At the core of every employment relationship is the employment contract. The employment contract is a binding agreement between two parties in which an individual agrees to perform work in return for payment.

As with any contract, the law requires certain conditions to be met before it will recognise an employment contract. Those conditions are:

1. There must be an offer of employment which is accepted by the prospective employee.

2. Each party must provide consideration in return for the obligations undertaken by the other party

3. The parties must have intended to enter into a legal relationship

So, what is the best practice approach to developing employment contracts that will protect the needs of your business?

Do employment contracts have to be in writing?

A contract can be in writing or verbal.

While it is strongly recommended that a written agreement always be put in place when engaging an employee, in the absence of such a document, an employment contract can develop based on the conduct of the parties (ie. if someone is performing duties for your business, excluding genuine contractors, it is more than likely that an employment contract exists).

Regardless of whether a written or verbal employment contract is in place, there are a number of a number of implied duties that exist for both parties to an employment relationship. These duties include:

• The requirement for an employee to follow lawful and reasonable directions
• The duty of fidelity
• The duty of an employer to provide a safe working environment.

Why have a written employment contract?

Regardless of whether you are a small, medium or large business, it is essential that a well-drafted employment contract be in place for every employee.

A written employment contract will help to ensure that the rights and obligations of each party are clearly understood. This will help reduce the risk of any misinterpretations or misunderstandings which could potentially put the business at risk.

What should be included in a written employment contract?

Where an employee is covered under a Modern Award or Enterprise Agreement, that Award / Agreement will establish the minimum wages and working conditions of the employment. The Award/Agreement will operate in conjunction with the employment agreement.

The terms of an employment agreement are also subject to the National Employment Standards (NES).

While an Award/Agreement and the NES will set out details of the employee’s working conditions and entitlements, the employment agreement will set out the specific details relating to an employee’s engagement. Such details should include:

• Employment type (Fixed Term, Full Time, Part Time, Casual etc)
• Commencement date
• Period of employment if fixed-term
• Agreed hours of work, and when the work is to be performed
• Location of work
• Agreed remuneration
• Payroll Frequency
• Probationary Periods (where applicable)
• The requirement to hold any specific industry licenses or professional registrations which are required to perform the role
• Post Employment Restraints
• Confidentiality Provisions and Intellectual Property

Employment contract wording and language does not need to be complicated or legalistic. The simpler and plainer the language used, the more easily the contract can be understood by all parties.

What should not be included in an employment contract?

The employment agreement should not contain any provisions which are ambiguous, contradictory, discriminatory or that are non-compliant to law or an applicable industrial instrument.

It is recommended that the following provisions are not included within an employment contract. Should you choose to include such provisions, they will become binding contractual terms to which you could be legally bound to

• Explicit details of bonus or incentive schemes – While an employment agreement could refer to an employee being eligible to participate in a bonus/incentive scheme, it should be made clear that any such scheme is discretionary. Where a bonus or incentive is expressly included in the contract, as an employer, you may not unilaterally vary or remove the bonus.

It is recommended that specific details relating to the bonus/incentive scheme be documented in a policy or separate document (again which clearly sets out that it is a discretionary bonus/incentive).

• Policies or procedures – Although workplace policies and procedures are essential documents to have in place, they should not be incorporated into the terms of an employment agreement. If the policies are included as a contractual term, as an employer, you would be unable to vary or terminate the policy without obtaining the agreement of the employee.

While a provision setting out the requirement to comply with company policies can be included, it should be clearly stated that the policies do not form part of the employment contract.

As the Employer, can I change an employment agreement?

An employment agreement can only be varied by consent between the employer and an employee (i.e. an employer cannot unilaterally change an employee’s employment agreement without the employee’s consent).

For assistance with your obligations regarding risks in the workplace or any other HR matter, please contact us at advice@stg.hradviceonline.com.au.au or 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.

The Fair Work Commission (FWC) has found that employment ended due to the cessation of an unsigned fixed term contract rather than the claimed unfair dismissal argued by the employee.

