4 Sep 2025All areas of the law evolve under the stimulus of societal change, and few areas evolve more quickly than that of employment law.
The pace of change in the field of employment law can make it hard to keep up with what’s happening, and this is made harder by the complex tapestry of legal sources from which the “rules” are drawn. So the first step is understanding the sources of what we call “employment law”; and this requires winding the clock back some way into the past.
Industrial revolution creates need for large, well-organised workforce
Societal arrangements in which the many carry out work for the benefit of the privileged few predate humanity. In the beehive there are drones, workers, and the queen. Images of the earliest human societies include, for example, depictions of slaves toiling with huge blocks of stone to build the pyramids.
However, systems we would now recognise as variants of current arrangements arguably date from the industrial revolution, when the scale of production and manufacture demanded much greater and better organised workforces.
Until that time, the English common law, gradually adaptable to changing societal demands as it was, had been adequate to deal with work in a largely agrarian society with limited mechanisation.
In this respect the notion of a contract was the essential soil in which British prosperity was rooted.
What is a contract?
One of these developments was the contract. Contracts aren’t complex. They have two fundamental elements: agreement and consideration. Some other features are either useful or indeed necessary for enforceability, but the basics are simple.
“Agreement” scarcely needs explanation, other than to say that, to be enforceable, it must be quite clear what exactly the parties had agreed on, and what each party had to do to fulfil their obligations.
“Consideration” is not quite as obvious: in some ways “value” is a slightly better explanation, but “consideration” is the settled term. Essentially it means that each party must stand to gain something material in return for fulfilling the obligations imposed by the terms of the contract.
Bluntly, there must be a bargain, and not just a promise, where the consequences of breach are no more than dishonour.
In one way contracts of employment are simply variants of contracts which apply to all sorts of human endeavour, but the analogy goes only so far.
What is a contract of employment?
Contracts enforceable by courts can be made to regulate pretty much everything two parties can agree to, with a few narrow exceptions, such as the carrying out of unlawful activities. So enforceable contracts of employment can be made under which one party employs the other to do work.
One party, the employee, provides value by doing the work; the other, the employer, provides value by paying the employee a wage or salary. There is, however, one very important thing which differentiates employment contracts from all other kinds of contract; and that concerns breaches of contract.
If one party to a contract is “in breach” of its obligations under that contract, the courts will provide a remedy. In almost all cases, that remedy is an order that the party in default pay the other party monetary damages, as assessed to be adequate to compensate the other party for the loss suffered.
Courts will not grant orders for “specific performance” of employment contracts
In a tiny minority of cases, a court will make an order for “specific performance”. This means that, rather than ordering the defaulting party to pay the other party money to compensate for the damage suffered, the court would order the defaulting party to actually do what it should have done.
But by the end of the nineteenth century, it was settled that the courts would not, in any circumstances at all, grant orders for specific performance of employment contracts, because it would be impossible for the courts to “supervise” what was, by definition, an unworkable relationship between employer and employee.
What the employee wanted was not damages, but an ongoing job. And from this dilemma, more than a hundred and fifty years ago, was born the system of laws and tribunals which today regulate employment; to say nothing of the controversies around things such as weekend work, and working from home.
Establishment of tribunals to adjudicate in employment disputes
The effective departure from the employment arena by what might be thought of as the ordinary courts – those which had developed over hundreds of years, in tandem with the common law – meant that the gap had to be filled by legislation.
First, although the ordinary courts had to a considerable extent withdrawn from the employment arena, tribunals created by acts of parliament were established to adjudicate in disputes between employees and employers about the terms and conditions of work. That this was essential was owing, in part, to the recognition by the law of organised labour – trade unions.
The establishment in Australia, shortly after Federation, of a system judicial in nature but legislative in origin, was at the time widely regarded as a great innovation, providing ordinary workers with protection from unfair employers.
However, by the time most of the century had passed, it was argued that having decisions about businesses and their employees by third-party umpires with no stake in the outcome was a bad thing, leading to the current landscape including enterprise agreements. But that’s the plot for another episode.
