The two ‘Fair Works’ are comparing notes! What a closer FWC and FWO relationship means for employers.

Back in 2024, we made a submission to the Fair Work Commission (FWC) as part of the Modern Awards Review 2023-2024: Making awards easier to use (AM2023/21).

At the time, we were deep in the trenches with our SCHADS clients and wanted to contribute to the discussion about making Australia’s most complex awards easier to understand. Because we were at the frontline of both enterprise agreement (EA) negotiations and Fair Work Ombudsman (FWO) investigations, we had front row seats in managing the daily conflicts between employers and their employees, because each arm held a conflicting view on clause interpretation.

One of the issues we raised was the inconsistency between the FWC's interpretation of its own legislation and the FWO's interpretation of the same when it came to enforcement activities. It is never fun to have to wait weeks for the FWO to get legal advice on its own award interpretation and then have to explain to an employer why the answer is no practical answer at all.

For example, when undertaking the better off overall test (BOOT) assessment for a SCHADS EA, the FWC would require undertakings if an EA did not provide the double time penalty for SCHADS employees who were required to work their next shift without having the mandatory 10/8-hour (with an IFA) rest break between shifts.

When investigating an underpayment case, the FWO (and multiple legal opinions) determined there was no overtime entitlement payable to the employee who may have only had a 6- or 7-hour rest break between shifts.

For the latter, the FWO interpretation was that the failure to provide employees with the 10/8-hour rest break was a “technical breach”, meaning the employee was not entitled to overtime because the award was silent on the penalty, but the employer could still be fined for breaching the award.

Across our client base this produced different treatments of the same clause. Some organisations paid the double time penalty, some did not, and employees moving between employers in a high-turnover sector noticed and were certain the latter was a breach of their minimum entitlements.

What was frustrating was that the issue could not be raised by FWO to FWC for advice on the interpretation and would only be determined if the matter went to the FWC for arbitration and a decision.

No SACS/NFP organisation we know has the time or financial capital to spend the hundreds of thousands of dollars in time and legal fees to get a determination on award interpretation that has sector-wide ramifications. Having one mechanism available (case law) as the means of clarifying such a basic questions, where employers have to foot the bill to get an answer was just one example of why the left and right hands of Australia’s industrial relations system can be so complex and frustrating.

So, on 21 July 2026, when the President of the FWC announced exactly that fix, I was both delighted and relieved.

Some employers are still surprised to learn that "Fair Work" is not one organisation. In short, the FWC makes the rules and writes the rule book (acts and awards). The FWO is the regulator that answers your questions about an award’s interpretation, minimum entitlements, and enforces compliance.

That split spans quite a gap. Through its advice lines and investigations, the FWO hears every day from employers and employees wrestling with award clauses that are unclear, contradictory or simply wrong.

But the FWO does not have the authority to fix an award! As strange as it sounds, until now, there has been no standing channel for the regulator’s front-line experience to reach the body that wields the pen.

What was announced

The 21 July 2026 statement announcing that the two agencies have established a new process for the FWO to refer apparent ambiguities, uncertainties and errors it identifies in modern awards to the FWC should have attracted much more attention than it has.

In my view, the announcement deserves a street parade and a national public holiday! Yet, in the three weeks since the announcement landed, there doesn't seem to be a flurry of commentary in the socials as to why this is a BIG DEAL!

Why this matters for employers

A procedural announcement about inter-agency referrals sounds dry. Its practical effects are not, because awards should get clearer over time. The clauses most likely to be referred are the ones that generate the most confusion in their practical application. The ambiguous classification descriptor, the allowance that seems to contradict the rostering clause, the penalty rate that reduces the rate of pay instead of increasing it, the pay rate that is clearly a typo, the transitional provision that no longer makes sense.

The desired end state is the actual minimum entitlement spelled out clearly. But these are precisely the clauses that drive underpayment disputes and creates conflict within the employment relationship.

The technical stuff

The key features are worth noting. The process is governed by a set of agreed Guiding Principles. It starts in the September quarter 2026 and is intended to run as an annual cycle, not as a one-off. The FWC has confirmed it will continue to exercise its award-related functions independently, and that referrals will be considered through an open and transparent process. Both agencies have framed the arrangement as part of an ongoing commitment to collaborate in delivering their functions under the Fair Work Act 2009.

For HR Practitioners

We should expect an additional annual round of targeted award changes to put into our calendars. Because the process is designed to run yearly, employers should anticipate a regular cycle of variations arising from FWO referrals, alongside the annual wage review. If an award that applies to your workforce is varied, your pay rates, classification mappings, and rostering practices may need to move with it.

For consultants and advisors like us

The ambiguity is still our greatest risk today, as we are attempting to support our clients in managing the impacts of unclear clauses. A FWO referral to FWC that takes place once per year is a process that fixes tomorrow’s award, not today’s payroll. The interpretation risk stays until the clauses are clarified by a FWC decision.

All we can do is document the reasoning behind the position we take and advice we give, and...wait...

In this era of wage theft and criminal penalties, we recommend going with the higher entitlement interpretation, and treating the minimum entitlements, like in our rest break between shifts example as the WHS issue it is, and using the unpalatable costs of the penalty payments as the financial deterrent to risky rostering.

If you sit at the front line of these issues, we strongly encourage you to write to the FWC and the FWO (and encourage your employer clients to do the same) so the problems are top of mind come referral season, rather than seeing them left in a call centre file note.

Advice for employers: Three practical steps

1.      Confirm which modern awards actually cover your employees. Award coverage is decided by the work performed, not by what a contract says, and misidentifying the award is still the most expensive mistake in Australian payroll.

2.      Subscribe to FWC and FWO updates for the awards that apply to you, so variations arising from this new referral cycle do not take you by surprise.

3.      When a variation lands, check it against your classification structures, pay rates, allowances, and rostering arrangements, and provide training and education to your managers and team leaders before the operative date, not after.

Organisations that fare best will be the ones that treat award compliance as a living and breathing practice rather than a set-and-forget exercise. Over time, we hope this will result in fewer grey areas, with more frequent, targeted changes to the awards you rely on.

If you would like help working out what an award clause means for your workplace, or what an award variation may change your employee’s minimum entitlements, feel free to get in touch to learn more about how we can help.

www.resourcesforhumans.com.au