Contract of Employment Considerations

Contracts of employment take various forms and can be difficult for employers and employees to navigate. A contract can be made in writing, verbally, or a combination of the two. It is highly recommended that all contracts of employment are made in writing. This reduces the potential for ambiguity and confusion arising from the agreed terms and conditions.

Once a contract of employment is executed, any variation requires the consent or agreement of both parties. This often poses challenges for employers who need to make time sensitive changes to meet business requirements. Accordingly, it is important to ensure when preparing a contract of employment, careful consideration is made whether the terms and conditions allow flexibility and avoid incorporating obligations they cannot fulfil or vary.

Unilateral variations

A unilateral variation is where a contract is varied by one party without the consent of the other. If this occurs, the aggrieved party may pursue legal action for breach of contract by the other party. An employee may also make a General Protections claim under the Fair Work Act 2009 (Cth), for coercion, duress or being terminated for enforcing their existing contractual terms and conditions. Such claims, if successful, can result in significant fines for the employer and uncapped damages for the employee. Examples of unilateral contract of employment variations include, but are not limited to:

  • Reducing or increasing the number of agreed contracted hours;
  • Reducing the rate of pay; and
  • Removing or inserting a term or condition of employment.

Essentially, an employer cannot force an employee to change the terms and conditions of their contract of employment. Where a contractual change is required, the employer should consult with the employee about the proposed changes and must obtain the consent of the individual employee affected. It is recommended that any agreed variation to a contract be confirmed in writing.

Flexible terms

Contracts of employment may include a term which permits flexibility for the employer. Such clauses enable the employer to make reasonable changes to specific employment conditions. Examples of flexible terms include, but are not limited to:

  • Location of work – may direct the employee to work from a different location; and
  • Reasonable overtime – employee agrees to work reasonable additional hours when necessary.

Contracts of employment by their nature vary significantly and depending on the requirements or outcomes desired by employers, may require extensive drafting and research. Accordingly, employers should always seek legal advice when considering editing existing contracts or drafting new ones.

Extending probationary periods

While many employees successfully complete their initial probationary period, some require additional time and assistance. When this occurs, employers may wish to extend an employee’s probationary period, providing the employee with a further opportunity to demonstrate their ability to successfully fulfil the requirements of the role. It is possible to extend a probationary period where the contract permits an extension. If no such term exists, the employer cannot extend the probationary period without the employee’s consent.

Practical pointers

Employers should consider the following when preparing or changing a contract of employment:

Can I fulfil my obligations under the contract of employment?

  • Do I need flexibility for future events?
  • Do I have a record of the changes the employee and I agreed to?

Need more information about contracts of employment? CCIWA’s Employment Forms Guide or HR Business Basics Manual include template employment contracts plus much more. Contact CCIWA’s Employee Relations Advice Centre team on 9365 7660 or email advice@cciwa.com

 

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