Basic wage, Modern Awards and the Fair Work Act
In 1907, Justice Higgins in the Commonwealth Court of Conciliation and Arbitration, in what is commonly called the “Sunshine Harvester Case” made a binding decision that a wage of seven shillings a day was “fair and reasonable” wage for a (male) unskilled labourer to provide the basic necessities of life for a wife and three children. This became the “basic wage”, to which might be added “margins” – additional payments to workers who brought some specific skill which was useful in the employer’s business.
The history of the evolution of the basic wage and margins into the present system which regulates most employment in Australia is beyond the scope of this present item, but the enactment of the Fair Work Act in 2009 brought with it over 120 “Modern Awards” specifying, in great detail, the terms and conditions of work in pretty much every industry imaginable, and applying to the great majority of workers.
The Modern Awards apply unless there is an enterprise agreement in place in some specific business or workplace. Enterprise agreements apply only when registered, after being approved by the Fair Work Commission; and the Commission will not approve an agreement unless the workers covered by it are “better off overall” than if employed under the applicable Modern Award.
Employment contracts still apply, but an individual contract must still pass the “better off overall” test in order to survive scrutiny by the Commission, or courts with the appropriate jurisdiction.
The qualification above, that this system applies in respect of the “great majority” of employees, is because people employed in state and local government instrumentalities are beyond the reach of the Fair Work system, and instead have their employment regulated by state industrial relations tribunals (except in Victoria, which some years ago ceded most of these powers to the Commonwealth).
Employment tribunals still overseen by ordinary courts
While in the employment law arena in Australia there have been judicial and quasi-judicial bodies with the word “court” in their names, none has been a court in the sense of the forums that evolved over centuries from the English common law.
All have been creatures of statute; perhaps more accurately called “tribunals”; and have such powers and functions as are conferred on them by the Act of Parliament which establishes each of them. No more, and no less.
However these bodies are, in a real sense, still “overseen” by the ordinary courts. Very recently important decisions have been made by these courts about the dismissal of Qantas ground staff. And about three years ago the High Court made a couple of decisions departing from decades of precedents about the test for determining whether a worker is an employee or an independent contractor.
Work health and safety, trade unions and compensation for injured workers
A picture of the legal framework surrounding employment would not be complete without mention of work health and safety. The emergence of trade unions arguably owes more to this than to rates of pay. In the nineteenth century, contracts reigned supreme: if a worker agreed to work in a terribly dangerous coal mine for a few pence a day, and the agreement was not the product of some kind of coercion, it was all fine.
In America, the constitutionally embedded words “the right to… the pursuit of happiness”, being translated as the right to make a buck, led to the striking down of work health and safety laws until well into the twentieth century. Lots of these decisions concerned hours of work.
However Australia has been in many respects a leader in work health and safety regulation, both in terms of workplace safety, and compensation for injured workers.
The workers compensation scheme introduced in the mid-1920s was one of the first such schemes world-wide. Although these aspects are regulated by the states rather than the Commonwealth, programs of “harmonisation” have meant that these provisions are fairly much uniform across the nation.
The long journey to enterprise bargaining and the resurgence of individual contracts of employment
At the dawn of the twentieth century, Australia’s innovation of a legalistic system to conciliate and arbitrate disputes between workers and their unions, and employers, was internationally applauded as a good thing. The same was true of the innovation of workers compensation.
However, by the final twenty years of the century the ground had shifted. It was realised that a wage fixation system requiring that an electrician maintaining equipment in a small shearing shed be paid the same wage as an electrician in a major manufacturing plant; and that prevented the making of small pay sacrifices in the interest of retaining jobs, didn’t quite make sense.
This set the scene for enterprise bargaining, and the resurgence of individual contracts of employment. A long journey, and one that is doubtless not over yet.
Further reading on employment law
NSW rail transport strikes and the poker game of industrial relations
“Twenty pegs wouldn’t have done it”: questions posed by the Tasmanian jumping castle accident
New laws preventing and addressing sexual harassment in Australian workplaces
Independent contractor or employee? Why it’s a bit of a legal circus
Changes to labour hire laws for “same work same pay”
Negligent bosses in NSW to face 20 years in jail for industrial manslaughter
Tougher penalties for employers to protect foreign workers
Sacking an employee who criticises your client is not unfair dismissal, says Federal Court
Workplace surveillance and employee monitoring on the rise
Can the boss force you to return to the office?
Address workplace risks from technology and social media with a code of conduct for employees
