Every employment relationship involves a contract between an employer and an employee. This contract may be verbal or in writing or may sometimes involve a mix of the two. It is not necessary to specifically agree on a contract for one to exist. The fact that an employee starts work for an employer brings with it certain fundamental implied terms, such as the right to payment for work performed and a duty of mutual trust and confidence.
The inherent difficulty with verbal contracts or relying on implied terms (in cases where there is no specific written agreement or only a limited verbal agreement) is that there can be later disagreement about what was agreed in the first place. This is why a written contract is always preferable. The contract should set out the main terms of the employment and be signed by both the employer and the employee. Whilst agreements are subject to minimum legislative entitlements and any applicable award or enterprise agreement requirements, there is a large range of matters which can still be covered, such as:
- Dates of commencement and duration of employment;
- Duties and accountabilities;
- Personal presentation;
- Probation (if longer or shorter than the statutory requirements);
- Hours of work;
- Confidential information;
- Intellectual property;
- Employer policies;
- Dispute resolution;
- Performance appraisal and unsatisfactory work performance;
- Grounds for suspension and termination;
- Termination notice;
- Post employment restraints;
- Relationship of the parties; and
- Governing law.
It is also common practice for the statutory entitlements to be repeated in a common law contract for the sake of completeness.
It is always a good idea to have a new contract reviewed in consultation with your lawyer. You should remember that a contract is a binding legal document capable of enforcement in the civil courts. The reality is that many new employees simply sign their contracts without understanding the full implications. For example:
- most employment contracts contain a mutual obligation to give notice of termination. So, if you resign your employment and don’t provide the appropriate notice whether it be one, two or more weeks, the employer may be within their rights to deduct an amount from any money owing to you (eg from annual leave owing) equivalent to the notice not given or to sue you for this amount;
- you may have been with the same employer for say 10 years and your employment is then terminated. Most contracts reflect the statutory minimum requirements which essentially provide for up to five weeks notice. Is this going to be a long enough period for you to find other work or should you have proposed a longer period when agreeing on the contract?;
- you may not have appreciated or just ignored a post employment restraint provision saying that you couldn’t work for a competitor for a period of time. It may very well become an issue when you leave your employment.
You should also keep in mind that old employment contracts can still apply even if you change jobs or get promoted with an employer. It is a good idea to check the terms of your employment contract whenever there is a significant change in your job to make sure they still apply.
You should also ensure that you are familiar with your employer’s policies because they may form part of your contract of employment (eg no private use of the internet policy) and may be relied on by your employer, for instance, if it wishes to take disciplinary action against you. Conversely, there may be occasions when you want to rely on employer policies. For example, some employers (particularly larger ones) have redundancy policies which require a higher payment by the employer than would otherwise be required. The key issue will always be whether a particular policy is binding on yourself or your employer and this may depend on the wording of the contract itself or the conduct of the parties.