4 Key Things to Include in an Employment Contract
Written employment contracts are the best tool for employers to ensure their business runs smoothly and legal issues are avoided. Not only do they protect their business interests and limit themselves from potential claims made by employees, but they also enable healthy workplace relationships by providing clear communication and employee workplace rights.
However, common pitfalls can turn an employment contract from friend to foe. To avoid this happening to your business, here are 4 things we recommend to include in your employment contracts:
Compliance with Current Legislation
In Australia, employment agreements are required to comply with the Fair Work Act 2009, the National Employment Standards (NES) as well as any relevant industrial instruments which may apply to particular enterprises, industries or occupations, such as Modern Awards or Enterprise Agreements. Legislation and industrial instruments underpin contracts of employment and outline employees’ minimum entitlements throughout their employment such as a maximum number of hours to work per week, notice of termination, annual leave, superannuation, public holiday pay rates etc. With employment legislation and Modern Award conditions regularly evolving, it is common for some employers to be unknowingly violating their employees’ rights by relying on outdated contracts. All employment contracts should be regularly reviewed, including those of long-term employees. We recommend having a clear date set for annual reviews of contracts to avoid non-compliance.
Clear Job Description
Having a clear and concise job description in employment contracts is beneficial for both employer and employee as it sets the expectations and duties of the role and the nature of the employment (full time, part-time or casual). This is also a great reference document for annual performance reviews and can assist in identifying where an employee may be lacking, or if the role has transformed over the past year and needs to be redefined. Where a position is covered by a Modern Award, duties outlined within a job description should also be used to assess an employees’ classification and minimum wage under the Modern Award.
Non-compete or Restraint of Trade
Restraint of trade and non-compete clauses are commonplace for particular industries that have fierce marketplace competition. They are used to prevent employees from either being poached from a competitor or from starting a business of similar nature and taking business away from the employer. They should be reasonable and relevant to your enterprise and the individual restrained. This is necessary as restraints can often only be enforceable when protecting legitimate business interests and clients and does not unnecessarily inhibit the employee’s freedom to engage in trade or employment. In considering the reasonableness of a restraint, regard will be had to its particulars, including the geographical limits of the restraint and the time period that must be respected before engaging with a competitor or client after leaving the business.
Business Policies and Procedures
If the business has any particular policies, such as a social media policy or a drug and alcohol policy, the employment contract should make reference to them and ensure that compliance with them is a term of the employment. This is beneficial as it creates an enforceable contractual obligation on the employee. Should an employee break a policy, the employer can refer to the signed employment agreement, issue directions consistent with the employment agreement and the policies and procedures and take disciplinary action for noncompliance as required. This is particularly helpful, for example, in circumstances of workplace bullying allegations where businesses find themselves needing to ensure policy compliance by all parties or to take disciplinary action. Critically, policies and procedures should never be incorporated into or form part of the employment agreement. To do so will result in an obligation on the employer to seek employees’ consent in varying its policies and procedures.
Optimum Legal are well experienced in reviewing and preparing employment contracts, including any relevant policies, that protect both employer and employee. If you are facing issues in this area or require assistance in drawing up your contracts, book a consultation with us today.