Five Tips To Get Employment Contracts Right

- February 27, 2016 3 MIN READ

Recent high profile employment law breaches by businesses such as 7-Eleven have put employment contracts back on the agenda of small businesses. Now, more than ever is the time to ensure you have employment contracts in place which are regularly updated to comply with the law and avoid putting your business at not only legal, but also reputational risk. Here are LawyerQuote’s top tips on all things employment law.

Why use formal employment contracts?

As lawyers we are often asked questions like “do we need employment contracts if we are just a small business?” The answer is yes. A few of the benefits of written employment contracts are that they:

1. Clearly define the rights and duties of each party, so everyone is on the same page from the start.
2. Provide protection for employers (for example through restraints of trade and intellectual property clauses).
3. Reduce the likelihood of confusion and disputes about remuneration, as entitlements are clearly set out.

What should you include in an employment contract?

Here are our top 3 tips on what should be included in every employment contract:

1. A restraint of trade clause prohibiting the employee from engaging in a competing business in the area for a certain period following termination of their employment. This is particularly important where the employee has the opportunity to develop relationships with your key customers/suppliers during their employment.
2. A clause incorporating company policies into the employment contract. Without such a clause, it may be doubtful as to whether policies such as social media, drug and alcohol related policies are enforceable.
3. A clause allowing the employer to change the employee’s duties if necessary, as this will give the employer flexibility in the future.

The recent scandal involving 7-Eleven is a good reminder to employers to check that they are paying their employees correctly under the relevant award. In late 2015 it was exposed that certain 7-Eleven stores had been underpaying employees. Once that was revealed, it began paying employees the correct amounts into their bank accounts but then subsequently demanded that the employees pay 50 per cent of the amounts paid back. If the employees refused to do so, the stores would threaten them with deportation. Several 7-Eleven stores have been prosecuted, fined and ordered to pay the underpaid amounts back to employees.

To avoid ending up in this situation you need to review your employment contracts regularly to ensure that they remain compliant with the relevant award. Did you know that the minimum wage under each award increased by 2.5 per cent on 1 July 2015?

Who owns the Intellectual Property: Employers v Employees

Another question we are asked is “who owns the intellectual property created by the employee during their employment when they leave?” Intellectual property includes things like designs, know-how, patents, client lists and trade secrets, such as KFC’s seven secret herbs and spices.

As a general rule the employer owns the intellectual property, unless the employee created the intellectual property outside their normal course of duties. Employers should ensure their employment contracts carefully describe the duties undertaken by their employees to ensure it is clear that any intellectual property created by the employee will be the property of the employer.

Steps to take after hiring a new employee

After you have hired a new employee, you should:

1. Ensure they are given a copy of their fully signed employment contract (and ensure you also retain a copy).
2. Provide them with the employer’s policies and allocate them time to read through them. This is so that they cannot later argue that they were unaware of particular policies.
3. Introduce them to the team!

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