Contract of Employment - Not True Fixed Term

Who can use this correspondence

This contract can be used by all employers throughout Australia, except the following excluded employers:

non-consitutional corporation employers in Western Australia
State public sector employers; and
Local Government employers — except in Tasmania

If any of the excluded employers wish to use this Contract of Employment — Not True Fixed Term ('the contract') they should seek legal advice, as the contract complies with federal legislation which may be more or less generous than that which applies to those employers.

Commentary

This document will assist you in creating a written contract of employment for a specified period of time (referred to as a 'term contract'). You will be able to tailor the contract of employment ('the contract') to suit your requirements and circumstances.

The contract will typically end without either party needing to give notice to terminate since the contract will conclude through the passage of time, not at the initiative of either the employer or employee. Alternatively, the contract may be terminated by the giving of notice to terminate in accordance with the terms of the contract.

This contract is suitable for full-time and part-time employees. It is not suitable for casual employees or independent contractors.

Coverage

The contract includes coverage of the following matters: nature and status of employment; reason for the contract; duration; employer details; employee details; position; general details; probationary period; reporting relationship; location of employment; hours of work; remuneration; confidential information; policies and procedures; compensation for award entitlements; deductions, superannuation; period of notice; and termination.

The contract also includes optional clauses concerning: intellectual property; reporting lines; non-cash benefits; bonus and incentive payments; performance review; salary review and post employment obligations; company credit card; mobile phone; laptop; performance; driver’s licence; drugs and alcohol; uniforms; continuing education; leave; public holidays; and resignation from offices held.

A clause dealing with salary sacrifice may be relevant but is not included in this contract.

Particular matters to consider

There could be legal issues concerning certain classes of employees where you should obtain specific legal advice, including employees subject to awards and collective/enterprise agreements, employees employed in a sales capacity, employees employed by public sector organisations, shift workers, and senior executive employees. It is recommended that employers seek separate legal advice in drafting these contracts.

The reason for making a contract of employment will differ depending on the circumstances. This will, in turn, affect a number of clauses. Care should be taken in using the document, and advice sought if there is any uncertainty as to the applicability of any clause.

This contract is prepared for standard non-award employees. It may also be applicable for some award-covered employees, although specific advice should first be obtained before using it with such employees. A better choice for award covered employees may be the contract together with an individual flexibility agreement, or an enterprise agreement together with a contract.

Particular matters to consider — fixed term contracts

When completing the questionnaire for the contract, you should be aware that you will be making a contract that is not a 'true fixed term contract' for the purposes of the exemption in unfair dismissal laws.

As the contract you are creating is not a true fixed term contract, you will have the option of including a probationary clause for new employees, and a notice of termination provision which allows either party to terminate the contract during its term by giving a particular period of notice. The inclusion of those types of clauses makes the contract for unfair dismissal laws, not a true fixed term contract.

This means the contract will not be considered a 'contract of employment for a specified period of time', for the purposes of the exemption from the unfair dismissal laws. If you wish to create a true fixed term contract, you should use the Contract of Employment — True Fixed Term, available to HR Advance subscribers on the Agreements and Contracts page of the HR Advance website.

Before deciding to use this contract, you should seek legal advice and also consider whether the contract will meet the requirements of your business.

Post employment restraints

The nature of the duties being performed by the employee who will be subject to the contract, and their access to sensitive information, will influence whether you need certain post-employment restraints in their contract. It may not be necessary to require an employee to agree to a post-employment restraint. You should seek to customise the restraint to relate to the specific employee.

In order for a post employment restraint to be enforceable it must be 'reasonable' in the circumstances of the particular employee’s employment. Specifically, the restraint must be reasonable in relation to the activities sought to be restrained, the geographic area, and the duration of the restraint. The courts will not enforce restraints that impose an unreasonable restraint of trade on an employee or which extend beyond protecting the legitimate business interests of an employer.

