Employment law wrap-up 2025: key trends, decisions and what employers need to know

2025 was a significant year in employment and industrial relations law. A surge in claims, employee-favourable decisions and wide ranging legislative reform reshaped the employment risk landscape for employers across Australia.

Now that we are in 2026, employers should reflect on the developments of the past year and ensure they are prepared for what lies ahead.

This update highlights the key trends, significant court and tribunal decisions, and legislative changes that emerged in 2025 and continue to affect employers in 2026.

Key employment law trends from 2025:

Sharp increase in Fair Work claims

Throughout 2025, both the Fair Work Commission and the Federal Court of Australia experienced a substantial rise in employment-related claims.

Since 2020/2021, applications in the Commission increased by almost 50%, exceeding 44,000 claims annually. Employment matters before the Federal Court almost doubled during 2025, reaching more than 1,000 cases.

Of particular concern was the increase in general protections claims, which rose by 128% from 81 in 2022/2023 to 185 in 2024/2025.

The President of the Fair Work Commission, Justice Adam Hatcher, described the increase as “unsustainable”, noting that the Commission was being pushed beyond its operational capacity. In response, procedural reforms were flagged, including tighter requirements for employees to properly particularise claims.

For employers, this trend highlighted the growing importance of defensible decision-making, early risk assessment and strong internal processes.

Employee-favourable unfair dismissal outcomes

Throughout 2025, the Commission continued to adopt a strong protective approach in unfair dismissal matters.

In one widely reported decision, two Uber drivers dismissed following allegations of sexual misconduct were reinstated with full back pay. While allegations were raised by passengers, including one police report, the absence of direct evidence ultimately led the Commission to conclude that there was no valid reason for dismissal.

The decision reinforced the Commission’s emphasis on procedural fairness and the need for reliable evidence, even where serious allegations are involved. Employers should remain cautious when acting on allegations and ensure investigations are thorough and properly documented.

Significant court and tribunal decisions in 2025:

Coles and Woolworths underpayment litigation

In 2025, Coles and Woolworths continued to face major consequences arising from failures to comply with record-keeping obligations under the Fair Work Regulations 2009 (Cth).

The use of annualised salary arrangements and set-off clauses resulted in the underpayment of nearly 300,000 salaried managers, with remediation costs exceeding $1 billion.

This served as a clear reminder that annualised salary provisions do not remove the need for accurate time recording and award compliance.

You can read more about this decision here.

Westpac WFH decision

In Karlene Chandler v Westpac Banking Corporation, the Fair Work Commission granted a Westpac employee the ability to work from home full time, after Westpac’s initial refusal of this request, that stated she must work in a corporate office at least 2 days per week.

Westpac’s significant procedural flaws throughout the initial request process and failure to argue the business grounds in which the employee must attend the corporate office, ultimately lead to the employee receiving her wish of full-time work from home arrangements.

The outcome turned largely on procedural shortcomings and the employer’s failure to properly articulate and evidence the business grounds for refusal. The decision highlighted the importance of handling flexible work requests carefully and in accordance with statutory requirements.

Genuine redundancy clarified by the High Court

The High Court’s decision in Helensburgh Coal Pty Ltd v Bartley confirmed that when determining whether a redundancy is genuine, the Fair Work Commission may consider whether it would have been reasonable for an employer to redeploy an employee by changing how its workforce is structured, including replacing contractors with employees.

The decision expanded the scope of what may constitute reasonable redeployment and increased scrutiny on redundancy decisions.

You can read more on this here.

Record damages for workplace sexual harassment

The Federal Court’s decision in Magar v Khan awarded a record $305,000 in damages for workplace sexual harassment, highlighting the seriousness of employer responsibility and confirming the broad reach of sex-based harassment protections under the Sex Discrimination Act 1984 (Cth). For employers, it highlighted the need for robust policies, training and complaint-handling mechanisms.

You can read more on this here.

Legislative changes flowing into 2026:

Right to Disconnect now applies to small businesses

From 26 August 2025, the right to disconnect was extended to small businesses, following its earlier introduction for larger employers.

Employees may now reasonably refuse to monitor, read or respond to work-related communications outside working hours. As we move through 2026, employers should ensure expectations around after-hours contact are clearly managed.

Victorian restrictions on NDAs

In 2025, Victoria introduced the Restricting Non-Disclosure Agreements (Sexual Harassment at Work) Bill 2025, aimed at preventing victims of workplace sexual harassment from being pressured into NDAs. This bill aims to help minimise the negative impacts of workplace sexual harassment on those who have experienced it and allows them to decide if they wish to enter a non-disclose agreement or not.

The reform limits employers’ ability to mandate confidentiality and shifts greater control to affected employees.

Proposed ban on restraint of trade clauses

The Federal Government also proposed a ban on restraint of trade clauses for employees earning below the high-income threshold.

If implemented, this reform would significantly limit the enforceability of non-compete clauses and require employers to reassess how they protect confidential information and client relationships.

What does this mean for employers In 2026?

The developments that emerged throughout 2025, and continue to shape 2026, highlight the importance of proactive employment law compliance and early risk management. With Fair Work claims increasing, employee protections expanding and further reform on the horizon, employers should ensure their contracts, policies and decision-making processes remain fit for purpose.

If you require expert advice on remaining compliant and minimising risk to your business, contact Elizabeth McLean or our Employment Law & Industrial Relations team.