Australia: Time to review and update employment contracts

With remuneration reviews and salary negotiations approaching, employers should consider their existing contracts of employment to determine whether they offer maximum protection for the business and are in line with best practice.

Carefully drafted terms and conditions of employment can give employers greater protection against legal claims and better chances of enforcing key terms of employment, including restraints of trade and termination provisions. Key issues to help identify whether updates are required include:

• whether there have been significant changes to an employee’s employment – if so, consider issuing a new contract or ensuring that the changes in terms are documented and clearly preserve the existing written contract
• whether contracts provide flexibility to make changes to benefits, roles, duties or reporting lines without affecting the employee’s ongoing employment or triggering a potential breach of contract or redundancy claim
• whether policies and procedures are incorporated into the contract and binding on the company – where these are contractual, this can create unexpected liabilities. A recent case saw an employer required to pay more than AUD$3,000,000 in redundancy pay pursuant to its own ‘closed’ policy
• whether termination provisions, notice periods and post-employment restraints are tailored to the particular individual and their role, seniority, access to confidential information and importance to the business
• whether executive contracts are compliant with the Corporations Act 2001 (Cth) and may require the company to seek shareholder approval for certain termination payments – this can be avoided by careful drafting.

Actions for employers

Employers are encouraged to review their existing employment arrangements, including template employment contracts, for issues such as those above. As some changes may require employee consent, the remuneration review process often provides an opportunity for the ‘updating’ to occur.

For more details, see our website here.