Don’t let an employment relationship turn in to a horror story
One of the most dangerous and costly mistakes an employer can make is to overlook written employment agreements. Whenever I discuss this topic with my clients, they often tell me that they do not see the necessity in spending time and money developing a legal document to clarify the employment relationship. They trust their employees, and according to them, each party has a clear understanding of what is expected of the other.
Unfortunately, the truth is that relationships change, and they can change for the worst. Getting written employment contracts in place with your employees may save you a lot of time, money and stress should things within the employment relationship turn sour. Here are a couple of scenarios that highlight just how wrong it can go:
Horror story #1 – Grounds for Termination – do you have any?
Bob has had his employment terminated. He decides to go to the Fair Work Commission to sue his employer for unfair dismissal. The employer argued that they had complied with the correct termination provisions. However, there was no written employment contract and therefore no detailed termination process or circumstances providing for serious misconduct.
Because there was not a clear statement or clause in the employment contract dealing with the termination process, the client was required to outlay funds for defence proceedings. That would have been avoided if details of a termination process was contained within a written contract of employment.
Lesson: Your contracts of employment should always contain detailed termination provisions and specify the circumstances that can constitute serious misconduct.
Horror story #2 – Pack up your desk but leave our clients!
Gertrude’s former employee is now working for one of Gertrude’s direct competitors. Gertrude discovers that this ex-employee is providing confidential information to the competitor to target Gertrude’s client base. She did have a written employment contract with the former employee, however the contract did not contain a restraint of trade clause. A restraint of trade clause provides an employer with a greater ability to restrict the employee’s activities and enforce any breaches of confidential information.
As this clause was missing from the contract, Gertrude cannot enforce her rights contractually, and will be required to rely on implied duties of the employment relationship. Arguing implied duties at Court makes proceedings difficult, lengthy, and costly.
Lesson: It is essential for your contract of employment to contain a detailed restraint of trade clause. Without one, there are no formal restraints placed on an ex-employee restricting them sharing your confidential information with another competitor.
How we can help
While verbal agreements are protected by the law in part, they leave a lot of gaping holes that make both the employer and employee vulnerable. The only way to have control over a wide variety of circumstances of the employment relationship (and to avoid your own horror story) is to create a formal, written agreement.
If you need help drafting or revising employment documents, we would be happy to help you. Feel free to call our office on 07 5428 1111.
Craig Mason – Director