Insights & News

September 11, 2025

On 5 September 2025, the Federal Court[1] reshaped the law on a practice many employers have relied on for decades: using contractual set-off clauses to balance out overpayments in one pay period against shortfalls in another.

The ruling was unequivocal: employers relying on this contractual practice can only offset within a single pay period and cannot “carry forward” payments to cover entitlements arising in another pay period.

The ruling does not abolish set-off clauses altogether, but it sharply limits their utility – both practically and from a compliance perspective. They now have a far narrower function than employers have historically assumed to consolidate different award entitlements within the same period.

The decision contributes to the tension at the heart of Australia’s industrial relations system between highly regulated compliance obligations and the need to deliver the flexibility and dynamism required for a modern economy to remain globally competitive. While the decision is certainly a hurdle for employers, options remain available for employers willing to invest in strategic workforce planning.

Why it matters  

This shift has major implications for payroll design, contract drafting, and remuneration strategy. While an appeal is possible, the Fair Work Ombudsman and plaintiff firms will rely on the decision immediately, making it essential for employers to act now.

The decision also risks stifling flexibility in how employers structure remuneration, as it narrows the scope for innovative salary models and increases reliance on rigid ‘per period’ compliance.

Whilst an appeal looks likely, unless and until a superior court says otherwise, this represents the current state of the law.  This means employers must act now to review – and potentially address – their approach to remuneration, payroll and record-keeping compliance, to protect against exposure to claims.

The key findings

Set-off limited to each pay period
Contractual set-off clauses cannot operate across pay periods. Employers cannot use overpayments in one month to cover underpayments in another month. The requirement in s 323 of the Fair Work Act 2009 (Cth) (FW Act) is that entitlements be paid “in full” for each prescribed pay period.

Set-off clauses in contracts operate differently to annualised salaries which are expressly provided for in Modern Awards and/or Enterprise Agreements. The Court reaffirmed that offsetting pay across pay periods is still allowed but only when a Modern Award or Enterprise Agreement expressly allows for an employee to be covered by an ‘annualised salary’.

Clearly drafted set-off and annualised salary clauses are a must
Set-off clauses in employment contracts can only discharge award entitlements where there is a clear “coincidence of purpose” — a direct link between the salary and the entitlements it is intended to cover. Vague or generalised clauses are unlikely to withstand scrutiny. This will mean that employment contracts must list in detail the exact Modern Award or Enterprise Agreement penalty, allowance or other rate which is being ‘offset’ to be effective.

Payroll systems must change
The decision effectively requires employers to introduce per pay period reconciliations and top-up payments. Annual or retrospective reconciliations will not avoid liability. This is likely to be one of the most expensive and complex implications of the ruling.

Agreements with employees must be genuine
Where a modern award requires agreement, the employer bears the onus of proving the employee knowingly consented. Implied or informal arrangements will not suffice.

Overtime clarified
A contractual clause authorising “reasonable overtime” is evidence of standing authorisation. But if an employee adjusts their hours for their own convenience, that is not employer-directed overtime. The Court also confirmed that “reasonable additional hours” and “overtime” are distinct concepts.

Record-keeping reinforced
Employers seeking to rely on set-off clauses or annualised salary arrangements must still comply with detailed record keeping requirements. This includes detailed records kept of overtime and penalty rates, even where the employee is not receiving additional payments for those entitlements because of the ‘rolled-up’ rate. The decision confirmed that simply keeping clocking data and roster information is not enough. Further, partial or reconstructed records are not valid. Records must be detailed, accessible and contemporaneous. This is critical, because the burden of proof under s 557C of the FW Act shifts to employers where records are incomplete.

