Good employment contracts are essential in every business. They create certainty for both the employer and the employee about what the employee is lawfully entitled to and what the employer is allowed to reasonably expect in return. This is important both during employment and in the event the employment may come to an end.
In contrast, poorly-drafted employment contracts expose an employer to significant risks. Failure to ensure compliance can expose an employer to prosecution. Most businesses – including small businesses – are covered by the Fair Work Act 2009 (the ‘Act‘). Penalties of up to $63,000 apply for each breach. Key advisors also risk personal fines for accessorial liability if they are connected to a client who breaches the Act. Employers also risk expensive and damaging employee claims or significant commercial loss if employment contracts fail protect the employer.
Better HR regularly come across poorly-drafted employment contracts. Our recent ‘contract review’ found shocking rates of non-compliance in contracts used by many employers in Australia. Of most concern, is that most of these contracts were prepared by people and organisations promoting themselves as HR or legal experts. You can read more about the shocking results of our contract review here.
This week we were asked to review another contract created by one of our competitors. The contract was for a senior manager position that is critical to the business, yet it was not obvious what an employee’s responsibilities were once they had finished with the business.
Firstly, it was not written in plain, straightforward English. It was full of legal jargon. This made the contract difficult for all parties to understand.
Secondly, it did not include a post-employment restraint of trade clause. This left the employer seriously exposed if the employee was to leave the business and work for a competitor. The employee could start working for a competitor the day after their notice period had finished, and poach staff, and there would be no obvious recourse for the employer.
In contrast, Better HR contracts are written in plain English. They include a post employment obligations clause by default.
It is critical that employers ensure they have good employment contracts in place to protect their business and ensure compliance with Australian employment laws.