With the world of work changing drastically this year, the time is ripe to review employment contracts.

COVID-19 has disrupted traditional work relationships and it’s important for employers to clarify employees’ expectations. Well-drafted and individually tailored employment contracts, supported by policies and procedures, can help achieve that.

In this article, we highlight key things employers should consider when drafting or reviewing contracts of employment.  

HR needs to have a good understanding of legal contracts or you might end up in front of the FWC. AHRI’s short course, ‘Introduction to HR Law’ will set you up with the skills to stay on the right side of the law.

Don’t rely on templates

It’s easy to fall into the trap of relying on a template or boilerplate terms for your employment contracts. However, this may not be appropriate for specific employees and their circumstances. 

It’s important to get it right, because once the contract is agreed to by both parties, it’s legally enforceable and will often require written agreement from the employee to change the terms. 

This is also important for restraints of trade situations, where one of the factors a court will look at for enforceability is whether the restraint clause was appropriate in the particular case. A blanket approach to a restraint will water down your ability to enforce it.

Fit for purpose

Policies should be regularly reviewed and updated to ensure they remain fit for purpose. The importance of this was highlighted this year when a large number of workers started working from home, but many work-from-home policies likely did not contemplate such large-scale arrangements. If you haven’t already, you should review your work-from-home policies to ensure they respond to the current environment.

Terms and conditions 

Make sure you include terms in the contract that are not already set out in other applicable sources, such as the Fair Work Act (the Act), modern awards or enterprise agreements. 

Depending on the nature of the employment relationship, certain terms may not apply or may be more difficult to enforce. These terms can include obligations in respect of confidential information and intellectual property, post-employment obligations and restraints of trade, as well as restrictions on secondary employment and conflicts of interest.

Conditions such as annual leave and personal/carer’s leave are already provided for in the Act and apply to the employment relationship. There is no need to replicate these conditions unless the employer intends to provide a greater benefit above the statutory minimum (although specifically referring to the Act will make it clear to the employee how the conditions apply).

Scope of employment

It’s also important to update employees’ contracts after any significant changes to their scope of employment, such as a promotion, position change, significant pay increase or a change to duties. The risk in not keeping the contract up to date so it reflects the employee’s actual terms of employment is that a Court may find that no written contract exists, which would mean the employer cannot rely on terms such as restraints of trade.

As contracts can only be varied by consent, we recommend that employers make a promotion or pay increase (or whichever change to the employment terms) effective upon the employee signing and returning their new contract or variation.

Regulatory changes

Changes to employment law may have a significant impact on the employment relationship and require the contract of employment to be updated. For example, this year’s decision in WorkPac Pty Ltd v Rossato* should have prompted employers to review their casual employment contracts, specifically remuneration clauses, to ensure casual loading is identifiable and severable, and that there is an appropriately worded set-off clause.

Hilary Searing is special counsel and Bianca Mendelson is senior associate at Clayton Utz.

This communication is intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication.

*WorkPac Pty Ltd v Rossato [2020] FCAFC 84.

This article originally appeared in the December/January issue of HRM Magazine.