Employment contract review lawyers
Some key points to consider when negotiating an employment contract.
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, reporting lines and remuneration package. With respect to such key aspects of the employment relationship, the employer should not have the latitude 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 to your employment contract, 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
Some employment contracts will state that the company’s policies and procedures manual is not incorporated into the employment contract. If it is the case that the employment contract does incorporate such documents, this may open up the possibility of the company amending the employment contract by 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. The clause should also state, however, that if a company policy provides a benefit to the employee [which is not provided by the employment contract], then in this instance, the company policy prevails.
It is common for company policies to confer rights or benefits on the employee which are not incorporated into the employment contract. A common example would be a redundancy policy which purports to offer generous severance payouts, but which the employment contract specifically excludes as being contractually enforceable.
In addition, some employment contracts may state that the employee must abide by company policies
“as varied from time to time”. This clearly has the potential of leaving the door wide open for the introduction of burdensome company policies. This is particularly so in the case of post-employment restraint obligations. If this occurs, you should be wary of simply working on without objecting to them, as you may be deemed to have consented to them by your conduct.
Don’t agree to policy documents you haven’t seen
You should not agree to company policies and procedures that are incorporated into your employment contract unless you have already seen these policy documents and have understood their content.
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, including age, seniority and length of tenure. Common-law reasonable notice can be quite generous and provide up to 12 months’ notice depending on these variables.
It may, therefore, be to your advantage not to bring this deficiency in the documentation to your employer’s attention. At a minimum, your rights under these termination provisions should be evaluated.
Express notice provisions are binding – but how do they work?
It is usually the case that an employment contract will contain an express notice provision setting out the termination rights of the parties. However, not infrequently, such clauses are poorly drafted and do not operate in the way that the employer assumes. In cases such as this where the termination provision is defectively drawn, this may be to your advantage and also open up a common-law reasonable notice claim. In these circumstances, it may be better to say nothing and have the argument at a later date as to how the termination provision should work.
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 on this subject on this web site. See Your Common Law Rights and Reasonable Notice Claims
Beware of restraint of trade covenants in the employment contract
You should not just passively accept an employment contract that contains restraint of trade covenants. Clauses of this nature can often be renegotiated so as to limit the duration, geographical reach, or the competing employers to which they may otherwise apply. These clauses are notorious for causing subsequent problems. If the employer is unwilling to remove the clause from the agreement, – and they usually won’t – you should at least make every endeavour to dilute its reach. Alternatively, you may be able to negotiate for the inclusion of a restraint payment clause. For further information regarding the negotiation of restraint of trade covenants, you should refer to the further information provided on this website on Restraint of Trade.
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 simple letter of appointment. Under such a loose arrangement, no provision would therefore have been made for the termination of your employment. It is often the case that you are then suddenly presented with a comprehensive employment contract which does contain an express notice clause and burdensome restraint provisions 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 employment contract, 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.
Legal advice essential
Always obtain legal advice when the employment contract is being created, varied or terminated. However, we recommend keeping your counsel and not telling your employer that you are seeking advice. It is better to allow them to believe that you are simply “muddling through”.
The review of common-law employment contracts for senior employees is a core area of our practice. If you are seeking legal advice regarding a new employment contract or an employment contract dispute, please don’t hesitate to contact us.
From our clients
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice regarding your own situation.