The big questions for employers

This ruling forces employers to confront three strategic questions:

• Is there any benefit in retaining set-off clauses at all?
  With their utility confined to a single pay period, some employers may find that set-off clauses now deliver very little compliance value. Those employers seeking to smooth payments across time may wish to consider negotiating annualised salary arrangements as part of their enterprise agreements or to make better use of existing ‘Individual Flexibility Agreements’ under Modern Awards.
• Do payroll systems need to be rebuilt?
  The practical answer is – most likely, yes (at least to some extent). Employers should anticipate the need for live reconciliation within each pay cycle, and processes for automatic top-up payments when shortfalls arise. Policies and procedures should also be considered which seek to more strictly monitor and approve the working of overtime.

What employers should do now

Even with the potential of an appeal on the horizon, employers cannot afford to wait until then.  The decision is likely to see an increase in claims from unions and employees, in addition to greater regulatory interest by the Fair Work Ombudsman, for those employers relying on contractual set-offs and annualised salaries.

At Kingston Reid, we see this decision as a turning point, as well as an opportunity to redesign future-focussed remuneration strategies that will offer protection and certainty. While this decision is a hurdle for employers, efficiency and flexibility is still possible for those employers willing to invest in strategic workforce planning.

If you would like to understand what this decision means for your business, and how to respond strategically, please get in touch with our team.

The views expressed in this article are general in nature only and do not constitute legal advice. Please contact us if you require specific advice tailored to the needs of your organisation’s circumstances.

[1] Fair Work Ombudsman v Woolworths Group Limited; Coles Supermarkets Australia Pty Ltd [2025] FCA 1092

September 10, 2025

Kingston Reid has appointed Joanna (Jo) Macchiesi as Special Counsel in its Melbourne office, further strengthening the firm’s national Safety and Regulatory practice.

Kingston Reid Managing Partner Alice DeBoos says:

“We are thrilled to welcome Jo to Kingston Reid. With deep expertise in safety, regulatory and employment matters across a wide range of industries, Jo will be an invaluable addition to our national team. This appointment reflects our continued commitment to providing market-leading advice to clients facing increasingly complex safety and compliance challenges.”

Jo has previously held senior in-house and private practice roles, including leading the design and implementation of major safety management systems for large enterprises.

Key work health and safety issues to watch in 2025 …

Jo joins the firm’s Melbourne office amid ongoing legislative reforms in the state and across Australia, but says there are two key work health and safety issues that employers need to be mindful of for the remainder of 2025:

“First, the new psychological health regulations that the Victorian Government is set to release next month, and which will take effect from 1 December 2025. This will align Victoria with regulations introduced in other Australian states and territories, reinforcing that psychosocial hazards, being work-related factors which can lead to physical or mental injury, are to be treated the same as physical hazards. Together with a Compliance Code providing practical guidance, employers with operations in Victoria will have greater clarity on how to meet their obligations to provide a psychologically safe workplace.

Second, across Australia we have seen increasing scrutiny of directors and officers following serious incidents, reinforcing the expectation that safety leadership is actively demonstrated from the top. While Victorian officers do not have the same positive due diligence duty that exists in other states and territories, they must be able to demonstrate the steps taken to ensure their organisation complies with its safety obligations. This is particularly important given the regulator’s heightened focus on individual liability.”

Jo Macchiesi is a Special Counsel in Kingston Reid’s Melbourne office.

“It’s an exciting time to be joining Kingston Reid and to play a key role in growing its Safety and Regulatory practice in Victoria,” Jo says. “I look forward to drawing on my operational experience to provide clients with practical, commercially focused advice that enables them to achieve sustainable and compliant outcomes.”

Kingston Reid Partner and Safety & Regulatory national lead John Makris says:

“Having Jo join the team is a significant development for Kingston Reid’s Safety and Regulatory practice. Her insights into the evolving regulatory landscape, particularly in Victoria, will be invaluable as our clients navigate new challenges and heightened expectations around workplace safety and governance.”

Jo brings extensive experience advising employers on work health and safety, employee relations, governance, and risk and compliance across sectors including education, mining, manufacturing, betting and financial services.

For further details, you can find Jo’s profile on our website here.

