ACLN· Issue #24 Employment Contracts of Employment - Why and How Frequently employers do not consider the terms in a contract of employment until a problem has arisen. Care at the time of draftingthese contracts will often reduce areas for disagreement 24 The terms of a conttact of employment are derived from a variety of sources. The conttaetmay be based upon the contents of a letter offering the appoinunent. a com- pany staff handbook could be incorporated and an indus- trial award binding the employer could provide implied terms. This variety of sources often makes it difficult to define exactly the terms of an employment conttact. The employment conttact is also a mixture of terms expressly agreed between the parties, and various implied obligations which arise from the employment relationship itself (such as the employee's duty to comply with lawful and reasonable directions and to serve his/her employer in good faith). The Written Employment Contract Some of the problems of uncertainty over the precise terms of the conttaet and the significance of the implied obligations can be overcome if the parties enter a written employmentconttact. These have generally been restricted to management level employees but there are many advan- tages for employers making use of written conttacts for a wider range of their employees. What Terms Should be in a Contract? Duration and Notice The conttact should state if the employment is for a fixed or limited period. It should also state the grounds on which the conttact might be terminated summarily (with- out notice), for example, the employee committing a persistent breach of the employment contract or engaging in acts of serious misconduct. For other than summary termination, the period of notice required should be stated. Without this provision, an employee would be entitled to "reasonable" notice, which, for an executive employee, could be up to 12 months. The contract should give the employer the right to make a payment instead of notice. Job Description The conttaetshould state the duties to be performed by the employee and there is some value in the contract containing a general job description or title. This job description entitles the employer to move the employee to another job within that general description at the same location without breaching the contract On the other hand, a very specific job description could be useful if an employer seeks to terminate the contract on the ground of poor performance. Job Mobility and Flexibility Another useful provision is a carefully drafted clause which gives the employer a discretion as to what duties are to be performed by the employee and the location where the work is carried out Without this stipulation, flexibility will depend upon the existence of an "implied" term. Although the courts tend to allow employers some latitude in this area, an express clause (which defmes the degree of flexibility and mobility) will place the matter beyond doubt. If the matter ofjob relocation is left to implication, it appears that a manual worker is only expected to be mobile within a reasonable daily commuting distance, while an executi ve or manager is expected to be as mobile as the demands of business dictate. Where job relocation is an issue, the employment contract should state what notice is to be given and whether the employee is entitled to relocation expenses. Salary The contract should state the salary and the frequency of payment. Any non-salary entitlement such as the use of a company car should be noted. If the rate of pay depends on the geographical location of the workplace (or its size), this should be stated in the contract: if an employee is later transferred, it is likely that he/she has thereby agreed to a variation in pay (which may involve a decrease). If em- ployers review pay on an annual basis, the conttaet should state whether this is binding on the employer or discretion- ary. Where an employee participates in a profit sharing scheme or is paid by bonus or commission, the agreement should state whether this entitlement is binding or discre- tionary, and should set out, where possible, the method of calculating such entitlement. Confidential Information and Ownership of Property A provision should be included to restrain the disclo- sure of confidential information by an employee during or after he/she has ceased employment In England an em- ployer is only able to prevent the disclosure of information that could be described as a "trade secret". But Australian cases show that an employer is able to use a contractual