March 25, 2018

Sources of employee rights - an explanation of how contracts, awards, enterprise agreements, case law and legislation all interact together and the essentials you need to know

Sources of employee rights: awards, NES, agreements, legislation and what you need to know

Updated: 8 December 2019

Did you know that employees have rights that come from contracts as well as awards, enterprise agreements and legislation ?

It’s easy to get confused if you don’t know how all the pieces work together.

But there’s no need to be confused.

In a nutshell, this is what you need to know:

An employee contract can have more but not less generous terms than those set out in an award, enterprise agreement and legislation. 

An employee contract can have more but not less generous terms than those set out in an award, enterprise agreement and legislation. 

Below is an outline of the sources of employee rights.

Employee contracts

A contract can be verbal, written or a mix of the two.

And your employee’s contracts can have more but not less generous terms for your workers than an award, enterprise agreement or legislation.

And if you have provided more generous terms in an employee contract, those terms will apply over the minimum legal requirements.

Employee contract case study 

An employer pays an employee $550 to work 3 days per week per a written employment contract. About 18 months later, the worker resigns. 

The employer writes to the worker once they have left and claims they have overpaid the worker by $20,000 because their wages in the contract exceeded the award rate.

Does the employer have the right to claim from the employee ?


Why ?

The employment contract had a higher rate than the Award and this is allowed. The employer cannot then renege and claw back the difference between the Award and the contract.


So what exactly is an Award ?

An award outlines the minimum pay rates and employee conditions for some industries in Australia.

An employer can of course pay employee's more than the award minimums. 

Currently, there are 122 Awards in Australia.

The term industry has to do with the product being produced. For example - the hair and beauty industry or the fast food industry.

Tip: You should always check the coverage section of an Award if you are unsure whether it applies to your workers (usually clause 4) and also review the job classifications section.

Always check the coverage section of an Award if you are unsure whether it applies to your owners (it's usually clause 4), also review the job classifications section.

Some examples of industry awards: 
What do Awards typically cover: 
  • consultation about major workplace changes;
  • dispute resolution processes;
  • types of employment (full-time, part-time and casual) and termination of employment;
  • redundancy;
  • classifications and wage rates; and
  • leave and public holidays.

Importantly, Awards won’t apply if an organisation has an enterprise agreement.

Also, an award cannot exclude the national employment standards.

So, what exactly is a registered agreement ?

Enterprise agreement

An enterprise agreement is an agreement made at the enterprise level and can be legally enforced. 

An enterprise agreement sets out the rights and responsibilities of employees and employers covered by the agreement.

Similar to Awards, enterprise agreements cannot exclude the national employment standards and if an award does, then it will have no effect.

The Fair Work Act deals with enterprise agreements and covers:

  • making an agreement;
  • bargaining and representation during bargaining;
  • pre-approval steps and applications for the FWC’s approval; and
  • approval by the Fair Work Commission.

And finally, legislation. 


The Fair Work Act governs the employee/employer relationship in Australia. 

And includes minimum entitlements for workers.

Here’s a sample of what’s covered:

  • national employment standards (minimum standards for employees) such as:
    • hours and flexible work arrangements
    • leave
    • public holidays
    • notice for termination and redundancy; and 
    • Fair work information statement
  • modern awards; 
  • enterprise agreements;
  • minimum wages; and
  • transfer of business. 

It's important to note that state and local employees are not covered by the Fair Work system. 

Avoid the flat rate pitfall

One pitfall to avoid is paying your workers a flat rate in lieu of overtime and penalty rates that may apply under an award.

Many large employers have been caught out, because they've paid their workers a flat rate which has meant they have been underpaid and also penalised by the Fair Work Commission.

Instead, pay your Award covered workers at or higher than the Award rate and make sure you are covering all Award entitlements as well e.g. overtime, allowances, leave loading etc.

Summary of tips

Look at any applicable awardenterprise agreement (if any) and ​Fair Work legislation to see if your workers have other entitlements when you prepare employment contracts and also when your employee’s query their entitlements. 

Employment agreement terms will apply unless an enterprise agreement, award or legislation contains more generous terms for your employee’s. 

Also, avoid paying your Award covered workers a flat rate that means they are underpaid compared to their Award entitlements.

As always, If you are in doubt, it’s always a good idea to reach out for advice.

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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