December 5, 2019

The expenses an employee should never have to cover

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The expenses an employee should never have to cover

6 December 2019

Here’s what you need to know about expenses that employee’s should never have to cover so you can make sure your contracts are fair and Fair Work compliant.

Unreasonable requirements, for the employer's benefit

In a nutshell, the Fair Work Act says employee’s should never have to pay the employer or another person for unreasonable requirements OR make a payment that is either directly or indirectly for the employer’s benefit: s. 325 Fair Work Act 2009 (Cth)

Rule logic

So what’s the logic of section 325?

Section 325 exists to protect employee’s from being forced to pay for things that should be their employer's responsibility. 

The contractor vs employee distinction is a really good guide for an unreasonable requirement for an employee to spend or pay money. 


Because it guides our expectation of what employee's should and should not be responsible for.

We've covered the distinction between employees and contractors here. But, below are the relevant considerations for what's relevant for our section 325 analysis.


Employee’s don’t bear risk but contractors do. This means, they should not have to cover certain costs. 

It's the employer that takes on the risk of hiring employees and this includes buying business insurance that covers employee and business risk generally.

So, under these circumstances, it's unreasonable for an employer to require an employee to pay an insurance excess - this is a common mistake that employer’s make. That is, to require an employee to pay for excess and worse, think that having a clause in an employee contract to this effect makes it okay.


Employees are generally provided with the tools and resources they need to complete their work for an employer and this may sometimes include training.

So can an employer charge an employee for training costs?

An employer should not be charging employees for the initial training cost.

However, there are some contracts that have a claw back clause that allows them to recover training costs.

This means,  if an employee leaves after a certain time period, they may have to pay the employer the training cost. These clauses are particularly common in the hair and beauty industry but also many other industries as well.

These claw back clauses can be legally binding if they are reasonable. For example, if you have a clause that says that an employee will have to pay back a portion of a $1,000 training course if they leave within 6 months of receiving that training. 

But it's written

A contract, modern award or enterprise agreement may have an unreasonable requirement for an employee to spend money.

So, does that make these clauses legal?

It’s incorrect for employers to think a clause in a contract, modern award or enterprise agreement asking employees to pay for unreasonable amounts e.g. damage will make such a request acceptable and legal. 

We know this because of section 326 of the Fair Work Act which makes it clear that an unreasonable request like this will have no effect. 


Are there any exceptions?

Yes. The exception is where the requirement for an employee to spend is not unreasonable.

In the case of a worker that does not act based on employer directions you could claim the cost back from the employee.

I’ll use the example of a worker using an employer’s vehicle to run an employer's errands and has an accident during working hours. 

If an employee was using the vehicle as authorised by the employer at the time of the accident, there’s no exception. The employer needs to cover the cost. 

But, if the employee took the employer’s car without permission for a joy ride, this may give the employer the right to recover the excess and associated costs from the employee under tort law for negligence. 

What to do if you have unreasonable spend clauses 

Get advice. 

Your business contracts including employee contracts should have fair and reasonable terms that can be  upheld in court if need be.

If you have any agreements with your employees that have a requirement for your employee’s to spend an unreasonable amount, you should first get advice and have the clause removed or revised as appropriate.

Fair contracts attract good candidates and are great for your brand. 

Got questions or comments? leave them below.

I wish you every success in your ventures!


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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