Key considerations for employment contracts

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Here at Coutts we understand how important it is as a business owner to maintain positive and healthy relationships with employees. We also understand how crucial it is for an employer to protect their interests and limit their exposure to various claims by their employees.

With the combination of the Fair Work Act 2009 (Cth), the National Employment Standards and Modern Awards, entering into well written employment contracts is essential.

In fact, even if you don’t enter into a written agreement with your employees you are still entering into an oral agreement and therefore owe certain duties and obligations to your employees.

Under the National Employment Standards, whether there is a written employment agreement in place or not, a set of minimum entitlements automatically applies to employees. For example, maximum weekly hours, annual leave, public holidays and notice of termination, and these entitlements are on top of the employee entitlements already provided for under the relevant Modern Awards.

Although you do not legally need to provide an employee with a written agreement, employers often struggle if a dispute arises with an employee in the future, as there is no record of the agreed terms of the employment relationship.

So, the question arises, why not enter into a formal written agreement that clearly outlines everybody’s expectations and obligations?

Some key items to consider when it comes to employment contracts are:

1.       Does the agreement comply with current legislation?

Employment agreements will need to comply with the Fair Work Act 2009 (Cth). It is likely that any employment agreement entered into prior to 1 January 2010 will need to be reviewed to provide for the provisions in this act.

2.       Have you reviewed the relevant award?

Employment agreements must comply with the applicable modern award. Awards will often dictate:

·       minimum wages;

·       overtime and penalty rates;

·       types of employment such as casual or permanent;

·       employee classifications;

·       expenses such as travel and meal allowances;

·       breaks, hours of work and rostering;

·       leave entitlements.

It is not uncommon for employment agreements to contain a provision that is inconsistent with the award without the employer even realising, for example paying an employee less than what is required under the award for their position.

In most situations it is likely that the award would prevail and the provision in the employment contract is overridden by the award. To avoid disputes with employees or a breach of the law, it is crucial to ensure the employment terms comply with the law and in particular the relevant award.

3.       Is a restraint of trade necessary to protect your business?

Restraints of trade are very common to try and prevent an employee from working with a competitor, poaching clients or other employees.

However, restraints of trade are only enforceable where the employer can show the restraint is necessary to protect legitimate business interests such as trade secrets, confidential information and clients. The restraint can’t be against public interest, as the employee has a right to earn a living. For example, a restraint which tries to restrict employees from working for a competitor for 100 years within Australia, is unlikely to be enforceable.

Factors to be considered when determining the enforceability of the restraint include the nature of industry, the time of the restraint, the distance of the restraint and overall how reasonable the restraint is.

It is really important to have a properly constructed restraint that is clear, well-worded and reasonable to give the restraint the best chance of being enforceable.

4.       Does the employee know what is expected of them?

A written employment can clearly define the duties and role of the employee to create certainty and ensure the employee is aware of an employer’s expectations.  

5.       Does the agreement protect your confidential information?

Often a business has confidential information which may include things such as financial statements, manufacturing processes, trade secrets or client databases. It is important to ensure your employment agreement protects this information and that an employee is prohibited from disclosing confidential information as it may harm the business.

6.       Have you covered your intellectual property?

Employees are likely to be using your intellectual property throughout the course of their employment, so it’s important to ensure it remains your intellectual property.

Depending on the type of employment, the employee may also be developing or creating new inventions, processes or procedures whilst employed with you. If this is the case, you may want to consider ownership of these creations and covering it in the employment agreement to protect your interests.  

7.       Does it deal with the policies of the business?

You should consider if you have any policies you want to incorporate into the employment contract. For example, a drug and alcohol policy or a work health and safety policy. However, if you are including policies in an employment contract, you may also bind yourself to follow and implement those policies under contract law. Alternatively, you might want policies to be acknowledged by the employee as lawful directions. Generally, if you make the policies accessible and clearly communicated to employees you should be able to rely on those policies.

 

Coutts have expertise in preparing tailored employment agreements that both protect the interests of employers, as well as ensure employees are aware of their obligations. Call 1300 268 887 and book an appointment with Alexandra Johnstone or Keely Irving today.

For further information please don’t hesitate to contact:

Keely Irving
Lawyer
keely@couttslegal.com.au
02 4607 2124

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.