Employment Lawyers for Australian Executives

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+61 3 9653 9123

17th June 2022

Call 1300 789 302

17th June 2022

  • Fast Facts
  •     How to avoid the 10 most common mistakes made by executives
  •     Employment Contracts
  •     Redundancy Entitlements
  •     Bonus Plans
  •     Wrongful Termination and the Law of Contract
  •     Restraint of Trade Covenants
  •     Deductibility of Legal Expenses
  •     The Fair Work Act 2009 – Unfair Dismissal and Implications for Executives
  • Emergency Checklists
  •     10 things you need to know if you are facing possible wrongful termination
  •     10 Basic rules to follow if you are confronted with a disciplinary meeting
  • Expatriates - Employment Law Issues
  •     Australian employment law and the Fair Work Act 2009
  •     Negotiating an Expatriate Employment Agreement
  • Employment Contract Review

Employment Contracts

When negotiating an employment contract, there are a number of points to consider. The following list is not exhaustive but represents some of the key issues:

Do not allow unilateral changes to key provisions of the employment contract without your consent

Be sure to reach a clear agreement on your position title, duties and responsibilities and the person to whom you report. Under no circumstances should the company be allowed to unilaterally change any of these components without your prior consent.

The company may seek to reassure you that they will “consult” with you regarding any changes to these components. However, “consultation” is not the same thing as “agreement” and it is the latter that you should be insisting on.

If, notwithstanding your insistence, the company is only prepared to offer a consultation process before making any of these fundamental changes, then you at least know where you stand. In these circumstances, you need to realise that the company could at some future time effectively demote you, even if they do not reduce your remuneration package.

Beware of Company Policy and Procedures Manuals

Be wary of any employment contract that says that the company’s Policies and Procedures Manual is incorporated into the terms and conditions of your employment. This may be another way of saying that the employment contract can be varied by the company simply amending its manual. Any provision to this effect should be subject to a clause that provides that, if there is a conflict between the agreement and the manual, the agreement prevails.

Simple employment contracts may create valuable common-law rights

Some employers are reluctant to commit themselves to a formal employment contract. They will often provide a simple letter of appointment outlining basic terms and conditions of employment. This can often be to your advantage, as many letters of appointment fail to deal with the issue of notice.

The general rule in employment law in Australia is that, if parties have entered into an employment contract but have failed to deal with the issue of notice, the courts will imply a term of reasonable notice. What is “reasonable” will depend on a variety of factors, but common-law reasonable notice can be quite generous and provide up to 12 months’ notice depending on your seniority.

It may, therefore, be to your advantage not to bring this deficiency in the documentation to your employer’s attention. For a further discussion on the value of common-law reasonable notice, and how you may take advantage of it, you should refer to the information provided with respect to common-law rights on this web site.

Beware of restraint of trade covenants

You should not just passively accept an employment agreement that contains restraint of trade covenants. These clauses are notorious for causing subsequent problems. If the employer is unwilling to remove the clause from the agreement, you should at least make every endeavour to dilute its reach. For further information regarding the negotiation of restraint of trade covenants, you should refer to the Fast Facts on this web site which deal with restraint of trade covenants.

How common-law rights are often lost

You may have already been employed by the company for many years on nothing more than a handshake or, at best, a letter of appointment. Under such a loose arrangement, no provision would therefore have been made for the termination of your employment. One day you are suddenly presented with a comprehensive contract of employment which does contain an express notice provision and asked to sign it. You are reassured that this is a requirement of the new HR Director and that everyone else in the company is also being asked to sign the same or a similar document. What are the implications of signing this agreement?

Prior to the arrival of the new contract of employment, your termination rights would have been governed by the common law. This means that you would have valuable common-law reasonable notice rights in the event of your termination. Almost certainly, by signing the agreement, you would extinguish these rights.

In addition, the employment contract will almost certainly have post-employment restraints preventing you from working for another employer in a similar industry. Again, under your original letter of appointment, the chances are that there were no such post-employment restraints.

Don’t agree to policy documents you haven’t seen

Do not agree to company policies and procedures unless you have already seen the documentation and have agreed to the content of those documents.

Express notice provisions are binding – but how do they work?

It is important to realise that you will be bound by any notice provision contained in the employment contract. The termination provision needs to be examined carefully to determine under what circumstances it operates. It is often the case that termination provisions are defective. In these circumstances, it can be to your advantage not to bring this to the employer’s attention, but to simply allow the employer to proceed on the assumption that they have the power to terminate your employment without the payment of compensation.

Legal advice essential

Always obtain legal advice when the employment contract is being created, varied or terminated. However, don’t let your employer know that you are seeking advice. It is better to allow them to believe that you are simply “muddling through”.

See also:

Negotiating an Executive Employment Contract