It is often believed that “money talks” when it comes to hiring senior executives. But does a salary alone provide motivation to senior executives?
When it comes to senior executives, many businesses believe by paying a significant salary they will obtain the best out of the employee. However, this is not necessarily always correct. A number of other options should be considered by organisations to motivate their senior executives. It is a fact that the culture and success of any business starts with its people and most notably its senior people. If the senior managers are engaged, motivated and have the relevant leadership skills, the business is much more likely to succeed.
In this week’s article, we consider how best to motivate your senior executives and consider a number of ways to do so. In addition, on the topic of executive employees, our next article will look at the factors responsible employers should be considering to ensure the business protected when senior people wish to resign or the business chooses to remove them.
Motivating Senior Executives
Let’s talk about money first. The standard components that make up an executive’s remuneration package usually include salary, superannuation and some sort of short and long term incentive payments. Incentive payments can include:
Share or Options Scheme:
Employees share schemes are a way of attracting, retaining and motivating staff as they align interests. Specifically, employees can benefit financially if the company performs well. These are generally a form of long term incentive as they vest over a period of time, encouraging senior employees to remain with the business.
A range of conditions generally applies to determine when and how an employee can access those shares. For example, commonly an employee may not have full access to the shares until they have been employed by the company for a certain number of years or until they have satisfied certain performance targets. The benefit of long term incentives such as these, is that it encourages employees to remain with the business, but they do little to motivate behaviours. This is usually done by the use of short term incentive plans/bonuses.
Short-Term Incentive Plan (STI)
STI are designed to primarily reward overall outstanding performance over a shorter period of time, against performance goals, but may also take into account behavioural expectations. For example, this may include an annual performance bonus. The use of short term incentive payments should be carefully considered such that it actually operates to motivate excellence rather than merely making up an appropriate remuneration. If the latter is in fact the case, such bonuses will be more demotivating than motivating.
Any monetary incentive payments and plans should be carefully considered to ensure that they enhance and encourage a culture of excellence rather than mere expectation.
While money is a motivating factor, money alone may not motivate your employees. As such, non-monetary benefits to inspire and engage employees are becoming increasingly popular in the workplace.
Effective non-financial incentives for employees can assist employees feel welcomed, appreciated and valued. These benefits may include:
- Motor Vehicles;
- Housing or accommodation assistance;
- Mobile Phone and laptop;
- Paid training and development;
- Enhanced decision making;
- Additional leave;
- Flexible working arrangements;
- Paid parental leave;
- Child care reimbursements for working parents;
- Gym memberships;
- Volunteer opportunities;
- Rewards based on specific personal interests e.g. tickets to the latest theatre show.
However, if employers wish to consider such non-monetary benefits, they must understand that they will inevitably create fringe benefits tax (“FBT”) consequences. As such, employers often offer these benefits as part of an over-all remuneration package which includes the cost of FBT.
The most valuable motivating factors for employees at this level are opportunities to make a difference and to learn and grow. As such, training programs, further education (such as MBA opportunities) and the ability to shape their own contribution may be more motivating, than money alone. It will also set the tone for the culture more generally and encourage employees to value the investment the business makes in them.
However, what motivates individuals differ from individual to individual. The biggest misconception is that one size fits all. In fact, employers that take the time to actually understand what its employees want and more specifically the senior management level, are far more likely to have employees who are aligned with the business and want it to succeed. Like anything, the amount of effort and care the employer puts into its employees is reflected in the time and effort the employees are likely to put into the business. If an employee feels they are being heard, rewarded appropriately and have the opportunity to grow and contribute, they are likely to be successful and bring those under them along for the journey.
In order to assist you create a high performing executive managing team within your business, we suggest employers undertaking the following:
- Review your remuneration policy and incentive plans to ensure they are achieving the desired outcomes.
- Organise one on one time to set consistent clear goals and expectation. It will also strengthen relationships and allow for discussions regarding suggestions, ideas, concerns and/or issues.
- Establish interest in your employee by taking time to understand what motivates them including their interests and goals.
- Ensure they have the resources to do their work well. A simple question may be ‘What do you need right now to ensure you succeed?’.
- Praise and recognise your employees including senior management. Recognition can be a powerful motivator for many employees.
- Many employees including management like to feel that their work has purpose and is meaningful. Allowing managers and senior staff to create purpose in their work can in turn boost drive and productivity.
