Contracts Explained

Chapter 32: Contracts of Employment An employment contract between an employer and an employee is similar to other forms of common contract, but there are additional special rules applied via statute law and common law. If a person is to work only as a volunteer, there should be clear documentary evidence to that affect, otherwise a contract of employment may arise. The law differs between jurisdictions, and also between industries and professions. The following comments provide a general understanding of the nature of a contract of employment, but do not cover the complexities of employment law. People often do not really consider the terms of their employment contract until there is a breach or issue to be resolved. Despite the existence of standard documents and terms, every employment contract should be regarded as unique. The best approach to resolve differences and uncertainty is to produce a consolidated written agreement or Induction Manual before there are any problems to negotiate. A contract of employment can be understood by following the process of establishing the contract and by examining the documents involved. The normal process consists of the following steps: • Invitation. Usually the employer makes an invitation, which consists of advertisements, a job or position description, and perhaps a performance agreement. The performance agreement may be an industrial award plus some form of workplace agreement, or something specially written by the employer. • Offer. Usually the prospective employee makes an offer to the employer by referring to the documents in the invitation and lodging an application, which might include the application form, covering letter, and resume. The offer is usually followed by negotiation that includes an interview, during which process questions might be asked by either party to substantiate and understand the terms of the contract. The questions and answers can be included in the contract and so important items should be put in writing. • Counter-offer. Usually the response from the employer is a counter offer, not an acceptance, because it includes terms that may not have been raised before or the offer includes a statement that it is subject to acceptance by the prospective employee. • Acceptance. The prospective employee accepts the offer (counter offer). When an employee starts work, they are likely to discover more documents relevant to their employment contract. Documents may include an occupational health safety and welfare policy, other company policies (e.g. working hours and conditions, use of vehicles, use of equipment, conditions of taking leave), and general employee agreements (e.g. Enterprise Bargaining Agreements, Certified Agreements, and Workplace Agreements). The employee is obliged to seek out and check the relevant documents. While perhaps not part of the original contract, the terms contained within these documents become part of the contract unless the employee takes specific action within a reasonable time to decline or negotiate modification of the terms. As with other contracts, when the contract terms are proposed or changed by one party, inaction by the other party can result in implied acceptance after a “reasonable time”. The word “reasonable” is difficult to define. It relates to what a reasonable person would do in the given situation. The definition of “reasonable” may differ between courts. Employees might be automatically covered by an award or authorised agreement. Such awards and agreements include minimum rates of pay, times of work, leave entitlements, allowances, redundancy payments, dispute negotiation procedures, and overtime conditions. In addition, statute law might provide all employees with rights relating to matters such as equal opportunity, workers’ compensation and superannuation. Award and statutory conditions cannot be circumvented but better conditions can be negotiated. In addition to written documents, there are implied terms dictated by common law and statute law. Some important terms follow: • “The employee is obliged to provide the agreed professional services to a professional standard.” This may include obtaining and maintaining agreed professional qualifications. • “The employee has a duty to not act in any manner that is contrary to the best interests of the employer.” They must not improperly disclose the employer’s confidential information. They must not use the employer’s tools and equipment for the employee’s benefit, nor are they allowed to actively compete against the employer. The employee is obliged to advise the employer of any potential conflicts of interest, such as connections and interests in competing companies, and second jobs that may impact on the employee’s performance. • “The employee and employer have obligations to meet the requirements relating to occupational health, safety and welfare.” For example, the employee has an obligation to ensure the work environment is safe and to report to the employer any safety issues for rectification. The employer is obliged to promptly act on any safety issues. • “The employee must be paid in money.” Deductions cannot be made from payments due to the employee except when allowed by law or by agreement of the employee. Payment in goods and services is not allowed unless freely agreed to by the employee. Overall, a contract of employment is a dynamic contract. It is subject to negotiation in line with changing job responsibilities and changes mooted by management.