7 Red Flags in Your Employment Contract That Are Actually Illegal (2026)

Since 7 June 2023, pay secrecy clauses in employment contracts are prohibited under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022. You've the legal right to discuss your pay with anyone — colleagues, friends, family, or your union. If your contract contains a clause that prohibits you from disclosing your salary, that clause is void and unenforceable.

Employers who include pay secrecy terms in new contracts or take adverse action against employees for discussing pay face penalties. This reform was introduced to help close the gender pay gap and improve pay transparency.

If your contract calls you an independent contractor but you work like an employee — set hours, employer's tools, cannot subcontract, told how to do the work, work exclusively for one business — you may be a victim of sham contracting. This is illegal under section 357 of the Fair Work Act and carries penalties up to $93,900 per breach for the employer. Sham contracting denies you minimum wage protections, superannuation, leave entitlements, workers compensation, and unfair dismissal rights.

If you suspect sham contracting, contact the Fair Work Ombudsman.

Your employment contract can't provide less than the National Employment Standards or your applicable Modern Award. Any clause that attempts to do so is void. Common examples include: paying below the award rate, providing less than 4 weeks annual leave, requiring you to forfeit accrued leave, or setting notice periods shorter than NES minimums.

The contract can provide better conditions than the award or NES, but never worse. If your contract tries to override these minimums, the NES/award provisions apply regardless.

Non-compete clauses are only enforceable in Australia if they are reasonable in scope (the activities restrained), geography (the area covered), and duration (how long the restraint lasts). Courts frequently strike down restraints that are too broad — for example, restraining you from working in your entire industry, nationwide, for 2+ years. A reasonable restraint might cover a specific competing business, within a limited geographic area, for 3-6 months.

If you are asked to sign an unreasonable non-compete, you can negotiate or seek legal advice. Even if you sign it, an Australian court may refuse to enforce it.

Since 26 August 2024, eligible employees have the right to disconnect under the Fair Work Act. This means you can refuse to monitor, read, or respond to employer contact outside your working hours unless the refusal is unreasonable. Contracts that require 24/7 availability or on-call without compensation may breach this right.

Whether a refusal is unreasonable depends on the reason for contact, how disruptive it is, whether you're compensated for being available, and your role and level of responsibility.

The NES sets minimum notice periods based on length of service: 1 week (under 1 year), 2 weeks (1-3 years), 3 weeks (3-5 years), and 4 weeks (5+ years), plus an extra week if the employee is over 45 with 2+ years of service. Your contract must meet or exceed these minimums. A contract with no notice clause, or one that specifies less than the NES minimum, isn't compliant.

The NES minimums will apply regardless of what the contract says.

Some contracts include use-it-or-lose-it clauses for annual leave. Under the NES, annual leave accumulates year to year and cannot be forfeited. While an employer can direct an employee with an excessive balance (8+ weeks) to take leave, they can't simply cancel or forfeit accrued leave.

On termination, all accrued leave must be paid out. Any clause that says you lose unused leave at the end of the year is void.