Watertight contracts

Regularly clients come to me in dispute over employment contracts they thought were watertight. After a seminar recently, an employer approached me about an employee who misrepresented his skills, experience and ultimately his qualifications. The employer terminated the employee and was not involved in litigation. His questions around contracts squarely raised many misconceptions employers have with contracts of employment.

Let’s start with the employer’s first inquiry. What happens when you have employed a candidate based on what he or she said, only to find out later it is not true. Such representations made by candidates form the fundamental basis of your offer of employment. How do you protect yourself? The answer is surprisingly simple.

• Ensure your employment contract has a specific clause that makes such representations a fundamental term of the contract.
• Make the clause that excludes pre-contractual discussions, negotiation and representations – subject to the first clause.
• Take careful notes of the representations made and wherever possible gain documentary proof.
• Reference check carefully the assertions made.
• In the interview process have objective questions and tasks that test the assertions.

This is one example of a process to cure a problem we have all experienced. So what other obvious issues do you need to think about in your contracts of employment?

1. There is a wheelbarrow of statutes that create minimum entitlements to some or all employees. These range from the Workplace Relations Act basic five minimum standards/to be replaced by Fair Works Act’s 10 on 1 January 2010. Minimum superannuation, long service leave, public holidays – the list goes on.

2. Award entitlements cover many employees and cannot be contracted out of (although there are methods of offsetting.) From 1 January 2010 nearly all employees will be subject to Awards unless you contract out of it for high-income earners.

3. One size does not fit all. Proforma contracts often do not reflect the work and conditions of each category of employee.

4. Look carefully at Workplace Agreements (approved industrial instruments) such as Enterprise Bargaining Agreements, Certified Agreements or Enterprise Agreements to determine who they cover. The terms of such agreements will prevail over lesser entitlements in a contract of employment.

Some last words of warning

1. A contract is formed when you offer employment and it is accepted. If that happens over the phone a subsequently signed contract is not enforceable. What is enforceable was the oral offer and where it is slim in its responsibilities courts will insert “reasonable” terms.

2. Don’t steal bits from other contracts or agreements you have in your filing cabinet.

3. Think carefully about what is the job, who you need in it, what is the skill experience and qualification the candidate needs and ensure the contract mirrors the work and is not in breach of any statutory requirement.

4. Never incorporate the policies and procedures of the business into the contract.

Employment contracts are complex, difficult documents and there are many traps for young players. Look, think and act with caution before you leap. The hole in your contract can be very expensive hole from which the profit of your business leaks away.

Andrew Douglas is the founder, principal lawyer and managing director of Douglas Workplace & Litigation Lawyers. Andrew is an experienced commercial litigation and workplace lawyer, who acts both as a solicitor and advocate.