SYDNEY – The Australian Government is preparing to introduce legislation early next year to govern the integration of artificial intelligence in the workplace, shifting the regulatory focus toward job augmentation rather than replacement.
The move follows the Prime Minister’s “AI in Australia’s Interests” address on July 15, 2026, at the University of Sydney, where the administration signaled a priority to manage AI-driven transitions through a tripartite framework involving government, employers, and unions.
For corporations in the technology, financial services, and manufacturing sectors, the transition introduces significant legal and reputational risks. While AI-specific federal employment laws are not yet in effect, existing obligations under the Fair Work Act and work health and safety regulations are already being applied to AI-driven organizational changes.
Regulatory frameworks and industrial pressure
The government’s strategy aims to balance productivity gains with labor market stability, positioning Australia between looser, market-led approaches and more prescriptive European-style regulation. It also reflects a broader international shift toward using AI to enhance, rather than displace, existing jobs.
This approach comes amid increasing pressure from organized labor to secure protections against mass redundancies and technology-led work intensification. The Australian Council of Trade Unions has proposed a four-day working week to redistribute productivity gains, while the Australian Services Union has requested a six-month increase in paid notice for employees dismissed due to the introduction of AI.
Minister for Employment and Workplace Relations Amanda Rishworth stated in April that the government intends to maintain a tripartite approach to regulation, though she noted that unions would not possess a veto over AI-related operational changes. Business groups, meanwhile, are lobbying for clear guardrails that recognise AI as a legitimate tool for restructuring, provided consultation and safety obligations are met.
Some commentators have noted that the speech is a sign the Government is prepared to use industrial laws to help “augment the workforce with AI rather than upend it”.
The forthcoming legislation is expected to sit alongside existing workplace statutes rather than replace them, creating an additional layer of AI-specific duties for employers and potentially codifying consultation and transparency requirements around algorithmic decision-making.
Operational requirements and genuine redundancy
Under the Fair Work Commission guidelines, AI adoption does not automatically qualify a dismissal as a genuine redundancy. To meet the legal threshold, an employer must demonstrate that the job is no longer required by anyone due to changes in operational requirements and that all consultation and redeployment obligations have been satisfied.
Legal exposure arises when companies fail to distinguish between the elimination of a role and a modification of how that role is performed. If AI systems are introduced to assist staff or reconfigure tasks rather than wholly remove the need for a position, redundancies based on that change are vulnerable to legal challenge.
To mitigate this risk, corporate governance standards increasingly require the maintenance of documented evidence that shows technology deployment is tied to bona fide operational decisions rather than cost-cutting alone, including:
- Detailed business cases for technology adoption that quantify projected productivity and outline workforce impacts
- Updated organizational charts that clearly identify which roles are being removed, merged, or re-scoped
- Board and management minutes verifying the operational necessity of the change and recording consideration of alternatives to redundancy
For listed companies and large employers, these records also intersect with directors’ duties and disclosure obligations, particularly where AI-driven restructures may be material to investors, regulators, or class action risk.
Psychosocial risk and enforcement
Safety regulators have shifted from an educational phase to an enforcement phase regarding psychosocial hazards in the workplace, treating AI-driven change as a potential source of stress, uncertainty, and job insecurity. This shift places a higher burden on employers to conduct formal risk assessments during AI implementation, including the mental health impacts of algorithmic monitoring, performance scoring, or rapid task redesign.
Failure to consult with employees regarding major changes to technology or structure can invalidate a genuine redundancy claim if modern awards or enterprise agreements are in place. These consultation triggers occur at the point of adoption, not only at the point of termination, meaning employers cannot rely on last-minute notifications once AI systems are already embedded.
The risk of regulatory intervention was highlighted in September 2025, when SafeWork NSW issued a prohibition notice to the University of Technology Sydney. The notice forced a pause in a restructuring process following an investigation into procedural deficiencies and a lack of risk assessment related to psychological harm. Workplace lawyers say AI-related restructures that proceed without similar upfront assessments could face comparable stop-work orders, compounding costs and reputational damage.
Redeployment obligations
The High Court of Australia has expanded the scope of redeployment inquiries, increasing the burden on larger organizations and their associated entities at precisely the moment many are piloting AI tools across multiple business units.
In the August 2025 judgment of Helensburgh Coal Pty Ltd v Bartley & Ors [2025] HCA 29, the court ruled that the Fair Work Commission can conduct broad inquiries into whether employees could have been placed into roles currently held by contractors. In practice, this widens the net of positions that must be considered before a redundancy can be justified, including temporary, project-based, or AI-enabled roles.
This precedent is particularly relevant where AI absorbs specific responsibilities, potentially creating new AI-related roles that could satisfy redeployment obligations – such as data quality, system supervision, or ethics and compliance functions. For multinational firms, these obligations may extend to overseas opportunities, provided they meet the test of reasonableness.
Corporate entities are now required to conduct thorough redeployment searches and align workforce composition with a broader economic strategy to ensure compliance with the Fair Work Act, which remains the central legislative framework for employment protections and dispute resolution in Australia. The government has signalled that forthcoming AI-specific workplace laws, expected to be tabled in early 2027, will plug perceived gaps in that framework by addressing the transparency and accountability of algorithmic tools used in hiring, rostering, discipline, and dismissal.