August 20, 2025

The establishment of the Industrial Court of NSW just over 12 months ago has marked a significant shift in the handling of work health and safety (WHS) prosecutions in the state. In assuming jurisdiction from the District Court for these matters, the Industrial Court has brought with it procedural reforms, and in the few decided cases, a familiar approach to sentencing. In summary, the Industrial Court has already demonstrated stylistic and procedural differences in determining prosecution cases.

Core sentencing approach

Unsurprisingly, the Industrial Court continues to apply the “instinctive synthesis” approach, weighing objective seriousness, aggravating and mitigating factors and deterrence, following established precedents in the reasoning process.

Foreseeability of risk, the ease and low cost of preventative measures and the importance of guidance material in setting the standard of care continue to be a priority. Also, the strong emphasis on general deterrence, often moderated with specific deterrence by post-incident remedial steps, plays a significant part in the sentencing process. In essence, the Industrial Court has not deviated from the core legal framework applied by the District Court.

This is welcome news as many years of established precedent in the District Court will help both SafeWork NSW (the Regulator) and the Person Conducting a Business or Undertaking when trying to determine where an incident may fall in regard to objective seriousness. We continue to see objective seriousness being assessed primarily through:

• foreseeability of the hazard/risk;
• severity of potential harm; and
• ease of available control measures.

This approach stresses that even infrequent hazards demand control where consequences are grave and preventative steps are simple.

Recent criticism of prosecutorial pleading practices

One recent procedural issue has been highlighted by the Industrial Court in the case of SafeWork NSW v Leichhardt Pty Ltd [2025] NSWIC 5 concerning the Regulator’s approach to pleading multiple particulars arising from the same operational failing. Particulars in a charge specify the way(s) the prosecutor alleges the defendant failed to abide by its duty so far as reasonably practicable. They usually take the form of various control measures the defendant should have followed or implemented to manage the alleged risk.

His Honour President Taylor noted that it is too common in SafeWork NSW proceedings that in addition to a primary particular of failure there are a series of further particulars which effectively repeat the same failing or make no significant difference to the overall culpability. In this case, President Taylor placed little to no weight to the additional repeated and irrelevant particulars when determining objective seriousness.

It is our view that these types of ‘precedent’ particulars adopted by the Regulator in WHS proceedings only complicate and draw out plea negotiations and can lead to disputed facts which further delay the process, take up more of the courts’ time and increase the defendant’s costs. This recent comment by President Taylor hopefully has the effect of influencing how the regulator drafts its charges in the future, preferably leading to more concise and relevant failings pleaded in the charge.

Effects of the updated Practice Note

A major procedural change in the Industrial Court was the implementation of the new Criminal Practice Note No. 1 for WHS proceedings. This focuses on a three-mention structure where if no plea is entered by the third mention, the Industrial Court can proceed on the basis that the matter will take place as a defended hearing and the defendant may lose the benefit of the 25% utilitarian discount that would otherwise be available on a plea of guilty. The intention is to ensure that matters are dealt with as expeditiously as possible.

This has placed pressure on both the prosecutor and defendants to negotiate and resolve matters in weeks, not months. In practice we have witnessed difficulty from both defendants and the prosecutor in meeting this timeframe set by the Industrial Court. However, in circumstances where there is an adequate explanation as to delay, the Industrial Court has been amenable to providing the parties with more time to come to a negotiated outcome, leaving the discount intact.

The procedural expectations are designed to expedite cases, reduce uncertainty and promote discipline. However, they also intensify the speed at which both sides must be ready to commit to positions on plea and evidence, again raising the risk in defendants preserving plea discounts.

Implications

The transition to the Industrial Court has not revolutionised sentencing outcomes as WHS offences remain substantial, deterrence-driven and anchored in established authority. But the procedural environment has changed markedly. Defence practitioners now face:

• greater urgency in analysing the brief and advising on the charge(s);
• increased importance of engaging with the Regulator early to refine or challenge particulars; and
• the need to adapt to prescriptive timetabling, especially for defended hearings where expert evidence and agreed facts must be organised well in advance.

