The March 2026 edition of the HR Breakfast Club, led by Special Counsel Ash Borg, examined the critical role of the employment contract in mitigating workplace risk. The session focused on the ‘beginning’ of the employment lifecycle and outlined that most complex legal disputes, such as those involving misconduct or termination, are often the result of structural flaws established at the commencement of the employment relationship.
The forum addressed the fact that employment contracts do not function in isolation. In the employment legal landscape, they must be meticulously aligned with a hierarchy of mandatory protections. Ash emphasised that while a contract defines the specific relationship between an employer and an employee, it cannot override the National Employment Standards (NES) or the provisions of an applicable Modern Award or Enterprise Agreement. A well-drafted contract should act as a supplementary layer that provides clarity where industrial instruments remain silent.
A primary focus of the session was the legal validity of ‘all-inclusive’ salary clauses. Ash highlighted the significant implications of the FWO v Coles / Woolworths litigation (Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092).
The Federal Court’s findings have placed a higher burden of “specificity” on employers.
To be legally effective, an offsetting clause must now do more than simply state that a salary covers all entitlements. It must precisely identify which portion of the remuneration is intended to satisfy specific award-based entitlements, such as overtime, penalty rates, or allowances, within each relevant pay period.
Without this level of detail, employers remain vulnerable to underpayment claims, regardless of how high the base salary may be.
The session provided a refresher on the 2023-2024 legislative reforms concerning fixed-term arrangements. Under current laws, most fixed-term contracts are restricted to a maximum duration of two years, including any renewals. Ash noted that if an arrangement exceeds these limits without a valid exception, the fixed-term provision becomes void. This results in the employee being considered permanent from the outset, granting them immediate access to unfair dismissal protections and statutory notice periods.
Following the High Court of Australia decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (Jamsek), Ash explained that the legal characterisation of a worker as either an independent contractor or an employee is determined primarily by the written terms of the contract, rather than the subsequent conduct of the parties. It is important to ensure that the rights and obligations set out in the contract accurately reflect the intended nature of the engagement.
Legislative amendments to the Fair Work Act 2009 (Cth) (FW Act) – primarily section 15AA – have since been made to revise the approach required by the Personnel Contracting and Jamsek decisions. Under section 15AA, the issue of whether an individual is an employee or a contractor is to be determined by looking at:
This involves an assessment of all relevant issues as to how the relationship actually operates, rather than relying upon a single factor such as the terms of the contract.
Section 15AB of the FW Act alsoprovides some flexibility for high-income earners who prefer to maintain their status as independent contractors. Persons earning above the high-income threshold (which is $183,100 for the 2025/26 financial year) can provide written notice to opt out of the section 15AA definition. Where a valid opt-out notice is in effect, the legal criteria used to determine the nature of the relationship will continue to be governed by the principles established in Personnel Contracting and Jamsek.
A common pitfall identified was the inadvertent incorporation of workplace policies into the employment contract. Ash referred to the recent High Court decision of Elisha v Vision Australia [2024] HCA 50 to illustrate how a contract that requires an employee to “comply with all policies” can turn those policies into binding contractual terms. To maintain management flexibility, contracts must explicitly state that policies are non-contractual directives that may be varied by the employer at any time.
The forum concluded with a checklist for HR practitioners to ensure contractual integrity:
If you are an HR professional and would like to attend our future HR Breakfast Club forums, please visit our monthly forum page and register to attend.
If you have any questions or queries about the information in this summary, or if you are experiencing any issues and need advice, please contact the BAL Lawyers Employment & Investigations team on 02 6274 0999.
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