An executive manager engaged on a five-year fixed term contract claimed general protections that his employment was terminated arguing: –

• The employer contravened various parts of the Fair Work Act in terminating him
• Fixed term contracts were widely used by their employer and seldom ceased on expiry
• The contract was unsigned
• The contract did not contemplate termination of the employment relationship on expiry

The employer argued jurisdiction based on the employment arrangement simply ending at the cessation of the fixed term and provided the following reasons for not offering an extension or new contract:-

• Negative feedback from his colleagues
• The Manager’s lack of commitment to the employer’s new cultural program
• Discovery that the manager had failed to escalate serious staff and cultural issues
• The Manager’s failure to submit updated KPIs for his 20/21 performance plan
• The Manager spread unfounded rumours about a director.

The Manager was also offered time off to arrange alternative employment or apply for other vacant roles at the employer.

The Manager claimed that when he questioned why his employment would end, he received vague responses including that his team were being difficult to deal with, and a need for restructure and realignment.

The employer argued that they were under no obligation to offer continued employment and were not prepared to do so.  Further argument was although the contract was unsigned, the employee had adhered to its terms and worked in accordance with its provisions for 5 years.

In addition, funding, budgets and the needs of the employer were used to determine the engagement of senior managers.

In response, the Commission deemed that the Manager was aware of the contract terms finding that the Manager simply stated that he could not recall receiving a copy, that the contract held by the employer had been amended at the request of the manager evidencing his receipt of the contract at commencement of employment, and his acceptance based on his specific performance of the role within the contract and the receipt and acceptance of the associated benefits.

In determining if there was any ‘promise’ of ongoing employment, the Commissioner found that the assertions of the manager being asked to prepare plans for staffing and resourcing 5 to 10 years into the future, did not represent a promise that he would be provided a further contract.

The jurisdictional objection of the employer was upheld. The employment ceased in accordance with the contract terms and the employee was not dismissed.
 

For assistance with your long service leave obligations or any other HR matter, please contact us at advice@stg.hradviceonline.com.au.au or 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.

Two important High Court decisions have emphasised the importance of having clear contractual terms when characterising workplace relationships as being that of a contractor. The cases further highlight the need for employers to ensure that contracting arrangements are genuinely that of an independent contractor in practice and not of an employment relationship.

Below we review the two cases which highlight that Courts will determine the nature of an individual’s working relationship in line with the written terms of the agreement and the rights and obligations of the parties under that contract, as well as the nature of the engagement in practice.

Case 1 – ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2

The Jamsek case concerned two truck drivers who were engaged by ZG Operations Australia to deliver their goods. Although each of the truck drivers had previously been employed by ZG Operations Australia directly, they both began providing services to ZG through a partnership in the mid-1980s. This change occurred at the suggestion of ZG Operations Australia.

The engagement arrangements between ZG Operations Australia and the partnerships were updated over the years with new agreements issued. In each case the truck drivers, through their respective partnership:

• Entered into an agreement with ZG Operations Australia to deliver their products;
• Purchased a truck to be used in the deliveries;
• Were responsible for all running costs and other expenses associated with the trucks, including insurances, with relevant deductions claimed by the partnerships for tax purposes;
• Declared the net revenue received from ZG Operations Australia as partnership income; and
• Split the income received from ZG Operations Australia for the deliveries with their spouses.

After the agreement was terminated in 2017, the two truck drivers initiated proceedings in the Federal Court of Australia claiming they were actually employees of ZG Operations Australia for the entire period and sought entitlements that were owed to them as employees under the Fair Work Act 2009 (Cth). The truck drivers further sought entitlements under applicable superannuation and long service leave legislation.

The first judge found the truck drivers to be independent contractors, however this decision was overturned on appeal to the Full Federal Court which found that the truck drivers were employees. On further appeal, the High Court found that the truck drivers were not employees but were members of a partnership which provided a delivery goods service to ZG.

In making its findings, the High Court emphasised that:

• It was the partnerships, not the individual truck drivers, who owned and operated the trucks and contracted with ZG Operations Australia;
• it was the partnerships who:
  • invoiced and received payments from ZG Operations Australia,
  • incurred expenses associated with the ownership and operation of the trucks and
  • which took advantage of the tax benefits associated with this operational structure;
• the obligation under an agreement to undertake the carriage of goods “as reasonably directed” did not confer a power of control by ZG Operations Australia over the truck drivers but rather enabled ZG Operations Australia to give directions to make deliveries. It did not provide ZG Operations Australia with power as to how the deliveries should be made.