For prosecutors, the compressed timeframes create equal pressure to finalise facts and respond to representations swiftly. It is also likely they face additional pressure due to President Taylor’s comments in Leichhardt.

Our WHS team will continue to provide updates on trends as decisions are published.

The views expressed in this article are general in nature only and do not constitute legal advice. Please contact us if you require specific advice tailored to the needs of your organisation’s circumstances.

August 19, 2025

In considering the scope of redeployment obligations that must be met to engage the “genuine redundancy” defence to an unfair dismissal claim, the High Court has unanimously held that it may be reasonable and necessary for an employer to consider whether the employee could perform a contractor’s work.

In reaching this conclusion in Helensburgh Coal Pty Ltd v Bartley,[1]the majority expressed a clear view that employers should not simply take a static view of their organisation to see whether there are any currently vacant and suitable roles, as this would be an impermissibly narrow approach. This reasoning may have implications stretching beyond circumstances involving the use of contractors.

Background

In 2020, Helensburgh Coal Pty Ltd (Helensburgh Coal) faced a downturn due to COVID-19. To adapt, it scaled back its mining operations meaning that fewer workers were needed. During redundancy consultations, employees asked Helensburgh Coal to reduce its reliance on contractors from Nexus Mining Pty Ltd (Nexus Mining) and Mentser Pty Ltd (Mentser) in order to preserve direct hire employees. Helensburgh Coal went ahead with the restructure and cut its direct workforce by 90 employees, but continued to engage 90 Nexus and 8 Mentser contractors at the mine.

Twenty-two of the dismissed employees brought unfair dismissal applications in the Fair Work Commission (FWC). Helensburgh Coal objected to each of the applications, stating that all the dismissals were a result of genuine redundancy and therefore not capable of being regarded as unfair dismissals.

The matter involved a long procedural history in the FWC, including an initial decision, an appeal, a fresh decision on remittal and then a further FWC appeal. The conclusion of these proceedings was a finding that Helensburgh Coal could have redeployed the employees into roles being performed by contractors. An application for judicial review brought by Helensburgh Coal was dismissed by the Full Federal Court, leading to a final appeal to the High Court.

The legal questions

There were essentially two questions before the High Court:

1. Whether s389(2) of the Fair Work Act 2009 (Cth), which states that a person’s dismissal is not a case of genuine redundancy if it would have been “reasonable in all the circumstances” for the employee to be redeployed, allows the FWC to consider if an employer could change how it uses its workforce – for example, by insourcing work from contractors to direct hire employees (Primary Question); and
2. Whether the Full Bench of the FWC applied the incorrect standard of appellate review when considering the decision of Commissioner Riordan, the first instance decision-maker (Secondary Question). Helensburgh Coal alleged that the question of whether redeployment was reasonable has a right and wrong answer, such that no latitude or discretion is afforded to the FWC when determining these matters.

The High Court’s decision

In relation to the Primary Question, the majority (Gageler CJ, Gordon J and Beech-Jones J) analysed the requirements of a “genuine redundancy”.

Importantly, they held that two threshold requirements, being whether the employer no longer requires the employee’s job to be performed by anyone and whether this is because of changes in the operational requirements of the employer’s enterprise, are matters for the employer alone and are not attended by any reasonableness standard. That is, it is for an employer to make decisions about what jobs it requires to be performed and what changes might be required in its enterprise.

This will give a significant degree of clarity and comfort to employers embarking on organisational restructures.

The redeployment obligations are however more complex. The majority held that while employers are not required to alter the fundamental nature of their enterprise to create redeployment opportunities, the FWC otherwise has an “unmistakably” broad remit to consider what other changes might have been made.

In particular, the concept of redeployment “does not require there to be a vacant position” and might involve “some change to how an employer uses its workforce to operate its enterprise that facilitates redeployment.”

