture is now a legal issue
Discrimination claims increased in 2025, including in emerging areas such as gender identity and pronoun use. The message from regulators and tribunals has consistently been that policies without training, enforcement and cultural alignment are ineffective.
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