Case 2 – CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1

The Personnel Contracting Case involved a 22 year old British backpacker, Mr McCourt, who performed labouring work for Personnel Contracting in 2016. 

Mr McCourt signed an Administrative Services Agreement with Personnel Contracting in which his engagement was described as being a “self-employed contractor”. This Services Agreement prescribed that Mr McCourt:

• was to attend the host employer’s site at nominated times to supply his labour;
• was to supply his own hard hat and boots, but that all other equipment was supplied;
• was subject to the supervision and direction of the host employer’s employees while on the host employer’s site; and
• was to provide invoices to Personnel for the work completed and Personnel would pay him accordingly

The separate Labour Hire Agreement between the host employer and Personnel stated that the workers placed by Personnel would be “independent contractors” and the pay rates were determined between these parties.

In June 2017, Mr McCourt was told by Personnel that he was to cease work at the host employer’s site and was not provided with any further work from Personnel. Proceedings were commenced in the Federal Court, with orders for compensation sought on the basis that Mr McCourt was an employee of Personnel but had not been paid his entitlements as an employee. The first judge held that Mr McCourt was an independent contractor and an appeal to the Full Federal Court was dismissed. However the High Court found that Mr McCourt was an employee of Personnel.

In making its findings, the High Court emphasised that there was no reason the rights and obligations contained in the written agreement between the parties should not be decisive of the character of the relationship, given the terms of the parties’ relationship were comprehensively embodied in a written contract of which the validity was not challenged. The High Court considered that a ‘label’ such as “independent contractor” was not determinative, or relevant, to how the rights and obligations contained in the Services Agreement were characterised. 

The Court further found that:

• Mr McCourt was not carrying on his own business
• that the core of Mr McCourt’s obligations under the Services Agreement was to undertake work as directed by Personnel or the host employer. 

Due to the terms of the Services Agreement, Personnel was considered to be a labour hire business, having authorisation to determine Mr McCourt’s pay rate, provide him with payment for his work and terminate his engagement if he failed to obey its directions, or those of the host employer.

By determining which host employer Mr McCourt was referred to undertake work, Personnel was both exercising and commercialising its right to control what work Mr McCourt would undertake and how he would do it.

The above High Court decisions reinforce that the starting point in determining how a relationship is characterised is by reference to the written terms of an agreement and the rights and obligations embodied in it. Provided that the validity of the contract itself is not in dispute, there is no need to apply an expansive approach in determining the reality of a relationship with reference to post-contractual conduct. However it is essential that contractor agreements specify clearly and accurately the legal rights and obligations of the parties so the nature of the nature of the engagement is characterised correctly.

Organisations who do engage contractors are encouraged to consider and review their existing contractor arrangements and documentation to ensure they are suitable. Consideration should be given to whether the terms of contractor agreements adequately reflect:

• the nature of the relationship in practice; and
• a true independent contracting relationship (with reference to factors such as control, delegation, ability to work for other businesses and provision of equipment);

and whether the contracts contain appropriate offset provisions and other protective indemnities.

Despite these two High Court decisions, when engaging individuals on a contractor basis, businesses do need to ensure that a person is not engaged as a contractor when the relationship is genuinely that of employer/employee for the purposes of avoiding paying entitlements such as super, leave and workers compensation. Such arrangements would be deemed to be sham contracting and be a breach of the Fair Work Act 2009 with serious penalties for contraventions.  Under the Sham Contracting provisions of the Fair Work Act 2009, an employer cannot;

• misrepresent an employment relationship or a proposed employment arrangement as an independent contracting arrangement;
• dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor;
• make a knowingly false statement to persuade or influence an employee to become an independent contractor.

The engagement of contractors is a commercial matter, and the ultimate decider as to whether a person is an employee or a contractor is the Fair Work Ombudsman, the ATO and the Courts. We recommend advice be sought from your legal or business advisor prior to entering into a contracting relationship. In the event that you engage an individual as an employee, rather than a contractor, HR Advice Online can advise regarding the appropriate terms and conditions for their engagement. Should you require support regarding any HR matter, please contact the team at HR Advice Online at advice@stg.hradviceonline.com.au.au or on 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.

In this article we look at Court orders and their impact for your business in the workplace.

