Informal workplace norms often shape how organisations operate, but they can also expose employers to legal risk. Here are three scenarios where unwritten rules can lead to disputes, and how employers can respond.

Many workplaces rely on informal understandings. Whether it’s an expectation that employees stay online until 6pm, the tolerance of risqué banter in the breakroom or an informal work-from-home handshake deal with a manager, unwritten rules can define company culture.

However, recent decisions from the Fair Work Commission (FWC) and Federal Court highlight the risks that can emerge when expectations are not backed up by formal policies.

According to Aaron Goonrey, Partner at Pinsent Masons, whether or not an unwritten rule is enforceable depends on how clearly it has been communicated and embedded in the employment relationship.

“An employment contract doesn’t have to be in writing,” he says. “It could be expressed [verbally], it could be [implied] through conduct. And it could also be by way of custom or practice.”

For example, say a business has consistently closed at 3pm every Friday for years despite employment contracts specifying a 5pm finish. Over time, that early finish becomes an implied term. 

Through long-term conduct (managers locking up at 3pm) and custom (telling all new hires about this closing time), the parties have effectively varied the contract. 

As the practice is consistent and undisputed, the 3pm finish becomes a legally enforceable unwritten rule.

“However, if the employer has adopted its own rule, but it hasn’t necessarily promulgated that to the workforce, then it’s unlikely to be enforceable,” says Goonrey.

While workplace rules don’t need to be formally documented in order to hold weight, employers should tread carefully when enforcing unwritten expectations, he says.

Below, Goonrey provides insight on three cases where unwritten rules have led to legal disputes, and how employers should respond if similar scenarios arise.

1. Unwritten rules around workplace culture 

One area where unwritten rules often come under scrutiny is workplace culture.

In some workplaces, informal norms can develop around humour or crude language. But relying on workplace culture as a defence does not always hold up in legal disputes.

In February, the FWC upheld the sacking of a mining worker who made sexually explicit comments over a two-way radio. 

The worker admitted to the comments but noted he was a participant in a broader conversation, and that his physical location near a radio tower simply made his voice clearer than others on the recording.

However, the FWC described the comments as “egregious” and unacceptable in any workplace.

The employer in this case was able to demonstrate that it had a firm zero-tolerance policy on language like this, and had even provided training on radio etiquette and sexual harassment just six months prior. 

This would have carried significant weight in the eyes of the FWC, says Goonrey, since the employer was able to show it had clearly communicated the expected standard of behaviour and taken steps to reinforce it.

“Often, employers will rely upon the [argument] that ‘it was just banter’ – it’s been an acceptable course of conduct in the past, and maybe the victims have also engaged in it,” says Goonrey.

“But when you’re talking about safe and respectful workplace cultures, ultimately, the buck stops with the employer. They’re responsible for maintaining the rule of law and good order in their workplace.”

That said, problems can arise where employers tolerate certain behaviour over a long period, only to take disciplinary action suddenly when a complaint is raised.

“If you haven’t been consistent in applying the rule, whether it’s written or unwritten, the Commission may regard it as an unfair dismissal.”

If employers wish to roll back an unwritten rule, they need to be clear and consistent in the message that this behaviour will no longer be tolerated.

“Employers [should be] repeating that message time and time again, and consistently taking proportionate disciplinary responses [as needed], as opposed to making arbitrary decisions,” he says. 

“And when there’s been a breach of it, the breach needs to be pulled up then and there – it can’t be pulled up later on.”

Read AHRI’s article on when workplace banter crosses the line into bullying.

2. Unwritten rules around hybrid working

Unwritten rules often emerge around workplace flexibility. During and after the pandemic, many employees developed informal agreements with their managers about where, when and how they worked. In some cases, those arrangements were never formally documented.

This issue was explored in a recent FWC case where an employee claimed he had been unfairly dismissed after refusing to comply with the company’s return-to-office mandate. 

He argued in his application that he had effectively been granted the ability to work remotely after previous managers told him he could do so, which he said constituted an established expectation.

The FWC ultimately found in favour of the employer, concluding that the return-to-office direction was reasonable and that the employee had been given ample opportunity to comply before his employment was terminated.

In cases like this, there are a number of factors the FWC might consider in determining whether an informal working arrangement is binding, says Goonrey. These include: 

• How long the arrangement has been in place
• Whether the arrangement has been applied consistently
• Whether the employee has made decisions relying on the arrangement (for example, moving to a different area)
• How much notice the employer has given of any changes to work arrangements. 

Formal flexible work arrangements – such as those requested by parents, carers or employees with certain protected characteristics – must be documented under the Fair Work Act.

While ad hoc flexible working isn’t subject to the same requirements, Goonrey recommends treating it with the same care.

“We’re increasingly encountering these arguments from employees that there was an understanding that their arrangement was permanent. That’s why, even if you’re agreeing to an ad hoc arrangement, I would definitely be putting it in writing. I wouldn’t be leaving anything to chance.”

“You set yourself and your employees up for success when you tell them what your expectations are.” – Aaron Goonrey, Partner, Pinsent Masons

3. Unwritten rules around work hours

Unwritten rules can be particularly risky when they involve working hours.

In a recent Federal Court case, an employee challenged an expectation that staff work 40 hours per week despite their contract specifying a 38-hour week.

The employer argued that the longer hours were standard practice within the industry and necessary due to external deadlines.

While the Court acknowledged the fast-paced nature of the business, it found there was nothing inherent in the employee’s role that required them to consistently work beyond the contracted hours. 

The employer had therefore breached the Fair Work Act by requiring unreasonable additional hours and failing to pay overtime. The case has been listed for a further hearing to determine penalties.

“In my view, there’s no circumstance where an unwritten rule about working hours would be feasible,” says Goonrey.

Workplace cultures where overtime is normalised and not properly documented can lead not only to disputes, but also the risk of large-scale underpayments, he explains.

“You need to be clear in your documentation of what the expectations are and how many hours people are actually working.”

Under the Fair Work Act, employers can ask their employees to work “reasonable additional hours” – but this allowance is not unlimited.

“It’s assessed against a range of factors, [including] the nature of the role, the risk to health and safety, the employee’s personal circumstances and whether they’re compensated for the additional hours of work,” he says.

“Anyone who’s covered by a modern award or enterprise agreement is likely to get overtime [pay] after 38 hours per week, unless there is some provision in their employment agreement that their annual salary compensates for reasonable additional hours required.”

Without accurate records and clear expectations, businesses may struggle to demonstrate that additional hours were reasonable or that employees were properly compensated.

The bottom line for employers

The cases above point to a broader challenge for employers: workplace culture often develops informally, but legal disputes tend to focus on what expectations were clearly established.

Goonrey says the safest approach is to make workplace expectations explicit from the outset and reinforce them consistently.

“You set yourself and your employees up for success when you tell them what your expectations are,” he says.

That means:

• Clearly communicating behavioural standards and workplace expectations from the beginning of employment.
• Applying those standards consistently when issues arise.
• Documenting key arrangements that affect working conditions, such as flexible work or overtime.
• Addressing breaches promptly rather than allowing problematic practices to continue.

These steps make it easier to demonstrate that expectations were clear if a dispute later arises.

Need help crafting policies that set clear behavioural expectations? AHRI’s course will help you understand how to structure, write and implement effective policies and procedures.

All information, content and materials available on this site are for general informational purposes only. The contents of this article do not constitute legal advice and should not be relied upon as such.