Model Employment Agreements
In Victoria there is no common employment agreement used by parties to an employment relationship. Unlike a purchaser and vendor in a sale of land transaction, the Parliament has not provided a pro forma contract approved by the professional bodies. We provide suitable employment agreements for individual circumstances at a modest fee. An ideal employment agreement should not be unduly lengthy. It should contain the following key elements:
Job title and position description.
The job title should fit the position description and meaningfully reflect the work to be done. The position description should be finely particularized to ensure that the employee knows what is expected. The employer in drafting the position description is compelled to ensure that the job being offered is the job it requires to be done.
In the event that the position becomes redundant, it is convenient for both the employer and employee to refer to the position description in assessing whether the position still exists or not. A well-drawn position description provides a useful measuring tool in a performance review.
The remuneration is to be paid with reference to dates or periods of review. It should describe the total salary package and define the component parts including:
- Motor vehicle (if any)
- Bonus structure / commission structure
- Other benefits (e.g. mobile phone)
Fixed salary review dates give the employee certainty and an expectation about a review, and ensure that the employer periodically takes stock of the value/cost of the employee to the enterprise.
Save in exceptional circumstances (e.g. where an employer has enticed an employee to leave another well-paying job), there should be a probationary period of between one to six months depending on the degree of difficulty of the task and the need for there to be an assessment of suitability.
Entitlements to annual leave, sick leave or any other agreed leave.
While the law provides minimum requirements, it is best that these be set out together with a time when the annual leave can be taken (usually within a month or so of it falling due).
A clause prohibiting bullying, unlawful discrimination and unlawful harassment.
The most common problem disrupting workplaces is bullying. It is against the interest of any company to condone or promote bullying. If it is made a term or condition of employment that bullying is prohibited, it allows a bully to be dismissed for serious and wilful misconduct.
It also protects the enterprise from prosecution and WorkCover claims by the bullied employee and it promotes the need for personal disputes between employees to be resolved through mediation within the workplace rather than allowing the bully to go uncontrolled.
Similarly, the prohibiting of unlawful discrimination and harassment gives express authority for the employer to act against an offending employee and protect the enterprise against damages claims by disgruntled employees. Such a clause is reassuring to good employees that the company operates on sound principles.
To allow employees to prevent unlawful discrimination and harassment, a grievance procedure for employees should be included in a contract.
A timeframe and methodology for performance review.
A performance review should be regular (at least annually) and must not be an occasion to castigate an employee or set up counselling or warnings. If an employee is under-performing this should be addressed between performance reviews when the issue arises. The setting of objective standards in a written review by a person trained to undertake the review is essential to its success.
Most employees assume that before they are dismissed on grounds of non-performance, an adequate opportunity will be provided to address issues of concern to the employer and that an employer will not dismiss without recourse to a formal process. In cases where there is no issue of serious or willful misconduct, this process should at least involve the following and this should be referred to in the contract.
A private and confidential meeting with the employee to raise the issue of concern in a non-threatening way. The employee should be given full particulars of the concern. The employee should be given time to think about the concern before being asked to respond. Generally speaking, there should be a genuine exchange of information and knowledge.
If within not less than two weeks or more than three months of the first meeting the performance issues are unsatisfactorily resolved, another private meeting should be convened and the concerns and responses must be documented. A formal written warning may be given.
If within a further period of not less than two weeks nor more than three months of the second meeting the performance issues are not resolved, the employer should think seriously about whether employment can continue. If there remain genuine doubts about the employee’s capacity or conduct to perform the work, a termination process might be commenced.
This process must comply with the law. To comply with the law (at level 3) and to be fair, it is at least required that the employer properly formulate the alleged unsatisfactory conduct or performance, document this, put it bluntly and directly to the employee and allow the employee at least 24 hours to consider the allegations. The employee’s response should also be considered for 24 hours during which time the employer should make any inquiries it needs to make about the accuracy of the employee’s response.
If the employer is not satisfied that the allegations are adequately rebutted, it might terminate the employment but it must pay at least the period of notice described in the agreement together with any other statutory entitlements. Many employers chose to pay a little more than the minimum notice in return for the employee signing an agreement to leave on good terms and without litigation.
The employer should provide a statement of service and a separation certificate and should provide whatever assistance it reasonably can to that employee to find another position. Ideally, this is done through a payment for outplacement services at a cost to the employer for as little as $1,000. Allegations of serious and wilful misconduct require a completely different approach and are considered separately.
A statement of change to an employee’s position within a company or of ownership of the company.
The contract should allow the employer the scope to make limited changes to the position description or duties. It should give an option of termination on defined terms if the employee faces significant changes, which does not match the employee’s skill set.
An employer must not assume that it can sell its business without having an effect on the employment agreement with the employees. Depending on the nature of the sale or the change of shareholding, the employee should be given advice about either termination of employment or continuation on similar terms and conditions.
An employee must not assume that a change of ownership will have no effect on existing rights to long service leave, termination payment etc. It is therefore desirable that the employment agreement spell out specifically what rights exist and how and when they are to be exercised by both the employer and employee. There is significant body of law to be addressed on this topic.
The period of notice required by either party for termination of the agreement.
Many employees are so excited to receive a new position that they pay no attention to the termination clause in the letter of offer or employment agreement. Unwisely, they often assume that the employer must have a good reason or follow a fair process before termination. This is not the case for many employees.
The Australian Industrial Relations Commission has, in our opinion, often been lenient on employers in recent years and not required employers to follow due process. It is up to the employee to insist on a written agreement which contains a due process provision and which provides reasonable notice in the event of termination other than for serious and willful misconduct.
Reasonable notice will vary from case to case. It is fair to say that no one should accept less than two weeks’ notice and most employees should look to a minimum of two months’ notice. For persons earning more than $60,000 per annum, three months’ notice is usually fair notice.
It is wise for an employer to provide three months’ notice to ensure that it attracts the best candidate to the job. Three months’ notice also prevents an employee from suddenly leaving an employer at an awkward time without adequate opportunity to find a replacement. Of course, no notice is required to be paid during a period of probation unless otherwise agreed or for a repudiation of the contract by the employer.
A well paid employee in an elite field of work can be expected to sign a confidentiality agreement to protect the integrity of the employer’s business, its method of operation, client lists and confidential commercially sensitive data. Employees not exposed to confidential information are not normally subject to such an agreement.
Restraint of Trade.
Employers are not entitled to curtail the employment opportunities for employees merely because they have been employed in a field with the employer. However, it is reasonable for a well-paid employee to agree to a restraint of trade for at least the period of notice contained in the termination clause of the employment agreement. The wording defining the extent of the restraint in time and area needs to be carefully considered on a case by case basis.
The use of email must be regulated by a written email policy. The policy should cover frequency of use, type of use, access, misuse and consequences of breach of policy must be stated.