If you are looking for an employment lawyer in Sydney, or for further information in relation to any employment law needs, please do not hesitate to contact any member of our Employment Law Team.
Every employee in Australia has an employment contract. In many industries, that contract is verbal, or might only consist of a letter of offer. The employment contract is the deal negotiated between the employee and their employer regarding the key terms of the employment relationship. As well as whatever has been agreed verbally or in writing, Australia has very detailed laws on the rights and obligations of employees and employers.
There are also Modern Awards or Enterprise agreements which apply to many employees, the National Employment Standards in the Fair Work Act, and numerous other pieces of legislation providing for long service leave, freedom from discrimination and bullying, and other workplace entitlements. These other sources of law also apply to the employment relationship, and where the contract of employment conflicts with these other sources, the other sources usually override the terms of the contract. For example, an employment contract cannot provide that a fulltime employee is not entitled to annual leave, as the law mandates at least 20 days annual leave per year for every fulltime employee in Australia.
Employment contracts can cover issues not covered by the general law or Modern Awards and Enterprise Agreements, so that a business and the employee have certainty about the rules when issues arise in the workplace – such as how much notice an employee needs to provide on resignation, or what obligations continue after the employment relationship has ended (i.e. obligation not to divulge confidential information or to poach clients). A key matter that needs to be included in every employment contract is the rate of pay to be paid to the employee. This is especially important where bonuses or commissions might be involved based on certain performance criteria and targets. A properly worded employment contract provides comfort to both the employer and employee as it sets out clear expectations and obligations. Where conflict does arise, a properly worded contract will assist when resolving workplace disputes without hopefully, having to take the matter to court.
When negotiating the terms of a contract, make sure all of the following issues are covered:
Sometimes there is confusion about whether company policies are part of an employment contract. Most companies have their policies in a separate document, often called “company policies” or “company handbook”, and usually that separate document and the employment contract state that those policies do not form part of the employment contract. This is because if the policies are not contractual, then they can be changed by the company without having to negotiate agreement with staff to vary individual employment contracts – while also limiting liability for the company by restricting the ability for an employee to sue for breach of contract for a failure to follow a company policy. There have been many occasions however where courts have held that company policies do form part of the employment contract – and so each case will turn on its own facts.
The basic rule is that major changes to the employment contract (eg. changing the salary, the hours of work, or the position) can only occur where both parties agree to vary the contract. Most changes can be refused by the employee if they want to maintain their existing employment contractual arrangements.
The Fair Work Act also provides numerous protections for employees, including that an employer must not exert undue influence or undue pressure on an employee in relation to the employee’s terms and conditions of employment.
Sometimes employers may offer a pay increase but only on the condition that an employee will agree to changes elsewhere in the employment contract. This creates a dilemma for an employee – but in most instances if they want the increase, then they may have to agree to the other changes in the employment contract which the employer wants to make.
Laws in this area change from time to time. Employers are entitled (and indeed are well advised) to update and modernize their employment contracts to take into account legislative changes and changes to underlying industrial instruments such as Modern Awards or Enterprise Agreements.
If there is agreement to change a term of a contract, it is good practice to record that variation to the employment contract in writing.
Just like any other contract, where a term of an employment contract is breached, and loss is caused by that breach, it may be possible to commence proceedings. Court action in this area can be very expensive when considering the amount being disputed or potential loss, so most employment contract disputes are settled by negotiation. One area where there is a lot of litigation involving employment contracts concerns post-employment restraints and obligations (also known as “restraints of trade”). See the separate section on Restraints of Trade.
Atkinson Vinden has been advising companies and employees on employment law issues for decades. We have a team of experienced lawyers who can help you. If you have a contract law question, or would like assistance with drafting or negotiating an employment contract, please contact a member of our employment team at Atkinson Vinden on (02) 9411 4466.
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