Employment Contracts: Should I have one?
Written employment Contracts play a critical role in defining, protecting, and clarifying the employment relationship for both employers and employees. This is despite a written employment contract not being required for an employment relationship to exist.
Employment Contract Benefits for Employees
One of the greatest advantages of using a written employment contract is that it ensures an employee’s terms of employment are certain.
The Fair Work Act 2009 (Cth) (Fair Work Act) provides the minimum standards to be afforded to all employees. However, without a written employment contract, an employee may have trouble proving they are entitled to any benefits that exceed those in the Fair Work Act.
An example of an additional term that may be found in a written employment contract is a notice period greater than the minimum notice required under section 117 of the Fair Work Act.
For more information on employment conditions, please see here.
Employment Contract Benefits for Employers
An employer’s use of written employment contracts can assist with regulatory compliance. The use of template written employment agreements can ensure that an employee’s terms of employment are compliant with the Fair Work Act. However, employers should be mindful not to rely solely on template documents and take into consideration the circumstances of each employment relationship.
Written employment contracts also allow employers to include additional terms in an employee’s employment. For example, an employer may wish to include terms concerning confidentiality, post-employment restraints and expected behaviour. These are all matters not governed by the Fair Work Act.
For more information on restraints of trade, please see here.
No Employment Contract: What Next?
The existence and content of a written employment contract will become critical where there has been a breakdown in an employment relationship.
If there is dispute surrounding a written employment contract, or where a written contract does not exist, a court may need to infer the terms of an employment relationship. Such terms will generally be based on verbal statements and the conduct of the parties, which can be subjective.
Conclusion
To summarise, written employment contracts are significant because they:
Create legal certainty and reduce ambiguity around employment terms
Help ensure compliance with minimum legal standards
Protect business and employee interests
Minimise the potential for costly disputes
