7 Reasons to Update Your Employment Contracts

July 11, 2023
discrimination, employee behaviour, employee flexibility, employee performance, fair work act 2009, Fair Work Commission (FWC), hr managers, HRM, News
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Harrini Ratnanesan

Well drafted employment contracts are essential. They define the nature of the employee-employer relationship, and are vital for compliant and effective business operation. And whilst we all know employment terms and conditions should be reviewed regularly and adapted to meet current standards and legislative requirements, Australian case law shows we often forget or just don’t get around to updating one of the most critical documents in an employment relationship. Here are 7 key reasons you need to have a look at your employment contracts again before it’s too late and you get in hot water.

1. Our Ways of Working Have Changed and So Have the Laws!

There’s no denying COVID forced us to make incredible advances in our workplaces, and whilst we can debate the pros and cons of those advances (and whether they should stay), we can’t deny they have resulted in many changed expectations about how we work, when we work, where we will work, and so on and so forth. Add to this the most substantial amendments to Australian employment and IR laws since the introduction of the Fair Work Act 2009 over 13 years, and you’d better be sure your employment arrangements are up to date with all of your new rights, responsibilities and expectations. This includes getting on the same page as your employees about your obligations and reasonable expectations for them as demonstrated by the recent dispute between MP Sally Rugg and her Chief of Staff Monique Ryan over ‘unreasonable hours’. For more on changes brought in by the Secure Jobs, Better Pay reforms, visit our blog post here.

2. Pay Secrecy Clauses are Now Defunct

As part of the swathe of changes brought in by the Secure Jobs, Better Pay reforms, pay secrecy clauses are now unlawful and any pay secrecy (otherwise called “confidentiality”) clauses in old employment contract templates could expose you to civil penalties.

3. Fixed Term Contracts are Now Really Fixed

The new reforms also prohibit fixed term contracts which extend beyond two years with limited exceptions. These reforms don’t come into effect until 6 December this year. However, it’s important to ensure you have a plan for ensuring compliance after this date. We’ve been answering lots of questions from our clients about what this means for current fixed term contracts that will go over the two year period come 6 December, or what if I still need the work to be completed after the two year period? If you don’t need to use fixed-term labour, it might be time to consider moving away from it. If you do – you should make sure your current and future contracts don’t breach the new requirements. You can read more about the changes to fixed term contracts here. We also recommend checking out our blog on casual and permanent employees – understanding and making it clear with your employees whether they are full-time, part-time, casual or other in their employment contracts is essential!

4. New Wage Rates and Benefits Plus Increased Focus on Enforcement

2023 has seen unprecedented increases to the minimum wage in Australia (5.75%!) as well as the introduction of a number of new or additional employee entitlements such as increased paid parental leave, family and domestic violence leave. Employees are seeking (and are entitled to) more flexible working arrangements to enable them to balance their work and personal lives. With new wages laws sweeping the country, there’s no time like the present to check you are paying your penalty rates and overtime correctly to avoid any risk of civil and criminal penalties. This includes checking any offset clauses are drafted correctly!!

5. Protecting Workplace Assets and Intel

Protecting your businesses’ intellectual property (IP) and confidential information is an essential part of managing business risks. However, it can get confusing as to what constitutes IP and confidential information, who it belongs to and how you can protect it. For example, if an employee creates IP in the course of their employment that they were not hired or asked to create, who does that IP belong to? Or what if an employee who has access to highly valuable and confidential business information resigns because they are going to work for a competitor? How do you ensure confidentiality and protect your business interests?

This is often times a tricky area of employment law and there are a lot of moving parts. When it comes to protecting your workplace assets and intel through employment contract provisions, enforceable contractual terms are essential to future-proof and protect your organisation and its work. Express post-employment restraints in an employment contract should outline what actions a former employee is restricted from taking, over a specified period, upon concluding their employment. This could also include contacting former clients or asking a former colleague to come work with them at a competitor. Post-employment restraints are often not given much (if any) consideration in employment contracts, which can leave your business unprotected.

However, with lots of employees moving jobs or starting their own business post COVID, it is vital you clearly agree what post-employment restraints apply in your contracts of employments so that you can ensure your business is protected.  

Further, contrary to popular belief, in most cases when an employee resigns, employers cannot lawfully place employees on “gardening leave” (ie direct them to perform no work/contact colleagues or clients) unless there is an express term in the written contract. Accordingly, to avoid allegations of repudiating the contract of employment, you should consider including such a clause in your employment contracts, particularly for senior employees.

6. Changing Roles & Responsibilities

Whether it’s restructuring, promotions or simply changing the scope of an employee’s role – it’s good practice to introduce a new employment contract for employees when their role experiences any sort of change from the norm. Documenting the changes in a contract ensures not only clear communication of the new details for each party but also acts as a formal recognition of the change of the position description of the affected employee/employees and avoids risks of disputes down the track. Thinking about restructuring? Have a read of our blog post addressing the common FAQs around restructuring & redundancies.

7. Managing Suspensions and Terminations

Investigating and managing misconduct and poor performance can be tough enough without having to respond to complaints about how you’ve handled the process. Having clarity in your employment contracts on your options in these situations as well as what your stand down powers are and minimum notice requirements will help avoid disputes and enable you to focus your efforts on resolving any allegations of impropriety efficiently.

Next Steps

To ensure your employment contracts are enforceable, legally sound and have covered all necessary bases, it’s super important that they’re well drafted and adequately communicated to your employees. While templates or a ‘copy and paste’ job might seem like the easiest and most efficient method to creating an employment contract, it can leave you open for disputes and difficulties in the long run. A good employment contract is drafted specific to your organisation and with your business obligations and circumstances in mind. To ensure you’ve got everything you need and want in there, we recommend having a third party take helm of drafting employment contracts for you – not only does it ensure peace of mind when you’ve got experts taking charge, but it can also save you a lot of time and effort. Workplace Wizards’ employment law consultants and lawyers have years of experience in reviewing, drafting, and developing comprehensive, legally defensible, employment contracts. We can help ensure that employment contracts are up to date and meet their legal and modern award obligations, and can also make sure that the employment contract reflects the business’s best interests regarding confidentiality, disciplinary procedures, and so on.   For a quick, no-obligation consultation about how we can help your business with this matter, call Workplace Wizards today on 03 9087 6949 today or email at support@workplacewizards.com.au. Our team of Melbourne based employment contract lawyers and consultants can answer your queries, explain the particulars of employment contracts, and discuss what actions your business could be taking.