08 Apr HR LAW NEWSLETTER – MARCH 2025

Welcome to the March 2025 HR Law Newsletter.  This month, we explore some developments in employment law, including proposed reforms in the Federal Budget that aim to restrict non-compete clauses, a Fair Work Commission (“Commission”) decision clarifying the employee vs contractor distinction in international engagements, and a case concerning serious misconduct and procedural fairness in unfair dismissal proceedings.

BUDGET

As part of the Government’s strategy to enhance productivity and workforce mobility, the Budget includes proposed reforms to prohibit non-compete clauses for employees earning below the high-income threshold under the Fair Work Act 2009 (Cth) (“FW Act”), which is currently $175,000 per annum.

Non-compete clauses are contractual provisions that restrict employees from joining a competitor or establishing a competing business within a defined geographic area and timeframe after leaving their employer.  Research shows these clauses can limit career opportunities and hinder competition in the market.

The proposed reforms, set to take effect in 2027, mark a significant shift in Australian competition law.  Employers should take this opportunity to review their existing employment contracts and consider strengthening alternative protective measures.  Key areas to focus on include:

• Confidentiality obligations – Ensuring employees are bound by robust confidentiality clauses (including after termination of employment) to protect sensitive business information.

• Intellectual property rights – Clarifying ownership of intellectual property created during employment.

• Other restrictive covenants – Exploring enforceable alternatives such as non-solicitation clauses (although it is currently unclear whether these types of clauses will also be banned as part of the reforms).

To review the Budget, click here.

REMINDER: ENSURE YOUR CONTRACTOR AGREEMENTS are sound

The Commission has recently reinforced the significance of “control” in remote engagements when determining employment status.  In AB v Free Hearts Free Minds [2025] FWC 353, the Commission found that an Australian-based executive director for a US-registered charity was an employee, allowing her to pursue an adverse action claim under the FW Act.

California-registered non-profit Free Hearts Free Minds (“FHFM”) sought to dismiss the adverse action claim on the basis that:

• The executive director, “Ms AB”, was an independent contractor; and

• FHFM’s character as a foreign entity exempted it from the FW Act.

However, Commissioner Ben Redford determined that the nature of Ms AB’s engagement, particularly the degree of control exercised over her work, was more indicative of an employment relationship as evidence demonstrated by the fact that Ms AB:

• worked full-time for a set remuneration of $6,550 per month;

• received direct instructions from FHFM regarding her responsibilities;

• had no genuine capacity to refuse work;

• had a broad, ongoing role rather than discrete projects;

• represented to the public as FHFM’s executive director; and

• was required to complete a comprehensive handover upon termination.

Additionally, Commissioner Redford observed that while Ms AB was required to invoice FHFM, this was a requirement imposed by the organisation rather than her own choice.  The lack of employee entitlements, such as superannuation and leave, was attributed to FHFM’s refusal to provide them rather than an indication of independent contractor status.

In addition, given that Ms AB worked entirely within Australia and the contract was entered into domestically, the FWC found FHFM to be a “national system employer” under the FW Act.  As a result, it had jurisdiction to hear Ms AB’s adverse action claim.

To read the case, click here.

CASE BRIEF

In the recent decision of Manjeet Singh v CDC NSW Region 4 Pty Ltd T/A CDC NSW [2025] FWC 142, the Commission found that a Sydney bus driver (“the Applicant”), who had used his mobile phone whilst in control of a bus, was not unfairly dismissed despite deficiency of procedural fairness by his employer (“the Respondent”).

In May 2024, the Applicant complained of pain in his right shoulder whilst working, which prompted the review of CCTV footage by the Respondent.  As a result, the Respondent observed the Applicant using his mobile phone whilst driving a bus.

 The Respondent then issued a Show Cause letter to the Applicant, requesting a response to the Applicant’s use of the mobile phone whilst operating the bus.  In response, the Applicant stated that he was holding his spiritual diary.  The Respondent ultimately terminated the Applicant’s employment on the basis that he had been using a mobile phone whilst operating the bus.

The Applicant subsequently brought an unfair dismissal claim.  Commissioner Riordan found that the termination of the Applicant’s employment was valid due to his serious misconduct, which was supported by the Respondent’s indisputable CCTV footage evidence.

Commissioner Riordan determined that “the Applicant’s hand movements whilst he has hold of the object are consistent with operating a phone and totally inconsistent with opening a diary” due to his thumb movements across the object, hiding the object from CCTV and other road users, and struggling to remove the device with one hand from his pocket.

Commissioner Riordan observed that the Respondent did not provide the Applicant with sufficient time to reflect on the CCTV footage, and that the Respondent’s Show Cause process indicated some “conclusive” wording. However, the Commissioner found that any deficiencies in procedural fairness were outweighed due to the seriousness of the Applicant’s misconduct and the strength of the evidence.  Specifically, Commissioner Riordan found that the Applicant’s misconduct not only breached NSW Road Rules and company and industry policy but also risked public safety.

This case serves as a reminder that employers should maintain procedural fairness and follow appropriate process when terminating staff members, even in cases of serious misconduct.

To access the full case, click here.

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The content of this newsletter is intended to provide a general guide to the subject matter.  Specialist advice should be sought about your specific circumstances.