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Employment Contracts

Almost everyone is an employee at some point in life, so chances are most people have entered into an employment contract (whether written or unwritten) at least once. There are special rules which govern employment contracts and it is important both employers and employees are aware of their rights.

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Probation Periods Explained

Most employment contracts contain a probation period. The purpose of probation periods is for employers to test whether employees are suitable for the job.

Generally an employer will decide the length of the probation period and it can range from a couple of weeks to several months – however this is subject to the Fair Work Act (if it applies).

The main difference between a probation and a non-probation period is the amount of notice the employer is required to give to dismiss the employee. Another difference is that under the Fair Work Act, employees are prohibited from bringing unfair dismissal claims unless they have worked for the employer for a certain period of time.

Why every business needs formal employment contracts

There are many benefits for businesses in ensuring they have formal employment contracts in place with each employee. Some of the benefits of employment contracts are that they:

  1. 1. Clearly define the rights and duties of each party, so everyone is on the same page from the start.
  2. 2. Provide protection for employers (for example a restraint of trade clause).
  3. 3. Reduce the likelihood of confusion and disputes about remuneration, as entitlements are clearly set out in an employment contract.

Top 3 things to include in an employment contract

There are many benefits for businesses in ensuring they have formal employment contracts in place with each employee. Some of the benefits of employment contracts are that they:

  1. A restraint of trade clause.
  2. A clause incorporating company policies into the employment contract.
  3. A clause allowing the employer to change the employee’s duties if necessary.

Are company policies enforceable?

People often question whether their workplace policies are enforceable and legally binding. The answer is that it depends on a number of factors. When determining whether a policy is enforceable, a Court will look at whether:

  1. The policy was reasonable.
  2. The policy was consistently applied to all employees.
  3. The policy was effectively communicated to employees.

The starting point is to ensure that your employment contracts contain a clause dealing with policies - both those in existence and policies that will be implemented in future.

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Can your employer stop you working for a competitor?

Whether an employee can also work for a competitor during their employment or move to a competitor depends on whether their employment contract contains a restraint of trade.

A restraint of trade is a clause in an employment contract restraining an employee from engaging in businesses similar to their employer’s business during and/or after they leave their employer.

Restraint of trade clauses are generally limited by both a time and a geographical location. An example of how a restraint of trade works is as follows:

“Within 2 years following the date Mary leaves her employment with Company, Mary is forbidden from working in a competing business in Queensland.”

Whether a restraint of trade clause is enforceable is a question that is often considered by Courts in Australia. Its enforceability will depend on a number of factors, such as:

  1. The nature of the business.
  2. How long the employee worked for the employer.
  3. Whether the duration and location restrictions are reasonable.

Don’t be caught in a situation where an employee leaves you and works for a competing business – ensure your employment contracts contain an appropriate restraint of trade.

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Who owns the Intellectual Property: Employers v Employees

A question that often arises when an employee leaves a job is who owns the intellectual property that was created by the employee during their employment – the employer or the employee? Intellectual property includes things such as designs, patents and trade secrets.

As a general rule the employer owns the intellectual property, unless the employee created the intellectual property outside their normal course of duties. It is very important for employers to ensure their employment contracts carefully describe the duties undertaken by their employees so as to ensure it is clear than any intellectual property created by the employee at work is the property of the employer.

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