The Fair Work Act Explained for Small Business Owners

The Fair Work Act 2009 (Cth) is the foundation of employment law in Australia. It governs the relationship between most employers and employees — establishing minimum entitlements, setting the framework for awards and enterprise agreements, regulating collective bargaining, and providing the enforcement mechanism through which the Fair Work Ombudsman investigates and prosecutes non-compliance.

If you employ people in Australia, the Fair Work Act applies to you. Understanding its key provisions is not just good practice — it's a legal obligation.

Who Does the Fair Work Act Apply To?

The Fair Work Act applies to national system employers and employees — which covers most private sector employers in Australia (other than in Western Australia, where the state industrial relations system applies to non-corporate employers).

Practically speaking, if you are a company (Pty Ltd), a partnership, or a sole trader in any industry, and your employees are not employed by a Western Australian state government entity, the Fair Work Act applies to your employment relationships.

The National Employment Standards (NES)

The National Employment Standards are 11 minimum entitlements that apply to all employees covered by the national system, regardless of their award or enterprise agreement:

1. Maximum weekly hours — 38 ordinary hours per week (plus reasonable additional hours)
2. Requests for flexible working arrangements — eligible employees can request flexibility for care responsibilities, disability, or other qualifying circumstances
3. Parental leave and related entitlements — up to 12 months' unpaid parental leave (with right to request an additional 12 months)
4. Annual leave — 4 weeks per year for full-time employees (pro-rated for part-time)
5. Personal/carer's leave and compassionate leave — 10 days' personal/carer's leave per year; 2 days' compassionate leave per occasion
6. Community service leave — unpaid leave for jury service and emergency management activities
7. Long service leave — minimum entitlements (see note below)
8. Public holidays — entitlement to public holidays as observed in the relevant state/territory
9. Notice of termination and redundancy pay — minimum notice periods and redundancy pay based on length of service
10. Fair Work Information Statement — must be provided to all new employees
11. Casual Employment Information Statement — must be provided to new casual employees

Long service leave note: The Fair Work Act sets a minimum framework, but long service leave is primarily regulated by state legislation, which varies. This is one area where state law often applies independently of the Fair Work Act.

Modern Awards

Modern awards sit on top of the NES and provide additional minimum entitlements — base pay rates, penalty rates, allowances, overtime, and leave loading — for employees in specific industries and occupations.

There are approximately 120 modern awards covering different industries and occupations. The key question for any employer is: which award (if any) applies to each of my employees?

Awards are not optional. If an employee is covered by a modern award, the employer must pay at least the award minimum and observe all award conditions — regardless of what the employment contract says.

The Fair Work Commission's Award Finder at fwc.gov.au helps identify the applicable award. Getting this right is foundational — every subsequent compliance decision (pay rates, penalty rates, overtime, allowances) flows from correctly identifying the award.

Enterprise Agreements

An enterprise agreement (EA) is a negotiated agreement between an employer and their employees (or the relevant union) that replaces the applicable modern award for covered employees. EAs must pass the "better off overall test" (BOOT) — employees must be better off overall under the EA than they would be under the award.

For most small businesses (under 20 employees), operating under a modern award rather than an enterprise agreement is more common and simpler. EAs are more typically used by larger businesses or those in industries with complex industrial arrangements.

The General Protections

The Fair Work Act contains powerful general protections provisions that prohibit employers from taking adverse action against employees for exercising a workplace right — which includes:

• Complaining about wages, entitlements, or working conditions
• Making a workers compensation claim
• Taking parental leave or personal leave
• Making a workplace health and safety complaint
• Being a union member (or not being a union member)
• Running for union office

Adverse action includes dismissal, demotion, reduction in hours, harassment, and other detriments.

General protections claims are particularly common because:

• They can be made directly to the Fair Work Commission without the unfair dismissal 6-month minimum employment threshold
• The burden of proof shifts to the employer — you must prove your action was not for a prohibited reason
• There is no monetary cap on general protections orders

For small business owners, general protections are one of the most significant legal risks in employment decisions — particularly terminations. A dismissal that follows an employee raising a WHS concern or making a pay complaint can look like adverse action, even if the employer had unrelated reasons for the decision.

Unfair Dismissal

An employee who has been dismissed (or forced to resign — "constructive dismissal") and believes the dismissal was unfair, harsh, or unreasonable can apply to the Fair Work Commission for an unfair dismissal remedy.

Eligibility requirements:

• Minimum employment period: 1 year for employees of small businesses (fewer than 15 employees); 6 months for larger businesses
• Employee must be covered by an award or enterprise agreement (or earning below the high income threshold)

Small Business Fair Dismissal Code: Small businesses can rely on the Small Business Fair Dismissal Code when dismissing employees. Following the Code provides a degree of protection — but it must actually be followed, not just referenced.

Remedies: Reinstatement (the primary remedy) or compensation (capped at 26 weeks' pay or the high income threshold, whichever is lower).

Unfair dismissal claims are common and the Commission processes them quickly. The best protection is a proper process — warnings, performance management, a genuine opportunity to respond — before any dismissal.

The Right to Disconnect

From 26 August 2024, the right to disconnect became part of the Fair Work Act. Employees have the right to refuse to monitor, read, or respond to employer contact outside their working hours — unless the refusal is unreasonable.

"Unreasonable refusal" takes into account the reason for the contact, any compensation for availability, the employee's role, and the nature of the business.

For small businesses: you cannot be penalised for contacting employees out of hours. But employees can choose not to respond, and you cannot take adverse action against them for that choice (unless the refusal is unreasonable in the circumstances).

The Wage Theft Provisions (From January 2025)

As of 1 January 2025, intentionally underpaying an employee is a criminal offence under the Fair Work Act. Penalties of up to $1.565 million for individuals and $7.825 million for companies apply.

The Voluntary Small Business Wage Compliance Code provides criminal prosecution protection for small businesses that self-report and repay underpayments. Using the Code requires acting promptly once a potential underpayment is identified.

How Reguladar Helps

The Fair Work Act is complex and changes regularly. Keeping up with award updates, NES changes, new protections, and evolving enforcement priorities is a significant ongoing task for small business compliance.

Reguladar tracks your Fair Work obligations alongside tax, WHS, privacy, and licensing requirements — giving you a single dashboard showing what applies to your business and when.

Start your free compliance check at Reguladar →