How employers can protect themselves with Employment Contracts

Employment Contracts are now commonplace for all types of employment (full time and fixed-term) and are a standard way for both an employer and employee to agree to the terms of their working relationship.

So, how can an employer protect themselves with Employment Contracts, and what happens if the agreement is breached?

Should an Employment Contract be verbal or written?

It can be difficult in the long term to prove the terms of a verbal contract therefore, it is recommended that Employment Contracts are always written so that each party can refer to it as needed and so that the terms are agreed as is written, rather than based on each party’s interpretation or memory of the conversation.

An Employment Contract should always be issued by an employer, not the employee, and it is common practice to have a general Employment Contract drafted and ready to be amended accordingly with each new hire.

What should an Employment Contract cover?

An Employment Contract can be as detailed or as brief as a company wishes it to be, however, it should at the very least contain the crucial elements listed below:

• date of commencement and, if applicable, the duration of employment (including terms for renewal or termination at the end of the period);
• remuneration and any bonuses or benefits attached to the role;
• the employee’s hours, general job description, and responsibilities;
• overview of key company policies, particularly those that pertain to leave (such as annual leave, personal leave, and maternity leave) ;
• details about termination, such as the process and notice period required for either party to terminate employment;
• a restraint clause (if applicable);
• expectations around confidentiality and intellectual property rights; and
• details about the probation period and procedure for terminating employment within this period.

An employer’s responsibilities

It is important for employers to remember that they are responsible for certain aspects of an employee’s working environment, such as the right to a safe and healthy workplace and for jobs covered by modern awards, certain rates of pay, and allowances.

These topics should be covered in standard Employment Contracts, but their omission from a contract does not mean that the employer is not responsible for them. Laws relating to Workplace Health and Safety and other elements of employment law will always trump an Employment Contract, therefore it is not in the best interests of an employer to attempt to mislead an employee by seeking to have them agree to unlawful working conditions.

Why are Employment Contracts so important?

Employment Contracts protect both the employer and employee against unlawful workplace practices.

The most common reason to enter into an Employment Contract is to provide an employer with the right to dismiss employees for breach of contract or performance and other disciplinary issues. Without a contract in place, it can be difficult to legally terminate a worker’s employment if they were not provided with prior notice about why and how their employment may be terminated. This is particularly useful for small businesses for which different rules around termination and probation periods apply.

With a well-drafted Employment Contract in place, it can be far more difficult for an employee to bring a case for unfair dismissal against their employer. The absence of an airtight agreement also opens employers up to other breaches of contract and/or confidentiality, the theft of trade or proprietary secrets, and issues relating to defamation.

It is always wise to have an employment law expert draft the Employment Contract to ensure it is legally sound.

What happens if an Employment Contract is breached?

If an employer breaches their agreement with their employee, the employee has the right to make a claim with Fair Work Australia. Typical breaches by employers include terminating employment unlawfully and reneging on leave entitlements, wages, or benefits.

If you need legal advice on an Employment Contract our experienced employment lawyers can assist.