Insight Close-Up: Employees + Employment Agreements
Written by: Gabrielle Andersen | Canny Insight
Welcome to our Insight Close-Up series, where we delve into the most common commercial and business law services we offer our Canny business clients.
This series will focus on the following topics relevant to most business owners, and will be released monthly throughout this year:
- Service Agreements + Terms and Conditions
- Independent Contractors + Subcontractors – What’s The Difference?
- Employees + Employees Agreements
- Protecting Your IP + Business Know-how
- Do We Need A Policy For That? What Exactly IS Compliance?
- Do We Need A Business Prenup?
- What Is The PPSR + How Can It Help My Business?
- Dealing With Disagreements With Customers
For now, sit back and enjoy our second Insight Close-Up Topic #3: Employees + Employment Agreements…
Legal Advice: Your Obligations To Employees
The Fair Work Act 2009 (Cth) sets out the minimum standards that employers must provide to their employees. These are known as the National Employment Standards, and most apply to all Australian workers, although there are some that don’t automatically apply to casual workers.
We have previously examined the legal obligations business owners owe to their employees in our article on Obligations to Employees + Managing Them Efficiently. Check out that article for a comprehensive list of the National Employment Standards to ensure you are providing your workers with their minimum legal entitlements.
It is extremely important that business owners understand the laws and obligations they owe to their workers, whether they are permanent or casual employees or contractors, and the differences in entitlements between each. Failure to provide legally owed entitlements for your workers is a huge area of risk for business and can have major financial consequences.
In last month’s Insight Close-Up we examined the difference between contractors and employees, and how this isn’t always straightforward as there are differences in the distinction when it comes to PAYG, Superannuation, workers’ compensation and also the obligations under the Fair Work Act. Business owners need to be aware that if a worker is legally considered to actually be an employee and not a contractor, the business owners themselves (potentially personally and not through their company) will be liable for unpaid tax, superannuation and workers’ compensation for that worker.
For more information on the employee/contractor distinction, check out last month’s Insight Close-Up Blog post here: Independent Contractors + Subcontractors – What’s The Difference?
When Do You Need Employment Agreements For Your Workers?
If the Fair Work Act ensures that all workers have a legal basis for their employment entitlements, you may ask;
“Then why do I need an Employment Agreement?”
The number one reason for having a written Employment Agreement is the same as it is for your business generally – it is sensible to put things in writing. This applies not only to your employees, but also to your contractors, service providers, clients – basically any person or service in which your business relies. In this way, Employment Agreements are similar to insurance. They’re there for when things go wrong.
The second reason Employment Agreements matter to your business is that they are an easy way to communicate to your workers the minimum standards you expect to be upheld throughout their employment. This can be hours, times or days of work, the location of work and any additional entitlements you are providing to that particular employee. It can also help you with an employee’s specific underperformance of their duties or obligations, or possibly more crucially, breach of confidentiality or IT policies, or any other internal policies or procedures referred to in the Employment Agreement.
In this way, a written Employment Agreement provides a way for you to clearly confirm to others that they haven’t met your standards or the duties and responsibilities you require in employing them for that particular role.
A written Employment Agreement also provides a basis on which you can argue that a person has breached that Employment Agreement by, for example, taking your clients or staff or business know-how and network and setting up a competing business using your hard work. Without a written Employment Agreement there wouldn’t be a basis for you to claim recourse for this unfairly happening to your business.
Changes to the Fair Work Act Are Coming – What Do You Need To Know?
There have been two rounds of recent amendments to the Fair Work Act, which are known as the Government’s “Closing Loopholes” changes.
The changes take effect from December 2023, through to 2025 and cover a variety of matters relating to protecting worker entitlements, supporting secure jobs and better pay, providing paid family and domestic violence leave, enforcing the laws preventing sexual discrimination and harassment at work and providing a new right to disconnect for all employees.
Below are the changes that are part of the “Closing Loopholes 2” package, commencing in August 2024:
- Changes to the definition of employee – whether a worker is actually an employee (and not an independent contractor) will be determined by reference to the real substance, practical reality and true nature of the relationship between your business and the worker. These changes apply only to the definition of employee under the Fair Work Act and will not apply to the meaning of employee for tax or superannuation law – making this a very complex legal issue.
- A new definition of “Casual Employees” – whether an employee is actually casual and not permanent will be based on whether the reality is that there is no firm advance commitment to continuing and indefinite work. As with the definition of “employee” above, whether an employee is casual depends on the real substance practical reality and true nature of the employment relationship. Employers need to ensure they’re not classifying an employee as casual, when there is actually an understanding that they will be provided with continuing and indefinite – which you can imagine would apply to many current casual employees.
- Casual conversion changes – the existing right of employees to request casual conversion will be solidified with a new set of rules. Once a casual employee has been employed for at least 6 months (or 12 months for small business employers) and believes they no longer meet the requirements of the new casual employee definition (above), they can initiate a change to permanent employment by providing their employer with a written notice to convert their employment. Upon receiving this written notice, the employer must engage with the employee about what will change if the employee converts from casual to permanent employment and on what basis this should occur. The employer must respond in writing within 21 days of the employee providing them with the written casual conversion notification.
Clearly the Government is hoping to disincentivise businesses from relying on casual labour, making the circumstances where an employee can remain casual more and more narrow.
- Right to disconnect – you may have seen many media articles articles about this new right for employees which is that they are now protected at law (under the general protections provisions protecting employees from adverse action claims) from any refusal to monitor, read or respond to contract or attempted contact outside of their working hours. This applies both to contact being made by their employer and by any third parties, such as clients of the business. Employers should ensure they’re aware of this new legal protection for employees and consider their overall approach to regulating and monitoring work hours.
Canny Insight + Employment Agreements For Your Business
Canny Insight is a customised legal service that meets the specific needs of your business. If you’re a start-up, or gearing up for growth and expansion, we’ll come up with a legal services package aimed specifically at your business needs.
Whether you need Employment Agreements prepared, or advice on employee issues or internal workplace policies, our business law focused Insight team will provide you with straightforward and reliable advice and contracts for your business.
Get in touch with our team today to see how we can help your business!
