Employment Law Update: Right to Disconnect, Wage Theft and More

As we move through 2025, significant legal reforms in Australia and New Zealand are reshaping how businesses approach workforce management. Designed to strengthen worker protections, boost employer accountability, and build healthier, more sustainable workplaces, these changes represent one of the most comprehensive overhauls of employment legislation in recent years.

From enhanced protections against sexual harassment to the criminalisation of wage theft, the message from legislators is clear: workplace culture matters, and compliance is no longer just a legal obligation—it’s a strategic imperative. Perhaps most notably, the growing conversation around the "right to disconnect" reflects broader shifts in how we view work-life balance and employee wellbeing.

While the changes may feel complex or even daunting, they present an important opportunity for business leaders to futureproof their practices and create work environments built on trust, fairness, and transparency.

“It’s not just about compliance—it’s about how we design our cultures to genuinely support wellbeing and prevent burnout.”

On a recent Market Update, Acting Branch Manager at people2people, Mary Savova, shared her insights on the most impactful employment law changes across Australia and New Zealand—and what they mean for business leaders.

One of the most talked-about shifts is the introduction of the "right to disconnect." In Australia, this entitlement has been enshrined in law; in New Zealand, while not legislated yet, there is growing expectation that employers respect staff boundaries outside of contracted hours.

“People want clear boundaries and respect for their personal time,” says Mary. The law now grants employees the right to ignore work-related communications outside their agreed working hours unless otherwise contractually required. This is particularly relevant in roles that involve client management, after-hours availability, or remote work.

Mary points out that this legal change forces a broader rethink: “It’s not just about compliance—it’s about how we design our cultures to genuinely support wellbeing and prevent burnout.”

Legislators are also tightening rules around workplace conduct, particularly sexual harassment and bullying. In both Australia and New Zealand, employers now face stricter requirements to proactively prevent misconduct—meaning it's no longer acceptable to respond only after an incident has occurred.

“There needs to be clear, proactive action,” says Mary. This includes revising company policies, rolling out compulsory training for all employees, and engaging in regular internal reviews to ensure policies are being implemented—not just documented.

Oversight bodies like the Fair Work Ombudsman and the Sex Discrimination Commissioner (in Australia) are taking a more active role in monitoring compliance, which increases both legal exposure and reputational risk for businesses that fall short.

Mental health and workplace stress are also taking centre stage in 2025. Employers are now legally required to manage psychosocial risks—a term that includes bullying, unclear job roles, change fatigue, and toxic work cultures.

Mary highlights this as a particularly important evolution: “We're being asked to take a holistic view of employee wellbeing. That means job clarity, emotionally safe environments, and leadership accountability are now compliance issues—not just ‘nice to haves.’”

This change demands stronger internal frameworks, more responsive leadership, and clear reporting channels that encourage early intervention when risks arise.

Another major reform is the limitation placed on fixed-term employment contracts. In Australia, most fixed-term roles are now capped at two years, with strict criteria around renewal and termination. In New Zealand, similar conversations are ongoing, with regulators increasingly scrutinising short-term contract usage.

“Two-year limits will force businesses to be more strategic in workforce planning,” says Mary. She explains that organisations can no longer rely on rolling short-term contracts as a default, and will need to invest more seriously in long-term hiring strategies, internal development, and succession planning.

This change promotes job security for workers and encourages employers to think more critically about how roles evolve and scale within the business.

Perhaps the most dramatic shift is the introduction of criminal penalties for wage theft in Australia. Deliberate underpayment of employees can now lead to up to 10 years in prison for individuals involved and fines up to $1.5 million—or three times the underpaid amount—for businesses.

Mary underscores the severity: “Ten years in jail is a serious consequence. HR and payroll teams now need watertight systems.” She notes that many businesses will need to invest in new technology, training, and process audits to ensure complete compliance.

While New Zealand has not yet criminalised wage theft, increasing regulatory pressure and public scrutiny suggest a tougher stance is emerging there as well. These legislative changes may feel overwhelming, but with the right approach, they offer a valuable opportunity to modernise workplace practices and enhance employer reputation.

Here are five immediate actions leaders can take:

1. Update employment contracts and handbooks to reflect new entitlements, especially around disconnect policies, fixed-term contract limits, and harassment obligations.
   
   
2. Introduce a clear ‘Right to Disconnect’ policy. Formalise your expectations around after-hours communication. Set boundaries, provide manager training, and lead by example.
   
   
3. Roll out sexual harassment prevention training. Ensure every employee—from junior staff to executives—completes regular and documented training. Review policies and embed clear reporting mechanisms.
   
   
4. Shift to long-term workforce planning. Audit your current contract usage and prepare for the move away from fixed-term reliance. Build stronger internal career paths and succession strategies.
   
   
5. Audit your payroll and compliance systems. Engage external advisors or implement tech tools to review payroll accuracy, especially if your business handles complex awards or penalty rates.
   
   

These reforms aren’t just legal checkboxes—they reflect a deeper cultural transformation underway in the modern workplace. As Mary Savova puts it, “Staying compliant isn’t about avoiding penalties. It’s about building trust with employees."