Court orders that restrain an individual or individuals can include an

• Apprehended Violence Order,
• Personal Intervention Order, or a
• Restraining Order. 

These orders are either

• Domestic relating to a personal relationship between the parties; or
• Personal relating to parties not related to each other.

Where such orders can impact the workplace, employers are required to comply with the terms of the order, which will include restrictions on contact between parties.

Examples of where restraints can impact the workplace include

• Two employees who work at the same employer and have a relationship end and one has an order against the other.
• An employee who had a relationship with a client or individual where their usual work would take them has an order in place.
• Workplace bullying resulting in an order taken against an individual following threats or physical violence.
• Employees married or in a relationship involving domestic violence.

Where an employer is required to comply with the circumstances of a restraint, considerations should be given to

• Physically separating the employees
  • Transferring one employee to another location.
  • Hybrid work arrangements where one is offsite while one is onsite; or
  • Dependant on the specifics of the order, relocating an employee to another floor or area of a workplace to ensure no contact occurs.
• Preventing email and phone contact between the parties (where reasonably practicable);
• Providing a warning to the employee who has the restraint order against them that any breach within the workplace can result in termination of their employment; and
• Ensuring all relevant stakeholders are aware of the restraint provisions to assist with compliance.

Should compliance with an order/s prevent an employee from being able to perform their role or is deemed a risk to the health and safety of others within the organisation, there may be grounds for termination. 

It is important to remember that due process must be followed when considering any action that may include termination of employment.

For assistance with your obligations regarding due process or any other HR matter, please contact us at advice@stg.hradviceonline.com.au.au or 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.

A modern award is a document that sets out the minimum terms and conditions of employment in addition to the National Employment Standards (NES). Modern awards came into effect on 1 January 2010.

Modern awards are industry or occupation-based and contain a coverage clause (usually clause 4) which clearly describes the type of work and therefore workers covered by that particular award. All workers are covered by the National Employment Standards regardless of their award coverage.

Managers or higher income employees may not be covered by an award. If an employee’s employment is covered by a modern award or a transition instrument, the person can have earnings of more than the high-income threshold and still be within the jurisdiction of the Fair Work Commission.

If the business is covered by a registered agreement, usually the conditions of the modern award will no longer be relevant. However, the base rates of pay must meet or exceed the applicable modern award.

All employers and employees are responsible for keeping up-to-date with the modern awards, any transitional arrangements and future changes (for example to the annual minimum wage).

If you require advice or assistance regarding modern award coverage or support regarding any HR matter, please contact the team at HR Advice Online at advice@stg.hradviceonline.com.au.au or on 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.

Policies and procedures, when written well, provide the framework for a company’s entire operation.

They provide many benefits which may include

• Insights into company values and ethical standards.
• Clarity of behavioural and performance standards expected of all employees.
• Rules and guidelines for decision-making in routine situations.
• Provide consistent and clear responses across the company to address various situations involving employee relations.
• Demonstration in good faith that employees will be treated fairly and equally.
• Clearly outlines the procedure of dealing with complaints and misunderstandings fairly.
• Framework for delegation of decision making.
• A means of communicating information to new employees.
• Protection from breaches of employment legislation.

Importantly, having workplace policies and procedures in place is only useful if, they have been properly implemented and are continuously monitored.

 

Procedures are different from policies in that they provide a step-by-step guide on how to perform a certain task or operation in a business.  It is important that both Managers and Employees understand the correct process when performing a task or operation to ensure that the service or product is maintained at the highest quality. Procedures also assist in the reduction of delays and mistakes.

 

Policies are a Company Statement outlining standards of behaviour or limitations.  Policies typically cover any legal or ethical concerns related to a type of business or employment situation. Policies help protect employees from making decisions that could lead to both personal and company legal repercussions.

 

With regard to safety, policies and procedures should provide for the physical and emotional safety of employees. A well written procedure will include proper safety gear to be worn, proper use of equipment, and a step-by-step guide detailing how to perform the task safely. These procedures help prevent serious injury or death. Additionally, companies often have policies against bullying, harassment and workplace violations as a way of reducing the number of incidents and managing the associated risks.

 

For assistance with policies and procedures or for any HR matter, please contact us at advice@stg.hradviceonline.com.au.au or 1300 720 004.

 

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.