A guide for members on employment contracts

Written employment contracts have not always been commonplace, but they are a crucial tool to protect the rights of employees and employers. They can often be confusing or overwhelming however, so it is important to be aware of what should and should not be typically included in one.

The Osteopathy HR Advisory Service is here to help all members – whether new or long-term employees, associates or business owners – to better understand employment contracts. We look at the common features of contracts and the most frequently asked questions.

WHAT IS AN EMPLOYMENT CONTRACT?

An employment contract establishes the terms and conditions of an employment relationship, and while it is possible for a contract to simply be a verbal agreement, it is best practice to have a written contract. This way both parties can be clear as to their rights and obligations and it makes it easier to resolve any future disputes.

HOW DO EMPLOYMENT CONTRACTS RELATE TO OUR INDUSTRIAL RELATIONS SYSTEM?

While an employment contract establishes the terms and conditions of an employment relationship, it cannot provide terms that are less favourable than the relevant employment legislation and industrial instrument (such as an award) which underpins it. In Australia, the most fundamental piece of employment legislation is the Fair Work Act 2009, which also contains the National Employment Standards (NES)*. In Osteopathy, the main modern award (for private practice) is the Health Professionals and Support Services Award 2020. To reiterate, an employment contract cannot provide terms which are less favourable than those provided by the Fair Work Act 2009 (including the NES) OR the Health Professionals and Support Services Award 2020.

* Note: this information applies to business in the National System and excludes unincorporated entities in Western Australia, who are covered by their state system.

Common Features Of An Employment Contract

Employment Status

The contract should outline the employee’s type of employment –permanent full-time or part-time or casual. This ensures no grey area about employee entitlements, such as leave, and notice of termination.

Further, terms specifying casual employment minimise the risk that an employee would be later deemed a permanent employee and not a casual employee.

Hours of Work

For a permanent employee, it is necessary to stipulate the number of ordinary hours of work they will perform each week, or the average hours over a set period. For a part-time employee under the Health Professionals and Support Services Award 2020, an employer is also required to agree in writing on their days of work, hours of work each day, and the start and finish time of these shifts.

Award Classification

For award-covered employees, most awards require an employer to inform their employee of their classification under the award. This classification will determine the employee’s minimum hourly rate.

Remuneration

The contract should clearly outline the employee’s rate of pay. This may be through an hourly rate, an annual salary, or a commission and retainer arrangement. Some employers may want to pay a higher rate than the minimum for all hours worked with the intention that this leaves the employee better off overall. This can be done through a “set-off clause” in the contract that specifies this arrangement.

Notice of Termination

A contract should set out the required notice that must be provided by an employer or employer if they want to terminate employment. The Health Professionals and Support Services Award 2020 adheres to the minimum notice required under the NES, in which the required notice increases in accordance with an employee’s length of service.

If an employer requires a greater notice than the minimum, it can often be more difficult to legally justify enforcing the contract term if the employee only provides the minimum notice under the award.

Lastly, the amount of notice should be the same for both parties.

POST-EMPLOYMENT RESTRICTIONS

Some employment contracts contain clauses that impose obligations on an employee to not engage in certain activities following the end of employment.

Usually, it will act to prevent an employee from working for a competitor of their former employer for a specific period within a specific area. It can also act to prevent an employee from sharing confidential information with anyone who is not authorised to have access to such information.

It is worth noting that post-employment restrictions are not automatically enforceable. To be enforced, the clause needs to be assessed and determined to be reasonable given the circumstances. This will involve the employer challenging their former employee for breach of contract and submitting the matter to the Courts or another relevant authority who will assess the reasonableness of the restraint.

WHAT CAN’T BE INCLUDED IN AN EMPLOYMENT CONTRACT?

An employment contract cannot contain terms that are illegal – either from a criminal or employment law perspective. For example, the notice period provided in an employment contract can’t be less than the minimum notice period provided for in an award. Similarly, an employment contract cannot promise remuneration that is less than the relevant award minimum rate.

If an employment contract contains illegal terms, such terms will be considered void, even if the employee has agreed to them. This is consistent with the idea that an employee cannot sign their rights away.

Recent changes from the Secure Jobs, Better Pay Bill now also prevent “pay secrecy” clauses – which used to be employed to prevent employees from discussing their pay amongst themselves.

CAN THE TERMS OF AN EMPLOYMENT CONTRACT BE CHANGED?

The terms of an employment contract can only be changed by mutual agreement between employer and employee. An employer cannot unilaterally change the contract terms without the agreement of the employee, and it is common for employment contracts to contain a term stating that any changes must come by written agreement.

WHAT IS SHAM CONTRACTING?

Sham contracting occurs when a worker is engaged as an independent contractor when the working relationship more closely resembles an employer/employee relationship. This is done either intentionally or unintentionally for the purposes of avoiding the responsibility of providing them their entitlements as an employee. There are serious penalties when an employer is found to have engaged in sham contracting – this is regardless of whether the worker claims they are happy to work as a contractor rather than as an employee.

In Summary

Employment contracts are a key employment document, so it’s crucial to get them right. The Osteopathy HR Advisory Service provides contract templates for members to access, and we also offer contract reviews for employers that want to make sure their employment contracts are legally compliant.

For more assistance, please contact the Osteopathy Australia HR Service on 1300 143 602, or via email at HRHotline@osteopathy.org.au.

Alternatively a suite of dedicated resources for members is also available at www.osteopathy.org.au 24 hours a day, seven days a week.