Most employers are aware that it is best practice to have written employment contracts in place with all employees. Something that is less well known is the fact that a contract of employment exists in all employment relationships, even where it isn’t recorded in writing. This is because a contract of employment may be oral, written, express and/or implied.
In the absence of a written contract of employment, it is often difficult to prove the existence of a particular term. For this reason (among many others), a written contract is the preferable form of a contract of employment. In this regard, a written contract will:
- provide clarity to both parties in relation to the terms of the employment;
- provide less opportunity for any ambiguity;
- set out the expectations that the employer has of the employee; and
- importantly, it can provide a level of protection to the employer.
The above being said, whilst having a written employment contract in place is the first step, it is important that it be well drafted. Otherwise, the written contract can cause headaches for an employer further on in the employment relationship.
Basic Information in Written Employment Contracts
There is a variety of information that a well drafted written employment contract ought to contain including, but not limited to, details regarding the:
- remuneration;
- location of the work;
- capacity in which the employee is employed (full time, part time or casual);
- normal hours of work;
- duties;
- leave entitlements;
- expectations that the employer has of the employee; and
- notice of termination.
In addition to the above, there are a number of important clauses that employers should ensure are contained in written contracts in order to protect the employer’s legitimate business interests. Such clauses include, but are not limited to, confidential information and restraint of trade. These clauses are discussed in more detail below.
Confidential Information Clauses
Employees are subject to statutory, common law and fiduciary obligations in relation to the confidential information of the employer. However, it is important that employers have a well drafted contractual confidential information clause which specifically refers to the information that is confidential to the employer as this will vary from business to business.
Unfortunately, confidential information clauses in employment contracts are commonly template clauses that are not specifically tailored to the employer’s business. Often these clauses were drafted long ago and have been inherited by the employer and imported into the employment contract. Occasionally these clauses purport to protect confidential information contained in floppy disks and/or cassette tapes. This can be an issue given most employers would not actually have confidential information on floppy disks and/or cassette tapes these days. It is more likely that any confidential information would be on USB Sticks, portable hard drives and the like (and let’s face it, if a clause refers to floppy disks and/or hard drives, it probably isn’t going to refer to USB sticks and portable hard drives).
What this often results in is a confidential information clause that does not ultimately protect the confidential information of the employer. Accordingly, it is important that an employer carefully review any confidential information clauses and ensure that they are relevant to the confidential information that the employer intends to protect.
Restraint Clauses
Similarly to confidential information clauses, restraint clauses are often template clauses and they are often not specifically tailored to the particular employee. In fact, this is one of the most common mistakes that is made which renders a restraint of trade clause unenforceable.
The Courts view restraints as prima facie unenforceable unless they go no further than to protect the legitimate business interests of the employer. It is therefore very important that a restraint is specifically tailored to both the employer and the employee. To this end, a restraint of trade that the Courts may be consider reasonable for an executive employee will generally be very different to a restraint of trade that the Courts may consider reasonable for a graduate employee.
Given the above, template restraint of trade clauses are usually not a great of idea if an employer intends to attempt to enforce it. Rather, a restraint clause ought to be well considered and tailored specifically to the particular employee that is to be restrained.
Conclusion
There are other clauses that an employment contract ought to contain as well as other traps associated with confidential information clauses and restraints which haven’t been covered in this article. However, what is apparent from the above is the fact that whilst it is important to have a written employment contract in place with employees, the written contract needs to be well drafted and adequately tailored in order to provide an employer with the best level of protection.
This article has been written by Emily Dempster of Madwicks Lawyers – a business contact of Rubiix. If you would like further information or clarification on your situation, please contact our office or email Emily Dempster.
Emily Dempster
Madgwicks Lawyers