Do I Need (To Review) Employment Contracts?
Written by: Gabrielle Andersen l Insight Team
While most businesses have employees, not all businesses will have employment contracts for their employees. This may be because employees are working on a short-term basis, or employers might not think to formalise the employment relationship. Most likely, it’s another task the business owner intends to get to on an already overwhelming to-do list!
Perhaps like many business owners, you’ve looked online for a simple employment contract without realising it doesn’t cover the matters you would expect it to. This is where we can step in and either review your employment contracts or provide new agreements to ensure they are suitable for your specific employment arrangements. This will not only protect you and your business but also satisfy your legal obligations when it comes to your employees.
What Are Employment Contracts?
Employment contracts are crucial for any business with employees. Not only do they set out the terms and conditions of employment, but they also provide important protections for the business.
At its most basic, an employment contract will state the specifics of the employment, such as the details of the role, who the person will report to, what days and hours they are required to work, and where the work will be performed. The employment contract should also make it clear whether the work is being offered on a full-time, part-time or casual basis, or whether the intention is to engage the person as an independent contractor. A comprehensive employment contract should also deal with more complicated matters such as confidentiality and intellectual property protections for the business, leave and remuneration entitlements for the employee, and clearly set out how and in what circumstances the employment will end.
Key Terms In Employment Contracts
Essentially, your employment contracts should cover the following:
- The specifics of the employment relationship – including the commencement, duration, basis of employment (such as casual, part-time, full-time, or independent contractors), position and duties of the employee, who they will report to, and what their remuneration will be.
- The rights of the employee – such as leave entitlements, remuneration, and the prevalence of the National Employment Standards and any relevant Award or Enterprise Agreement.
- The rights of the employer (and obligations of the employee) – the employment contract should make the employer’s expectations in relation to the employee’s duties and conduct clear. This includes protections for the employer’s business in the form of making certain information confidential, preventing the unauthorised use of intellectual property, warranties from employees prohibiting them from engaging in an authorised or unlawful manner during their employment, and restrictions on the employee taking the employer’s clients, customers, or staff, or engaging in a competing business both during and after their employment.
- The end of the employment relationship – an employment contract should have very clear provisions governing the end of the employment, both in terms of what notice the employee is required to give, provisions relating to redundancy, and specifically set out matters that may lead to summary dismissal.
What Happens If You Don’t Have Employment Contracts?
While most employment relationships start out positively, there are many unknown factors at play and an employment contract can provide important protection for your business.
An employment contract should confirm whether there is an initial probation period, provide clear expectations about the role and expected behaviour of the employee and provide termination provisions if the employment relationship isn’t working out for either party.
Employment contracts also very importantly contain restraints to prevent employees from taking your customers, suppliers, business know-how, or intellectual property and using them to set up a business in direct competition with yours. Without an adequate employment contract in place, you will have no means with which to prevent, or at least respond to, devastating damage to your business and professional relationships.
If you have a well-drafted employment agreement, you will be more effectively able to manage your employees during the term of their employment. Employees will be clearer about their obligations and complex requirements such as remuneration and leave entitlements will be easier to navigate. In addition, some provisions of a comprehensive employment contract survive termination, meaning they can be relied on even after the employee leaves your business. This is particularly important for protecting your business address book, client base, trade secrets, and know-how.
Do You Need To Review Your Employment Contracts?
Employment law in Australia is constantly evolving. Just recently, the courts have revisited what it means to be an independent contractor, with quite unexpected results which could impact your business and the classification of any casual or independent contractor arrangements you may have. The latest cases show that in order to characterise the employment relationship, the court will mainly look to the terms of the written employment contract, rather than how the employee and employer conduct their relationship in practice. This shows that having the right agreements in place is absolutely paramount and can save a business significant time and money should a dispute ever arise.
It is also important to remember that having comprehensive employment contracts in place can assist you in meeting the minimum obligations under the National Employment Standards and any Awards or Enterprise Agreements that may arise. In recent years the Fair Work Ombudsman has prioritised monitoring compliance and has significant powers to penalise employers who have failed to ensure these minimum standards have been provided for their employees.
Canny Insight + Your Business
A heavy fine and the stress of litigation could have a devastating impact on any business, and with employment law being complex and subject to change with little notice, why not seek reassurance and have your employment contracts updated to ensure they align with the minimum legal standards?
Having your employment contracts reviewed or rejuvenated is a key step in safeguarding and strengthening your business. Take your employment contracts off your to-do list and have our team at Canny Insight review them for you or better yet, put them in place to start with!
Get in touch with our team to start the chat today about your employment contracts and where to start, or how to start the review process.
