Does your employment contract have these critical terms?

At Lawlux, a lot of employment contracts come across our desk.

Many of them are poorly drafted.  Many don’t include critical terms.

In short, they expose the employer to unnecessary legal, financial and property risk.

A related question we often get is why an employer should valuable spend the time and money engaging a law firm to draft its template employment contracts.

It’s a sensible question, and we’re here to answer it. 

Australian employment laws are complex and regularly change. 

Most employers must comply with the National Employment Standards, other provisions of the Fair Work Act (ie the right to disconnect, equal pay & pay secrecy), relevant state laws and any applicable modern award or enterprise agreement.

If a national system employer gets its employment contracts wrong and there’s a contravention of federal employment laws the consequences can be significant.

The employer, directors and employees involved can face liability, penalties and even criminal prosecution. 

So engaging a law firm helps reduce that legal risk.  It minimises employee disputes, and the associated legal cost.  And it helps protect critical information, IP and client relationships.

For peace of mind, law firms also hold mandatory professional indemnity insurance.

What terms should a legally drafted employment contract have?

To assess if your current template employment contract need improvement, consider if it deals with the following:

1. The pay transparency obligations in sections 333C and 333B of the Fair Work Act.
2. Mitigating the risk of damages for psychiatric injury following the High Court decision in Elisha v Vision Australia [2024] HCA 50.
3. Excluding implied terms that limit an employer’s managerial prerogative, including to amend workplace policies and procedures.
4. Modern award coverage matters, including:
   1. If the employee is covered by a modern award.
   2. What the employee’s classification level is under the applicable modern award.
   3. If the employment contract complies with the modern award, including in relation to overtime, rostering obligations, payment terms, penalty rates, allowances, leave loading, time off in lieu and notice of termination.
   4. If the employee is being paid strictly in accordance with the award, under an annualised salary or (as is commonly the case) under a common law ‘set off’ arrangement (which requires a valid and effectively drafted ‘set off clause’).
5. Police record and background checks.
6. The existence and disclosure of pre-existing injuries to minimise workers’ compensation risk.
7. The right of the employer to vary the employee’s duties, position, remuneration, seniority, location of work and avoid the risk of an implied ‘reasonable notice’ entitlement (see Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567).
8. The right of separate corporate entities within the employer’s corporate group to require the employee to perform duties.
9. The employee’s hours of work, drafted to minimise risk under the right to disconnect, the Fair Work Act and an applicable modern award or enterprise agreement (including in relation to underpayments).
10. The legal status of workplace policies and if the employer can amend workplace policies without notice.
11. The scope of the confidential information and intellectual property clauses, particularly if they protect the employer’s critical information and inventions.
12. The extent to which the employer can direct employees to undergo medical examinations.
13. Compliance with State and Territory surveillance legislation and required employee consents with respect to IT system monitoring, camera surveillance and GPS tracking.
14. Post-employment obligations specifically tailored for the employer to prevent competition with the employer, taking the employer’s employees, and taking the employer’s clients, customers, suppliers or patients.  These clauses need to be specifically drafted for the particular employer to maximise enforceability.

If your current template employment contracts doesn’t deal with any of the matters above, it may need improvement.

If you’d like Lawlux to assist with a new template employment contract, see our upfront fixed pricing or get started with Lixo AI.

Do I need a contract for a casual employee?

A contract to employ casual employees is highly recommended.

A contract is not required by law, but a written contract will evidence the terms and conditions of employment, protect the employer’s interests and minimise its risk.

A written contract will also assist establish that the relationship is one of casual employment, and will provide the employer with additional protection if the casual employee claims they are a permanent employee.