Employment Contract Fundamentals
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Employment contracts sets out the terms and conditions of employment between an employee and employer. For a contract to be binding, there are four elements involved:
An offer
Acceptance
An intention to create a legal relationship
Consideration (remuneration)
What should be Expressly Stated?
There are a number of clauses that should be present within a employment contract, including:
Position
Employment Status
Remuneration
Confidentiality and Intellectual Property
Restraints
Pre- employment conditions
Notice of Termination
Post-employment Obligations
Additionally, there are terms that can be implied in the employment contract by law, fact, custom and practice. For example, duty to follow lawful and reasonable directions (for employees) and duty to provide wages (for employers).
What are some Common Mistakes?
Employers can make several mistakes when it comes to having effective employment contracts in place, including:
Not having a written employment contract in place.
Probation Period: failing to understand that the probation period does not have the affect of altering any applicable ‘minimum employment period’ under the Fair Work Act 2009.
Termination: lack of information on notice period for each party to terminate the employment and any situation where the employer may need to terminate the employee.
Hours of Work: failing to set out the number of hours the employee will be expected to work and whether or not the remuneration paid by the employer covers all hours of work.
Company Policies and Procedures: failing to expressly state that workplace procedures and policies do not form part of the contract.
Set-off clauses: failing to carefully draft clauses having regard to applicable legal principles.
Restraints: failing to tailor these to suit the business.
Governing Law: failing to outline the State or Territory in which the employer is based.
Compliance with Other Instruments
The Fair Work Act and other instruments such as modern award or enterprise agreement also apply to the employment relationship as a matter of law.
Employment contracts do not displace or change the minimum standards that employees are entitled to under the Fair Work Act or other instruments.
An employment contract and a modern award or enterprise agreement can co-exist with the employment contract supplementing terms and conditions of employment which exist at law.
Moreover, employers should be aware of:
Contractual incorporation of terms
Inconsistencies in terms and conditions of employment.
It is also essential for employers to periodically review contracts to ensure compliance with changing legislation.