News & Events

An employment contract is generally in place regardless of whether anything has been put in writing, lawyer Ben Urry and partner Stephen Godding told a breakfast briefing in Sydney recently. But the way contracts interact with the Fair Work Act, National Employment Standards (NES) and modern awards is "not entirely well understood", Godding says. While this is not an area that has historically seen a lot of employee litigation - because of the costs involved and the perception that a claim might affect their future employment prospects - the number of claims is increasing, he says.

Urry told the briefing that rather than being a single source of rights and obligations in employment, contracts now have to be read in conjunction with other legislation and industrial instruments, including modern awards. Care is required when drafting common law contracts to avoid legal risks, as "they can either document too much or too little". He advises employers to:-

Ensure all employees have a written contract of employment. Don't rely solely on the National Employment Standards (NES) and modern awards, he warns. Many employers still have employees on verbal contracts, after employing them some years ago and never documenting anything. While that might not have caused any problems to date, employers need to bear in mind that if nothing is in writing and a claim arises, they will find it difficult "to show what they need to show to defend the claim. It becomes 'he said, she said'". Even if an employee is covered by a modern award and the NES, it's important to put their contract in writing, he says. "Another reason is the NES don't deal with things like bonuses, incentives, location of work, restraint of trade, confidentiality and intellectual property. If those things are of concern to you, you need to have them written down somewhere."
Review modern awards to ensure consistency in common law contracts. Common law contracts can't be inconsistent with any modern awards, Urry points out.
Employers need to first determine if modern awards apply to their business and if they do apply, look at what they contain, to make sure there's nothing inconsistent in contracts and HR policies. (A complete list appears on this website.) You might be paying employees monthly, for example, and the relevant modern award specifies they have to be paid fortnightly. Urry notes that modern awards change, so employers need to keep abreast of amendments and look out for "little things".
Avoid making unilateral amendments to existing common law contracts. "If you're updating contracts as part of Fair Work, make sure employees have time to review their contracts and sign them; don't just amend them and say they apply.
Employees need to look at what they're entering into."
Maintain common law contract provisions where they are more favourable than the NES. If common law contracts have provided for 15 days' sick leave, when amending them employers can't revoke that entitlement in favour of the NES's 10 days. "You can't just take that entitlement away without agreement," Urry says. "If you've been providing 15 days, you need to keep providing 15 days. "It's common sense, too, because if you're taking something away from employees rather than giving, they're more likely to arc up and do something about it."
Don't make a modern award term a term of a common law contract. "You can refer to a modern award in the contract, but don't incorporate the provisions," Urry says, because "things change". "If you've got the modern award term in your common law contract and it changes [to be more favourable to employers], you still have to comply with it. If you've incorporated it, you're stuck with it."
Tailor any restraint provisions, and be careful of consideration. A lot of employers think now is a great time to close some of the gaps in their old contracts and include restraint clauses, Urry says. But if contracts haven't previously had restraints, then without consideration paid to the employee they will "fall over" and courts won't hold them to be enforceable. "By consideration we mean if you're going to put it in, which you can do, you may need to increase the employee's remuneration or give them a one-off bonus, which shows there is some consideration for the restraint provision."
Source - HR Daily

Return