What does this mean?

An employment contract must specify the type of employment relationship i.e. casual or full-time. However, it is no use specifying the type of employment if the remainder of the clauses are not conducive to the specific terms and conditions of the employee’s type of employment.

An employment contract should include clauses which provide for terms and conditions i.e. hours of work, casual conversion or remuneration that are consistent with the type of employment.

Implications of not having sufficient clauses

Where these clauses are insufficient, this can result in the employee being categorisedas a different type of employee other than what they were engaged as.

For example, if an employee is engaged on a casual basis however the employment contract is not drafted in a manner that specifies regular hours or otherwise indicates regular work arrangements, the employee may be considered as a permanent employee. As such, this employee may be eligible for various claims including unfair dismissal or underpayment of entitlements.

What does this mean?

An employment contract should include clauses that refer to the Fair Work Act 2009 (Cth) (FWA) as well as any industrial instrument i.e. Modern Awards or Enterprise Agreement which may be applicable to the employee. It is imperative to ensure that the contract is drafted in a manner which is consistent with the employee’s terms and conditions of employment and entitlements at law.

Additionally, it is important that these clauses are drafted in a manner which accounts for any future legislative amendments and changes to avoid inconsistency.

Implications of not having sufficient clauses

Where an employment contract is inconsistent with any applicable legislative provisions, this can result in the entire employment contract being rendered void. If employment contract provides for an entitlement which is less than the employee’s entitlement at law, this can trigger liability for non-compliance which can carry severe civil penalties.

Further, where the clauses are not drafted in a manner which accounts for future legislative changes, this will create inconsistency, requiring regular updates to the employment contract as well as potential non-compliance with applicable legislative provisions.

What does this mean?

Well drafted intellectual property clauses ensure that business owns any intellectual property rights to the works that your employee creates or contributes to while working.

Implications of not having sufficient clauses

Your employee, not your business, may automatically own intellectual property without an appropriate intellectual property clause.

What does this mean?

A well-written set-off clause lets your business subtract entitlements from the employee’s annual salary (excluding super). The employer must pay the employee more than the Award/Enterprise Agreement/National Minimum Wage rate (plusany owed entitlements) for this to occur lawfully.

Implications of not having sufficient clauses

If you don’t use a set-off clause, your business may have to pay entitlements in addition to the employee’s salary. Where your business is not sufficiently paying these employee entitlements, the Fair Work Ombudsman and State/Federal courts can impose severe fines or penalties for any underpayments of wages and entitlements.

What does this mean?

Company policies may include the handling of confidential information, workplace conduct or other processes the employee must adhere to.

If you have company policies, the employment contract requires employees to follow them.

However, the clause must be well-drafted to strike the correct balance between requiring compliance whilst ensuring that they do not form part of the contract.

Implications of not having sufficient clauses

Where incorrectly drafted or insufficient, you may have to amend or update every employee’s employment contract each time you wish to amend or implement a new workplace policy and procedure. In other words, you cannot require employees to comply with the updated or new policies and procedures without also updating the employment contract.

What does this mean?

Well drafted termination clauses should explain how the employment relationship can end. It should provide for termination as a valid disciplinary action in a variety of circumstances in order to protect your business from potential liability from any claims regarding dismissal.

Implications of not having sufficient clauses

Where an employment contract has insufficient or does not contain clauses regarding abandonment of employment or termination, this may restrict your right to terminating an employee and increase the risks of liability against your business.

What does this mean?

Restraint of trade clauses e.g. non-compete clauses are notoriously difficult to enforce against an employee. These clauses can apply both during and after the employment relationship.

These clauses deal with canvassing, soliciting and poaching of employees, clients, customers and other business relationships. However, this largely depends on the sufficient drafting of such clauses including any applicable geographical and time period restraints.

Implications of not having sufficient clauses

Where the contractual terms are insufficient or overreaching, your employee may be permitted to join a competitor, poach, steal or otherwise frustrate your sacred business relationships i.e. with clients, customers, subcontractors and even other employees.

What does this mean?

These clauses refer to the employee’s obligations regarding the use and disclosure of confidential information.

Confidential information can be extremely broad and a well drafted contract can provide your business with the ability to determine what ‘confidential information’ means, as well as bolster the protection of such information.

Implications of not having sufficient clauses

Where the employment contract does not sufficiently define and protect the disclosure of confidential information, your employee may be permitted to use such information to join a competitor or otherwise cause a detriment to your business.

What does this mean?

An employment contract should sufficiently define the employee’s specific and general position duties.

However, it should be drafted in a way which is conducive to the manner in which the contract is actually performed and the business’ day to day operations. It is not uncommon for an employee’s work duties to change. As such, the contract should provide your business with the discretion to alter the employee’s duties where appropriate and lawful.

Implications of not having sufficient clauses

Where the employment contract does not provide adequate clauses regarding position description and duties, you may be restricted from changing an employee’s duties when necessary. For example, your business operations require you to assign additional responsibilities to an employee, however you do not wish to offer the employee a pay increase for these additional duties.

What does this mean?

These clauses deal with any skills, experience, qualifications, licences, certifications or other pre-requisites for the employee’s position. These clauses should be drafted in a manner which provides your business with the ability to implement disciplinary action (including termination) where the employee has misrepresented their experience, skills, qualifications, licences, certifications or other pre-requisite.

Implications of not having sufficient clauses

If an employee has lied or otherwise misrepresented that they possess specific experience, skills, licences, qualifications or certifications you may be restricted from taking any appropriate disciplinary action where you would otherwise be permitted to do so. For example, if an employee has lied about their experience or qualifications on their resume.

What does this mean?

Contrary to popular belief, probation periods are separate and distinct from the “minimum employment period” under the FWA[1]. However, an employment contract should include sufficient probation clauses which provide your business with protection in specific circumstances. Similarly, an employment contract should always include sufficient notice clauses which are consistent with the FWA and provide for separate notice periods regarding termination of employment during and outside of the probationary period.

Implications of not having sufficient clauses

Insufficient probationary period clauses may prevent you from terminating an employee during the probation period, which may have otherwise been permitted.

Insufficient notice period clauses which are inconsistent with the FWA can expose your business to liability for a claim in the Fair Work Commission. Additionally, if an employee’s contract provides for a greater notice period than their entitlement under the FWA, then you must still provide the employee with the greater notice period as set out in the contract.

As such, where you are paying an employee in lieu of their notice period, you can find yourself obligated to pay a notably higher amount than the employee would be otherwise entitled to at law. For example, if the employee is only entitled to 2 weeks’ notice at law, but the contract provides 6 weeks’ notice, you must pay the employee 6 week’s wages in lieu of notice.