The Fair Work Act Explained for US Founders
By Laura Chuck, Founder of LSQUARED
If you're a US founder who has just hired or is about to hire your first employee in Australia, someone has probably mentioned the Fair Work Act. Maybe your lawyer flagged it. Maybe it came up in a forum thread. Either way, you're now wondering what it actually means for how you run your team.
I've spent over 20 years working in People and Culture inside US tech companies operating in Australia including TikTok, Lyft, Zynga, and Amazon's Twitch. The Fair Work Act is the piece of legislation I've seen trip up US operators more than any other. Not because it's impossibly complex, but because it operates from a completely different set of assumptions about the employment relationship than US law does.
This is my plain-English explainer. Not legal advice but the context you need to ask the right questions and avoid the most common mistakes.
What Is the Fair Work Act?
The Fair Work Act 2009 is Australia's primary federal employment law. It governs the rights and obligations of most employers and employees across the country, and it is administered by two bodies:
The Fair Work Commission — Australia's national workplace relations tribunal, which handles disputes, sets minimum wages, and approves enterprise agreements
The Fair Work Ombudsman — the regulator that investigates underpayment, non-compliance, and wage theft complaints
Unlike US federal employment law, which primarily sets floors on discrimination and leaves much of the employment relationship to state law and contract, the Fair Work Act is comprehensive. It covers termination, minimum conditions, dispute resolution, collective bargaining, and more — all in one place.
Most Australian employees are covered by it. If you're hiring in Australia, it almost certainly applies to you.
The National Employment Standards: Your Non-Negotiable Floor
At the core of the Fair Work Act are the National Employment Standards (NES) — 11 minimum entitlements that apply to every national system employee. You cannot contract out of these. A clause in an employment contract that purports to give an employee less than the NES provides is simply void.
Here's what the NES covers:
1. Maximum weekly hours 38 ordinary hours per week, plus reasonable additional hours. "Reasonable" is defined in the Act and depends on factors like notice given, the nature of the role, and the employee's personal circumstances. Unlimited unpaid overtime is not a feature of Australian employment.
2. Requests for flexible working Employees who have worked for you for at least 12 months and fall into certain categories (parents of school-age children, carers, people with disability, employees over 55, and others) have the right to request flexible working arrangements. You can refuse on reasonable business grounds, but you must respond formally and in writing.
3. Parental leave Eligible employees (12 months of continuous service) are entitled to up to 12 months of unpaid parental leave, with the right to request an additional 12 months. You cannot require them to take less, and you must keep their position or an equivalent open for them. Australia also has a government-funded paid parental leave scheme that sits alongside this.
4. Annual leave Four weeks of paid annual leave per year for full-time employees, accruing progressively. Unlike US PTO, this cannot simply expire unused annual leave generally accrues as a financial liability and must be paid out on termination.
5. Personal and carer's leave Ten days of paid personal leave per year, which covers both sick leave and leave to care for an unwell family member. There is also two days of unpaid carer's leave and two days of compassionate leave per occasion available for bereavement.
6. Community service leave Unpaid leave for voluntary emergency management activities (like firefighting or SES), and leave for jury duty with pay-related obligations.
7. Long service leave After a set period of continuous employment (generally seven to ten years, varying by state), employees accrue additional paid leave. This is a significant liability for companies with long-tenured employees and is often missed in financial planning.
8. Public holidays Employees are entitled to a paid day off on public holidays. Australia has both national and state-specific public holidays the list is longer than most US founders expect.
9. Notice of termination and redundancy pay Employees are entitled to minimum notice periods based on length of service (ranging from one to five weeks), and to redundancy pay if their role is made redundant. These are separate entitlements and both may apply in a restructure.
10. Fair Work Information Statement You are required to give every new employee a copy of this document before or as soon as possible after they start. It sounds administrative, but it's a legal obligation.
