Focusing on some of the more ambiguous sections of employment contracts can help a company to limit their exposure to legal risks.
Many of the straight forward issues associated with employment contracts are related to whether they are in compliance with modern awards such as the Fair Work Act or National Employment Standards.
Here are a few preventative steps you can take to reduce legal risks in these areas:
- Have express notice provisions in place. These provisions provide a responsibility for employees to give their employer notice of their resignation. It also applies to the employer. In a recent case , Brennan v Kangaroo Island Council , the local government succeeded in defending its decision to use the relevant industry award to calculate the notice period for its former deputy CEO whose employment contract did not have a specific notice period outlined.
- Incorporate garden leave provisions. Garden/Gardening leave provisions are similar to restraint clauses but are easier to administer. If, for example, you have a three month notice period and have developed a garden leave provision, it is possible for an employee to not attend work during the garden leave period but still cooperate with the employer to attend meetings or give information and assist with the handover. The employee is unable to work with another employer during that time .The employee must be paid during their garden leave.
- Refine discretionary bonuses. If bonuses are referenced in employment contracts, it should be made clear that they will only be awarded at the employer’s discretion. The more detailed you can be about the conditions of the bonus, the more protection you have regarding when the bonus will or will not be paid.
- Make reference to policies without incorporating them. It can be precarious to incorporate workplace policies in employment contracts but it can be useful to reference them. If you do reference workplace policies in your employment contracts make sure to add disclaimers that they are not contractual.
- Continually update terms and conditions. Employee contracts should be updated following promotions or any changes to their roles. If contracts are not updated when an employee’s role has been changed it can be arguable that their contract no longer applies or is no longer relevant. This can create problems when a business is relying on the contract for protection. Specify how long the contract is valid. If you want the contract to be in force for a set period of time, specify the dates. Otherwise, the contract will continue for the life of the employment.