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When offering employment to a new employee, it is important to ensure the employment agreement comprehensively covers all items relevant to the different stages of employment and anticipates possible risks. If you are reviewing an existing employment contract or using a free template online, you should review it before providing it to the new employee to avoid uncertainty and disputes. This article explains:

  • how to make sure you are providing the right type of agreement; and 
  • what key terms to note.

Type of Employment

There are two main types of employment

Providing the wrong agreement or an agreement that includes terms that are relevant to both types can create both uncertainty and risk. 

For example, suppose a casual employee has entitlements relevant to permanent employment outlined in their agreement (such as a four week notice period). They may argue that (along with other factors) is indicative of permanent employment and that they should have an entitlement to all permanent entitlements (such as paid leave).

Permanent employment, which can be part-time or full-time, means the employer agrees to provide, and the employee agrees to work, a specific number of hours each week. The employee has entitlements such as paid leave, a notice period and generally more onerous obligations under the agreement, including restraints.

Where an employee is casual, the employer has no obligation to offer shifts. Further, the employee has no obligation to accept them. The agreement should reflect this, confirming the casual employee receives a casual loading in lieu of permanent entitlements.

Compliance with the Fair Work Act

The Fair Work Act 2009 (Cth) (the Act) does not require you to include specific terms. However, it is useful to ensure that the terms in your agreement are not inconsistent with the Act so that it does not render a specific clause or the agreement unenforceable.

Probationary Period

It is useful to have a probationary period for a permanent employee. This allows the employer to terminate with a shorter notice period than the one that applies after the probationary period. It is also useful to put the employee on notice that you are assessing the relationship. You can decide how long you would like the probationary period to be. For the notice period to be one week, the probationary period can be up to 12 months.

Notice Period

For a permanent employee, it is crucial to specify the notice period. Where the contract does not specify the notice period, the parties may argue on termination about its length and what amounts to ‘reasonable notice’. Therefore, it is simpler and risk-free to specify what it means in the agreement. You can decide how long you would like the notice period to be, so long as it is more than the following minimums (or the minimums in any applicable award).

Period of continuous service 

Minimum notice period

One year or less

One week

More than one year – three years

Two weeks

More than three years – five years

Three weeks

More than five years

Four weeks

Employees over 45 years old who have completed at least two years of service when they receive notice are given an additional week of notice.

For a casual employee, the employment starts and ends at the start and end of each shift. The parties have no obligation to offer or accept any shifts. On that basis, the notice period is relevant if a party chooses to end the employment during a shift.

Remuneration and Set-Off Clause

You should ensure the agreement includes the remuneration and whether it includes superannuation. If it is intended that the employee will work reasonable additional hours to their ordinary hours of work (for example, 38 hours for a full-time employee plus reasonable additional hours), it is key to have a clause that acknowledges this. This clause should also confirm that their remuneration includes such additional hours. Similarly, for employees who are award-covered, the agreement should include an offset clause confirming that the remuneration includes items such as overtime or penalty rates (or otherwise an annualised salary clause if relevant).

Confidentiality

In addition to employees’ confidentiality obligations at law, it is useful to include a clause in the agreement which confirms: 

  • what amounts to confidential information; 
  • that employees are prohibited from disclosing confidential information; and
  • that employees must take reasonable steps to ensure that confidential information remains confidential.

You should also include an indemnity clause for breach of employees’ confidentiality obligations.

Intellectual Property

For many employees, the value they provide is the intellectual property they create for the employer. Therefore, you should review the employment contract: 

  • so that intellectual property is defined broadly; 
  • to confirm any intellectual property created in connection with the employment vests in your business; and
  • to include that the employee agrees to do anything to ensure the intellectual property is assigned to you.

Restraints

Restraints prohibit employees from: 

  • working for competitors;
  • poaching clients or suppliers; and 
  • poaching the employer’s other workers during and for a period after the term of the employment. 

Courts are reluctant to enforce restraints. Therefore, if there are none in the agreement, it is unlikely any restraints will apply. On that basis, you should review the restraints to ensure they are included and drafted in a way to make them likely to be enforceable. 

Restraints are more likely to be enforceable in circumstances where they are reasonable to protect a business’s legitimate business interests. You should consider whether they: 

  • are reasonable for each employee’s specific circumstances;
  • include a cascading clause for the restraint area and restraint period; and 
  • include acknowledgements that speak to relevant case law.

Surveillance

Although the relevant legislation varies from state to state, it is generally useful to have a clause that notifies the employee that you may conduct intermittent and ongoing surveillance. This can assist you in circumstances where, for example, you undertake an investigation for harassment, and you wish to review an employee’s IT systems.

Key Takeaways

The employment contract outlines the commercial terms agreed between the parties. It also avoids uncertainty and associated risk for the duration of employment and upon the termination of employment. You should ensure you have the right agreement for the type of employment the employee will undertake and ensure it includes: 

  • a notice period (including during any probationary period); 
  • a clause specifying the remuneration and what it compensates the employee for;
  • confidentiality and IP clauses; and
  • terms relating to restraints and surveillance.

If you need assistance with reviewing or preparing an employment contract to ensure that it is compliant and includes key terms, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What should be included in an employment contract?

When reviewing an employment contract, you should ensure that it clearly outlines the commercial terms agreed between the parties, to avoid uncertainty and risk.

What is a probationary period?

A probationary period allows the employer to terminate with a shorter notice period than what usually applies after the probationary period. Therefore, this is a good idea for permanent employees in order to provide security if they are not the right fit.

Is a surveillance clause necessary?

When reviewing an employment contract, it useful to check that you have a clause that notifies the employee that you may conduct intermittent and ongoing surveillance. This helps protect your business in circumstances where you may wish to use surveillance as evidence in response to a claim against an employee.

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