11. Casual conversion Regular casual employees have the right to request conversion to permanent employment after 12 months, and employers have an obligation to offer conversion in certain circumstances.
Modern Awards: The Layer Most US Companies Miss
On top of the NES sits another layer: Modern Awards. These are industry and occupation-specific documents that set minimum pay rates and additional conditions for most Australian employees. There are more than 120 of them.
Common ones for tech companies include the Professional Employees Award (covering engineers, IT professionals, and similar roles) and awards covering administrative, sales, and support staff.
Awards can set minimum pay by classification level, overtime rates, penalty rates for evening or weekend work, allowances for specific conditions, and more. If your employment arrangements fall below what the applicable Award requires even if your employees signed a contract agreeing to those terms you are non-compliant.
Many US tech companies pay well above Award minimums, which can simplify compliance. But it needs to be structured correctly, ideally with an "all-in" salary clause that explicitly absorbs Award entitlements. Without that clause, you may face claims for Award entitlements on top of the salary you've already paid.
Unfair Dismissal: The Part That Surprises US Operators Most
Once an employee has completed their minimum employment period (six months for most businesses, 12 months for small businesses with fewer than 15 employees), they are protected from unfair dismissal.
This means that to lawfully terminate someone, you generally need:
A valid reason (related to capacity, conduct, or operational requirements)
A fair process (notification, opportunity to respond, consideration of their response)
If you dismiss someone without a valid reason or without following a fair process, they can bring an unfair dismissal claim to the Fair Work Commission within 21 days of the dismissal. Claims must be filed quickly, and they frequently are.
The Commission's primary aim is conciliation most claims are settled before a formal hearing. But even a settlement can cost you months of management time and significant legal fees. I've seen companies in a clearly defensible position settle for three to four months of salary simply because litigation was more expensive.
What this means in practice: Manage performance issues early and document them. If someone isn't working out, address it with a proper process from the start not six months later when you've run out of patience. The process protects you as much as it protects the employee.
General Protections: A Broader Safety Net
Separate from unfair dismissal, the Fair Work Act also contains general protections provisions that prohibit taking adverse action against an employee for exercising a workplace right for example, complaining about their pay, requesting flexible work, or taking personal leave.
General protections claims have a broader reach than unfair dismissal (they apply from day one, not after the minimum employment period), and the burden of proof works differently: once an employee establishes that adverse action was taken, the employer has to prove it wasn't for a prohibited reason. These claims are taken seriously by the Commission.
What You Should Do Before Your First Australian Hire
Get local employment law advice. A good Australian employment lawyer or experienced HR consultant should review your employment contracts before anyone signs anything. Contracts that work perfectly in the US may be non-compliant here.
Identify the applicable Modern Award. Know which Award covers your employees and make sure your contracts and practices meet or exceed those conditions.
Build the NES into your budgeting. Annual leave, long service leave, super, and redundancy pay are balance sheet liabilities. Factor them into your financial modeling from the start.
Set up proper HR processes. Performance management, conduct processes, and documentation practices are not bureaucratic overhead in Australia, they're legal protection. Build them before you need them.
The Bigger Picture
The Fair Work Act reflects a set of values about the employment relationship that are genuinely different from the US norm. Australian law assumes a degree of power imbalance between employers and employees and deliberately corrects for it. That's not a bad thing — it means Australian employees are generally more engaged and less anxious about their job security than their US counterparts. But it does mean you need to operate with a different mindset.
The companies I've seen thrive in Australia are the ones that leaned into that difference rather than trying to replicate their US model wholesale.
If you're building a team in Australia and want to get the employment foundations right from the start, I'd love to help.
Laura Chuck is the Founder of LSQUARED, a strategic People and Culture consultancy based in Sydney. She has led HR and People functions at TikTok, Amazon's Twitch, Lyft, Zynga, and Ancestry, across North America, Europe, and ANZ. This article is for informational purposes only and does not constitute legal advice.
