An employment contract is an agreement where an ‘employee’ agrees to provide certain services to an ‘employer’ in return for payment (i.e, wages). Provided the elements of a binding contract exist, an employment contract doesn’t necessarily need to be written or signed
Where a written contract does not exist, common law employment terms will be implied. These implied terms attempt to protect the rights of both parties balanced against the needs of the business.
To avoid leaving interpretation open to the Courts what should your employment contract, as a minimum contain:
National Employment Standards and Minimum Awards
Your employment contract must not and cannot provide for less than what is set out in National Employment Standards (NES) and any applicable Award. These legislative terms and awards are designed to protect employees and ensure that everyone is paid at least the minimum wage. The NES sets out 10 minimum employment entitlements that HAVE to be provided to all employees.
Other sources, such as industrial instruments, Workplace Health and Safety legislation and Discrimination legislation will also apply to your employment relationship. Any employment contract that does not comply, or attempts to circumvent legislation, will be rendered void and possibly give rise to criminal and personal penalties.
Generally, the first and most considered term of an employment contract is what are you going to get paid.
Your employment contract should not only confirm your wages, but should clearly define whether wages include bonuses, commission, overtime hours, penalty hours and/or any other payment made such as incentives and employee expenses.
It should also clearly state any relevant percentages and how calculations are made.
Straight forward annual or hourly contracts may be simple enough to draft, but if your employment contract contains performance-based payments, commissions or other complex formulas it may be wise to get some expert advice.
Your employment contract should clearly define your role, including where and when the work is to be performed.
If the role so requires, then outcomes and targets should be defined and measurable.
Termination of employment is the most controversial aspect of employment law. When an employment relationship has broken down and the contract fails to appropriately address termination clauses, the result is often long drawn out conflicts from which no real winners emerge.
Termination of employment can occur in several ways, with the three most common being:
- By agreement
- Operation of Time
Termination by agreement generally occurs when an employee tenders their resignation (which is accepted by an employer) or where the employer offers a redundancy (which is accepted by an employee).
To ensure an amicable parting of ways notice periods for termination by agreement should be clearly stated in the contract. Importantly, they must also be reasonable. What is ‘reasonable’ will depend on the nature of the role, the seniority of the employee, length of service and a host of other relevant factors. If you are unsure what may constitute reasonable for your circumstances, it might be worth seeking advice.
Termination by operation of time is used for projects or time-based contracts. The contract should clearly state both the length of the contract, i.e. 12 months, and the termination date i.e. 31 December 2018.
Termination for breach relates to an employee’s consistent or repeated failure to perform or exercise reasonable care and skill, or where a party to the contract has acted in a manner repugnant to the relationship. Termination for breach of employment contract are subject to additional legislative requirements and should be managed very carefully.
In the absence of anything to the contrary written in an employment contract, some terms can be implied purely due to the nature of the relationship, such as the duty to exercise reasonable care and skill in fulfilment of your role.
Confidentiality and protection of trade secrets are good examples of implied terms – however, it is prudent to include them in an employment contract for certainty and clarity.
The legalities surrounding employment law are complex and intricate. Having a sound and well-drafted employment contract agreed upon and signed at the beginning of any working relationship is the best way to guard against costly ligation or out of pocket expenses down the track.
Leaving “things to chance to chance” or making assumptions about the status of someone’s working relationship without clearly documenting it can land many businesses’ in hot water and employees’ out of pocket.
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* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.