The phrase “all the circumstances” in s389(2) was interpreted broadly, allowing the FWC to weigh factors such as future business plans, risk appetite, workforce composition and operational decisions when assessing whether redeployment was a viable alternative to termination, bearing in mind that the inquiry necessitates consideration of a hypothetical scenario of “what would have been”.

Where the issue involves an assessment of whether a contractor should be displaced to allow for redeployment, consideration of the contractor’s contractual terms, degree of permanency and whether their work is specialist in nature, will all be relevant. However, as can be seen from the analysis set out above, the implications of this case are not limited to blended workforces of employees and contractors.

In relation to the Secondary Question, the High Court held that even if the standard of review applied by the FWC Full Bench was wrong (that is, if it should have simply determined whether redeployment was or was not reasonable, rather than allowing latitude to the Commissioner), this was not an issue amenable to judicial review. As such, the majority provided no guidance on the appropriate review standard.

The High Court has in effect left it to the FWC to determine the correct standard of appellate review, which means the long-standing application of the discretionary standard of review to matters of this type will not be disturbed.

Key takeaways

This decision carries significant practical implications for employers who are undertaking organisational restructures. It confirms that the FWC can look beyond the surface of a redundancy and assess whether, in all the circumstances, it would have been reasonable to retain employees by reducing contractor engagement, or taking other steps which may have included rearranging the workforce.

Certainly, the time-honoured approach of providing displaced employees with a list of vacant roles now carries a much greater risk of being regarded as insufficient.

The High Court has now set a clear expectation that employers approach redeployment with a more creative and critical mindset. While sweeping structural changes are not generally required, businesses must be prepared to consider reasonable alternatives, possibly even if they involve some level of disruption or operational adjustment.

This nuanced approach required for redeployment is likely to prompt further litigation in the FWC, particularly around what constitutes a reasonable inquiry into insourcing where contractors are used.

The decision leaves open the complex question of where the line should be drawn between preserving employee roles and maintaining contractor arrangements. Grey areas include:

• labour hire arrangements where contractors are embedded in the business long-term and perform similar duties to employees;
• outsourced roles that are functionally interchangeable with internal positions, such as administrative support or maintenance; and
• future operational plans or other upcoming changes, such as when a contractor’s engagement is due to end shortly after redundancies are made, raising the question of whether employees could have been retained to fill that gap.

These scenarios illustrate the nuanced balancing act employers must now perform.

[1] [2025] HCA 29.

If your business needs assistance with navigating the redundancy process, please reach out to the team at Kingston Reid.

The Australian Human Rights Commission (AHRC) is increasing its attention on employers’ efforts to prevent workplace sexual harassment, sex discrimination and victimisation. Focusing on high-risk industries like retail and hospitality, the AHRC is shifting from reactive complaints to a more proactive, systemic prevention strategy.

The AHRC’s continued emphasis reflects a broader cultural shift in Australian workplace norms. Employers across all sectors should take proactive steps to review their practices, engage with available resources and ensure they are not only meeting but exceeding their obligations under the Sex Discrimination Act 1984 (Cth) (the Act).

Understanding positive duty obligations

Introduced in 2022, s47C of the Act imposes a positive duty on employers and persons conducting a business or undertaking to take reasonable and proportionate measures to eliminate, as far as possible, sex discrimination, sexual harassment, sex-based harassment, hostile workplace environments on the grounds of sex and related acts of victimisation. This duty applies to all employers and extends to conduct by their employees, workers, agents, and, in some cases, third parties such as customers and clients.

The AHRC makes it clear that “reasonable and proportionate” steps will vary depending on the size, resources and risk profile of each business. Nonetheless, all businesses are expected to address seven core standards: leadership, culture, knowledge, risk management, support, reporting and response and monitoring and transparency. Unlike previous frameworks which largely relied on individual complaints, the positive duty compels employers to act proactively. Prevention is now the legal standard, not merely a best practice.

