1. Employment law 101 – beware of incorporating policies in contracts

Case: In late 2024, the High Court, in Elisha v Vision Australia Ltd [2024] HCA 50, allowed an appeal awarding $1.44 million in damages to a former employee of Vision Australia for psychiatric injury flowing from breach of a disciplinary procedure incorporated into the employment contract. The employee was diagnosed with major depressive disorder following termination for an alleged aggressive workplace incident.

Impact: This case is a reminder to employers of the importance of following their own disciplinary procedures when making decisions impacting employment. If a contract is poorly drafted and incorporates the terms of a workplace policy, and the policy contains promises as to how the employer will deal with a disciplinary or investigative process, a failure to comply with that policy can amount to a breach of contract.

2. This time, it’s personal

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Case: On 5 August 2024, in Fair Work Ombudsman v Sushi Bay Pty Ltd (in liq) (No 3) [2024] FCA 869, the Fair Work Commission ordered that a sushi chain corporate group pay a total of $13.7 million in penalties for underpaying 163 employees over several years. The director and CEO was also personally ordered to pay $1.6 million for her involvement in the contraventions, which included failing to pay employees the minimum rates under the relevant modern award and other breaches of the Fair Work Act 2009 (Cth).

Impact: Regulators are continuing to focus attention on the exploitation of vulnerable workers, with failure to pay minimum entitlements to employees remaining prevalent. Boards and executives must be crystal clear on wage compliance obligations under modern awards and enterprise agreements because, from 1 January 2025, deliberate wage theft will become a criminal offence, attracting prison sentences of up to 10 years and significant monetary penalties.

3. Ex-employee slugged with half a million in damages for soliciting clients

Case: On 24 September 2024, in AEI Insurance Group Pty Ltd v Martin (No 4) [2024] FCA 1110, the Federal Court ordered that a former account manager pay $500,000 in damages to his former employer, after luring 45 clients to a rival, including 25 clients who migrated after the employer won an injunction against the manager. While the former employer had difficulty gathering evidence of solicitation of clients (mobile phones were ‘immersed in water’, another was run over by a lawn mower, and a third had information deleted from it), the court ultimately concluded that it was more likely than not that the manager had directly or indirectly solicited clients.

Impact: Restraint of trade clauses are in the spotlight in Australia, with the federal government currently considering whether such clauses are anti-competitive. However, even if injunctive relief is limited in the future, damages proceedings brought by former employers for breach of contract should be considered, with this case showing such a remedy can be successful. Obtaining and proving evidence of loss will be essential.

4. Avoid a “whodunit” mystery when terminating employees

Case: On 30 September 2024, in Pilbrow v University of Melbourne [2024] FCA 1140, a lecturer successfully argued that the University of Melbourne had taken adverse action against her in the form of misconduct allegations after she had made workplace complaints. In defending the claim, the university failed to call evidence about the state of mind of several people who were affected or involved in the decision to make the allegations. The Federal Court found that, due to ‘insurmountable’ uncertainty about these matters, the university failed to satisfy its reverse onus obligations under the Fair Work Act 2009 (Cth) to prove that it had not taken the adverse action for the reasons alleged.

Impact: Recent data from the Fair Work Commission shows the total number of employee claims against their employers increased by 27 per cent in the 2024 financial year, the highest number of claims since 2010. Accordingly, employers must take care to precisely identify each decision-maker when making decisions to end the employment of employees. This case emphasises the need for employers to provide clear contemporaneous documentary evidence of each person whose contribution to a decision to take adverse action against an employee rises above a threshold level.

5. Franchisor liable for franchisee underpayments

Case: Earlier in 2024, the Federal Court of Australia in Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2024] FCA 576 found a franchisor liable to pay $1.44 million in civil penalties relating to the franchisees contravening the Fair Work Act 2009 (Cth) by underpaying franchisee workers.

Impact: The penalties are the third-highest ever secured by the Fair Work Ombudsman (FWO), and the case marks the first time FWO has used the “responsible franchisor entity” provisions to hold a franchisor accountable for its franchisees’ actions. The case is a warning for franchisors who should specifically take action to consider the degree of control over franchisee operations, including how that control may be exercised to ensure that franchisees comply with legal obligations to personnel under the Fair Work Act 2009 (Cth).

Paul O’Halloran is an employment and safety partner at Dentons and is the head of the firm’s Melbourne office.