You are thinking of hiring an employee and want a written employment contract in place. You may find a lot of free resources on the internet for an employment agreement, but is a generic employment contract right for you and your business? This article discusses six key issues to consider when deciding whether to use a generic employment contract.

1. Confidential Information and Intellectual Property

Intellectual property (IP) and confidential information are valuable resources with significant financial value. However, generic employment contracts usually do not include effective clauses ensuring their protection.

Employees often have access to these assets in the course of their work. Accordingly, you should get a lawyer to craft an employment contract that includes clauses prohibiting employees from:

  • using confidential information without your consent; and
  • misusing IP against your business’ interests.

These clauses may be essential in certain industries, such as software engineering and design. For example, a well-drafted IP clause can ensure that any designs made by an employee during their employment belong to your business, rather than the individual employee. This ensures that the employee cannot take what they create for your business and start a competitor company with that work.

2. Restraint of Trade

A generic employment agreement also usually does not contain restraint of trade, non-solicitation and non-compete clauses. If they do, the clauses are often inflexible and do not distinguish between different levels of restriction that may apply, depending on the employee’s role. For example, you would generally have a stricter restraint of trade clause in an employment contract for a senior manager, compared to a general administrative assistant.

3. Nature of Engagement

A generic employment agreement also may not be tailored for the different ways in which you may hire an employee. It is important to determine whether you are engaging an employee as full-time, part-time or casual.

This classification affects an employee’s entitlements (such as paid annual and sick leave). Hiring an employee on a generic contract which does not include this classification can leave you open to liability. For example, an unclassified employee may argue they are part-time rather than casual, and lodge a formal complaint to the Fair Work Commission (FWC) or the Fair Work Ombudsman (FWO) to receive back-dated paid annual leave.              

4. Award Coverage and Rates

A generic employment contract may not include mandatory provisions under a relevant award.  Awards set out the minimum conditions of employment and pay rates for the employees it covers. The national employment standards (NES) and the Fair Work Act 2009 (Cth) also dictate the rights and obligations of employees and employers in the workplace.

The FWC recommends that businesses obtain legal advice to ensure they are hiring under the correct award and paying the correct award wages

5. Changes to Legislation and Policies

Generic employment contracts may be out-of-date or based on laws that have changed, so it can be dangerous to rely on them. As policies and legislation evolve fairly regularly, it is useful to engage a lawyer to draft a contract that complies with existing rules.

For example, changes to the Fair Work Act last year introduced higher penalties for serious contraventions of workplace laws. These changes apply to all employers and employees covered by the Act. As a result, employers had to ensure that they were not underpaying staff. A pay rate determined by a generic employment contract may not have met this requirement. Getting legal advice on wages can help protect businesses against strong penalties.

6. Dispute Resolution

Generic contracts may have general contractual provisions when it comes to dispute resolution, or not have such provisions at all. If you want to use particular mechanisms to resolve disagreements, a generic contract may not be right for you.

Downloading a free contract may seem cheaper in the short term, but it can lead to long term issues. A tailored employment contract drafted by a lawyer will include tightly-written disputes clause that follow the pathways of escalation you desire. For example, you might want employees to first raise disputes with a team leader and then human resources, rather than jumping into a formal investigation straightaway. A clearly drafted disputes clause provides clarity around the employment relationship.

Key Takeaways

Hiring a new employee can be an exciting yet daunting time for your business. A lawyer should draft a specialised employment agreement for you. This way, you can ensure you are compliant with current laws while safeguarding your business’ IP and confidential information. You will also be protecting your business from employment disputes.

If you need help drafting an employment contract tailored to your business, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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