Employment Contracts - Getting the Foundations Right

Posted by November 08, 2017 | Articles, Contracts, HR Advice & Support | No Comments

By MDC Legal

A well drafted employment contract, complemented by a professionally prepared Employee Handbook and Management Guide, provides a solid foundation for a positive employment relationship, and minimises the risk of legal claims.

Employment contracts are underpinned by the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) and any applicable industrial instruments, such as Modern Awards

Drafting an Employment Contract

Employment contracts must be consistent with the NES and Modern Awards, as contravening either can result in pecuniary penalties being imposed on an employer.

While generic templates may be a useful starting point, they are often insufficient because, for example, they contain:

  • terms that are inconsistent with the NES or an applicable Modern Award;
  • insufficient confidential information and/or intellectual property clauses;
  • insufficient, and often unenforceable, restraint of trade clauses;
  • insufficient “all in” and “set off clauses for employers who pay above award rates; and
  • terms that risk contractual obligations arising under employer policies/procedures.

It is always best to invest in expertly drafted employment contracts that are tailored to the specific needs of your business, and which are prepared with potential future risks in mind. A small investment to lay the proper foundations upfront, can often assist in preventing large investments to fix problems that arise down the track.

Employment contracts will generally include clauses covering, amongst other things:

  • the position the employee is employed to perform;
  • employee obligations, such as exclusive service, obtaining and maintaining relevant qualifications, certificates or licenses; and avoiding conflicts of interest;
  • location and hours of work, including where necessary clauses covering an employer’s right to vary an employee’s work location or hours;
  • remuneration (including base salary, superannuation, allowances, non-monetary remuneration like vehicles or accommodation, bonuses and other incentive payments);
  • policies and procedures;
  • leave;
  • termination of employment;
  • confidential information and IP;
  • restraint of trade; and
  • the use of an employer’s IT.

It is important for employment contracts to be clearly and expertly drafted, to avoid ambiguity in the interpretation of terms, and to avoid unintentionally creating contractual obligations. For example, employers commonly include terms in employment contracts to the effect that employees are required to abide by an employer’s policies and procedures. Without careful drafting, such clauses risk inadvertently creating contractual obligations on employers to also abide by such policies and procedures. This may not be the desired effect where policies and procedures are intended to be discretionary and subject to amendment from time to time.

Expert Legal Advice for Employment Contracts

A well drafted Employee Handbook, tailored to the needs of an employer, can reduce the content required in an employment contract, provide clarity for both employees and employers on their rights and obligations, and create clear expectations around employee conduct.

Management Guides can assist with complex issues such as performance management, bullying and managing ill or injured workers. Management Guides are a useful quick reference guide for managers, who are often required to deal with matters urgently and under pressure. By following clearly set out processes that contemplate the risk of future claims, managers can significantly reduce an organisation’s exposure to claims or, at least, improve its chances of successfully defending claims.

Get in touch with MDC Legal if you need an employment contract drafted or checked. We can ensure you employment contracts are compliant and enforceable, including terms and conditions that are appropriate for your specific business and employment relationships. Our team of experienced lawyers are based in Perth but assist clients nation-wide and abroad (with employment connected to Australia). Call us today on 08 9288 4000 or contact us online.