In NSW only, the Restraint of Trade Act 1976 gives the NSW courts power to read down the provisions of a restraint which would otherwise be unreasonable and thus unenforceable, unless the restraint is manifestly unreasonable on its face. That is, the employer should not include a clearly unreasonable restraint in a particular employee’s contract hoping it will simply be read down.

If the contract is intended to be used for employees who are situated outside NSW, the courts in other states are unable to read down the provisions of a restraint and therefore must apply the clause as it is drafted, or delete offending provisions. For this reason, we have drafted the restraint to include cascading provisions which can be severed to the extent that they are unreasonable or unenforceable.

When writing restraints for potential employees it is advisable to obtain specific legal advice.

Policies and procedures

There is an increasing willingness by courts to incorporate policies into employees’ contracts of employment. Contracts of employment which do not expressly exclude such incorporation may cause problems for employers. Whilst the contract contains an express exclusion, it is important that employers both comply with their policies and procedures and broadly word their policies and procedures, to further reduce this legal risk.

Accrual of leave

Whilst this contract can be used for full-time and part-time employees, the leave provisions of this contract (including annual leave and personal/carer’s leave) provide examples for the accrual of leave for a full-time employee as provided by current federal laws. Accordingly, you should consult the relevant workplace legislation with respect to any entitlements for employees who do not fit this category. If unsure, you should seek specific advice.

Other leave

The 'Other leave' clause in the contract indicates that parental leave and compassionate leave entitlements will be provided in accordance with legislative requirements. If your policies provide for more generous entitlements, your employees may be entitled to receive such leave in accordance with your policies. Alternatively, you should seek legal advice before amending this clause of the contract.

Withholding amounts from employees

The contract indicates that the employer can withhold remuneration from the employee where the employee fails to return the employer's property in a fair condition (including tools and uniforms). The general rule is that clauses withholding remuneration are not enforceable unless the employee specifically authorises the deduction. As such, this clause has been drafted to contain such an authorisation.

You should be aware however, that if you exercise your rights under the clause, it is possible that the employee may complain to Fair Work Australia, a court or industrial tribunal alleging your organisation has not paid his or her appropriate accrued entitlements or his or her guaranteed remuneration. Additionally, federal laws require that any deduction must be reasonable in the circumstances, and as such you should give careful consideration in each instance where a deduction is made.

We recommend you seek legal advice if you are considering withholding remuneration from an employee. There may be other options available which can be explored.

Fringe benefits tax

The contract allows for employees to be provided with benefits such as mobile phones, company vehicles, and laptops, with limits provided for. You should seek taxation advice in relation to potential fringe benefits tax liability before providing an employee with company property which the employee is allowed to use for personal use.

Other matters

You will need to provide the employee with a duplicate copy of the contract to sign, date, and return to you.

Before printing this document, you should ensure that you update all cross referenced clauses by following the instructions contained in the document.

Important note to subscribers

The commentaries and documents in HR Advance are updated as necessary, to keep them relevant. You should familiarise yourself with the relevant commentary each time you create a document.

This document has been drafted to suit a wide variety of businesses, with a number of options available to enable you to customise the document to better suit your business. Nevertheless, you may need to make other changes to the document so that it suits the specific needs of your business. If you make additional changes, we cannot guarantee that the changes and modifications you make to the document will be legally compliant or enforceable.

This commentary and any additional information provided to assist you in creating this document, does not constitute legal advice.

If you are unsure about any aspect of this document (including the changes or amendments you make to it), you should seek appropriate advice from a lawyer, skilled in these issues. You should consult with your financial advisor in relation to any relevant taxation or financial issues concerning the document you create.

After creating this document, you should read through it carefully to make sure it meets your business needs and is consistent with other industrial instruments, policies and procedures which operate in your workplace. This commentary is not designed to be provided to employees or other workplace participants.

Further information

Further information on how to use this document can be found at the 'How to use these contracts and agreements' link on the Agreements & Contracts page of the HR Advance website.