The AHRC’s compliance and enforcement strategies

Since December 2023, the AHRC has had the power to monitor and enforce compliance with the positive duty. In the 2024-25 financial year, the AHRC commenced formal inquiries into businesses in the Retail Trade, Accommodation & Food Services, Finance and Transport, Postal & Warehousing sectors, collectively covering approximately 7,500 workers. These inquiries were triggered by evidence of serious unlawful conduct, sourced from workers, regulators and media reports.

In June 2025, the AHRC released its Speaking from Experience report, drawing on the lived experiences of over 300 victim-survivors from diverse backgrounds. The findings expose persistent barriers to safety and justice, particularly for marginalised groups, and underscore the need for systemic reform.

The report sets out 11 recommendations which emphasise the need for cultural change, leadership commitment and transparent reporting, alongside calls for legislative reform to strengthen employer accountability. Notably, it recommends the introduction of civil penalties for breaches of the positive duty, enhanced information sharing between regulators, and restrictions on the use of non-disclosure agreements in workplace sexual harassment cases.

The Australian Law Reform Commission (ALRC) also recommended civil penalties for breach of the positive duty in its January 2025 Safe, Informed, Supported: Reforming Justice Responses to Sexual Violence report.

For 2025-26, the AHRC will continue to prioritise proactive compliance and enforcement in the Retail Trade and Accommodation & Food Services industries, which are identified as high-risk due to their large workforces and elevated exposure to sexual harassment.

The AHRC’s proactive compliance and enforcement strategies are scheduled to launch in September 2025. In the interim, as of July 2025, the AHRC has released several new resources and tools, including updated online learning modules and educational animations, tailored for broad dissemination across industry, government and community sectors. Further, they are working toward:

• creating a compliance survey for medium and large retailers, assessing adherence to the seven positive duty standards, with plans to extend this approach to the Accommodation & Food Services sector;
• creating an education package for senior leaders of large retail businesses, focusing on practical tools to facilitate compliance and address concerns about their responsibilities; and
• hosting the second National Regulator Roundtable in September 2025, which will bring together federal, state and territory regulators to coordinate efforts and measure regulatory effectiveness.

Legal and practical implications for businesses

Civil penalties for breaches of positive duty are now being considered as both the AHRC and ALRC recommend this reform. NSW has already amended its legislation for public sector employees. If implemented, employers risk significant financial and reputational consequences for non-compliance, alongside current enforcement measures like compliance notices and enforceable undertakings. To satisfy positive duty obligations, businesses must:

• Conduct risk assessments: identify and address specific risk factors in their workplace, including those arising from third-party interactions;
• Review and update policies: ensure policies on respectful behaviour, unlawful conduct, and reporting are current, accessible and consistently enforced;
• Implement training and awareness programs: provide regular, tailored education for all staff, including leaders and managers, with a focus on intersectionality and trauma-informed approaches;
• Establish robust reporting and support systems: offer multiple, accessible avenues for reporting, ensure timely and person-centred responses and provide appropriate support to those affected; and
• Monitor, evaluate and report: collect and analyse data on workplace culture, incidents and outcomes, and use this information to drive continuous improvement.

Broader significance and potential impact

The AHRC’s initiatives represent its ongoing commitment towards fostering safer, more respectful and inclusive workplaces across Australia. With positive duty compliance now established as the legal minimum, organisations are expected to demonstrate leadership, invest in cultural change and take meaningful, sustained action to prevent harm. This shift towards proactive, preventative regulation is intended to improve workplace safety, promote greater inclusion and reduce the prevalence of sexual harassment and discrimination. However, businesses must be prepared for increased scrutiny, higher compliance expectations and the possibility of civil penalties for serious or repeated breaches.

The views expressed in this article are general in nature only and do not constitute legal advice. Please contact us if you require specific advice tailored to the needs of your organisation’s circumstances.