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Published: 12 December 2017
Author: Mark Comito

How to avoid common traps in employment contracts

Employment contracts are a very popular means of engaging an employee. The problem is, they are often stacked with clauses and conditions that favour the employer.

Often people feel intimated in challenging an employment contract which has been offered to them, or they are not interested in the fine print, thinking that all contracts are similar.

You can be sure of only one assumption: if you are being offered a contract, if will be drawn up by your employer’s lawyers. Signing it without having first sought your own legal advice is fraught with danger and real risks to every employee, because once signed, a contract can tie you up for years even once you’ve left your job.

Here are some tips on what to look out for and what you should do before signing an employment contact.

Terms, conditions and clauses - the devil’s in the detail

While it is important that you read an employment contract very carefully, it’s also important that you obtain advice from a lawyer in relation to the particular terms of an employment contract and your rights which may flow from it.

Some of the terms you should look out for are: 

  • The unfair dismissal high income threshold;
  • Any post employment restrictions that you will be bound by (unless they are proven unreasonable) after the termination of your employment or after you resign, and:
  • your duty as an employee to adhere to confidentiality obligations during the employment arrangement.

Are there particular clauses in employment contracts that I should look out for?

Other clauses for concern

There are a number of clauses which employees particularly should look out for in terms of whether the employment contract is fair or not fair.

Some inquiries I've had relate to the ability of the employer to offset a salary as against an award or enterprise agreement entitlement. It's important that an employee receives advice first, about whether an employer can offset a salary or over-award payment against an award payment and secondly, what are the implications of that.

Other clauses include restraint of employment or restraint of activity post employment that are designed to prevent you from competing with your employer, or restrict you from approaching other employees or current/former clients if you work for a rival business for certain period of time.

As to whether those clauses are reasonable or not, very much depends on the wording of the clause, the geographic reach of those clauses and whether the restrictions are reasonably necessary to protect an employer’s “legitimate interest”. Relevant factors for a Court when reviewing the lawfulness of these clauses include whether the restriction prevents an employee from earning an income or pursuing their career interest, unreasonably.

Further, the period of the restriction on the employee is also a relevant consideration – ie: does the restriction prevent the employee from engaging in that activity for 12 months or so, for two years or, even worse, three years.

These are very important considerations because while you might not have a crystal ball at the time you're signing the employment contract, once signed, the contract can have serious ramifications for you during and after your employment.

How can a good employment lawyer help you negotiate an employment contract?

Generally, a specialist employment lawyer should work with a client to prepare and finalise any contracts so that they are able to approach the prospective employer about their preferred version of a contract. It is not necessary that a lawyer be involved with directly communicating with the employer, but sometimes they are. 

What legal fees in checking an employment contract?

When you are talking to an employment lawyer you should directly address the issue costs involved in reviewing an employment contract. 

You should consider whether the lawyer is flexible in giving you a range of fee models, whether that be an hourly rate model or a fixed rate model.

You should obtain an estimate of costs at least prior to engaging in the process of obtaining advice and finding out where you stand prior to starting an employment relationship.

What about specialist executive-level employment contract advice?

Our firm has a wealth of experience in representing executives.

Management or executives who have approached me for legal advice or representation may not be able to file an unfair dismissal application because of their salary level, however they may have other rights according to their contract such as pursuing a breach of contract claim, including a failure by the employer to provide the requisite or prescribed period of notice.

Executives may also have a right against their employer for breaching the implied duty to act in good faith towards an employee in employment.

An executive may be entitled to pursue a general protection application because they have exercised a workplace right. For example, they may have been injured in the workplace and the board of management has decided that the executive’s contract is no longer required, or not to be renewed.

When you sign an employment contract it is prudent to get advice beforehand. As the old adage says: “Act in haste, repent at leisure.”

Categories: Employment