An employment contract governs the individual relationship between an employer and employee.
Employment contracts can be in writing or unwritten, however it is good practice to have the terms of employment recorded in a written agreement. Written employment contracts avoid any dispute as to the terms of the employment arrangement.
An employment contract will set out the mechanics of the employment relationship and will address issues such as the role that the employee is employed to perform, where they will perform it and what they will be paid for doing it. It will regulate routine matters such as the hours of work, the individual to whom the employee reports and internal processes required when taking holiday leave, sickness absence or making internal complaints.
An additional benefit from a written contract of employment is to include terms that protect the businesses, intellectual property and confidential information from departing employees. Clauses can be inserted to ensure that the business owns any intellectual property (patents, designs, processes, etc.) created by the employee during the employment.
Restrictive covenant that act as a post-termination restraint are often included. These clauses are used to prevent employees from leaving the business to work for competitors. Such clauses are effective but require careful drafting to reflect the nature of employment, the level of risk and the rights of an employee to be able to work elsewhere. Post-termination restraints should only be drafted by a legal adviser after careful consideration of the business and the circumstances of the employment.
Although employers and employees are free to agree as to the terms of an employment contract, an employment contract cannot exclude the National Employment Standards contained in the Fair Work Act. Nor can an employment contract provide the terms and conditions that are less favourable than the minimum terms and conditions under the modern award applicable to the employment.
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Ashbrooke Law publications are intended to provide guidance and general information. They should not be relied upon as legal advice. Formal legal advice should be sought on matters of interest arising from this article.