- Allow managers and senior staff to continue to learn and develop new skills to enhance their natural skillset and demonstrate an interest in their advancement.
- Involve your staff so that they feel heard and valued. Not all information and decisions should be made from the top down and by allowing staff to be involved demonstrates the business appreciates and respects them.
If you require assistance in relation to how you may motivate your senior level employees or require general employment law related advice, please feel free to contact our office.
This alert is not intended to constitute, and should not be treated as, legal advice.
Few departments handle as many responsibilities and manage as much information as human resources. Technology makes the task of recruitment, performance evaluation, payroll, and benefits administration more manageable and allows human resource personnel to engage the company’s employees better.
Here are the top 5 Human Resource tools that any business can use to implement a better-managed workforce: –
- HRMS (Human Resource Management System)
Human resource departments have a lot of information to store and track. One of the most common ways of organising this content is with a comprehensive human resource management system, which is also called by its acronym HRMS.
Whether the human resource management software is a software solution or software as a service, it can incredibly helpful in the way its stores, organizes data like employee profile, attendance, schedules, and other information, etc.
Human resource information systems (HRIS) are generally more data-driven systems that permit you to create more in-depth reports for audits. Most HRMS systems act as an HR central platform; they have various modules and integrations that permit you to allow you to access and maintain employee records, such as signed contracts and performance conversations and easily share important documents, like policies or seek acknowledgment of compliance announcements.
- Payroll software
Payroll processing is tiring work. Human resource personnel can make this easier on themselves (and on their accounts department) by investing in an online payroll service. There are payroll solutions that automatically calculate and track the status of wages, benefits, paid/unpaid accrued leave, overtime and deductions. Some types of software even permit you to file and pay the payroll taxes and report hires to the IRS.
- Employee engagement tools
Employee engagement is always one of the highest priorities for any company. With today’s tech tools – you can monitor your company’s culture- giving you better insights into what your employee requires. There are tools, like for e.g. TINYpulse which allows you to collect anonymous feedback from your staff which can be used to improve your culture and business operations.
There are free employee engagement tools available as well, like for e.g. Google Forms and Survey Monkey which allow you to compile honest reviews anonymously. Other options include the organization intranet like the OneWindow Workplace or Igloo or corporate social media apps like WorkPlace by Facebook or Yammer etc.
- Performance evaluation systems
Performance evaluations are stressful not only for the employee and employers but for HR as well. As much as they seem an annual thing between the supervisor and the employee – the discussed goals and objectives are tracked and revised throughout the year by human resource personnel. To get the best out of a performance review and put out the most accurate measurement of an employee’s worth in the company – performance tools can help HR to track employee’s performance throughout the year. This saves notes and feedback to prepare both the supervisor and employee for the performance evaluation.
- Recruitment software
Recruitment is one of the most fundamental functions of human resources. The hiring process contains many tasks such as posting ads, sorting and accepting job applications, manage candidates and providing offers of employment.
These HR software helps streamline your entire recruitment process – all the way from the job posting to assessing possible candidates.
Looking for a comprehensive Human Resource Management Software services? Contact Flourish Employment Solutions on firstname.lastname@example.org
While you hire someone, you may feel the need for some additional information on a candidate. After all, there are chances that the applicant may give you false or incomplete information on their application.
Meanwhile, there are some employees who don’t want you to know certain facts about themselves that may put them in a difficult position or disqualify them from getting the job. Thus, it is generally a good idea to run a little background check before you make the final job offer.
Even so, you don’t have an unfettered right to dig into someone’s’ personal affairs. Job Applicants have rights in relation to their personal information. So, to protect yourself legally and to protect an applicant’s privacy rights, you can follow a few legal procedures – like for example., getting the employee/applicant’s signature on written consent before you access their personal records.
Below are a few of our recommendations:
A written consent
It is always best to ask the applicant or your employee for their written consent with their signature before conducting a background check. Explain clearly to them what exactly you plan to check and which method you plan to follow to do the research. This also provides the applicant the chance to take their names out themselves if there is something that they don’t want you to know.
A written consent also stops the applicant from later claiming that you violated their privacy. If they refuse to sign a consent, you may decide to not hire such a person.
Ensure background check is purely in regards to the job
Stick to the information that is pertinent to the position you are hiring. For e.g., if you are hiring an assistant and a security manager, a criminal background check is imperative for the security manager, but depending on the circumstance may not be necessary in the case of an assistant.
Employers get into trouble all the time for digging into more than what is necessary. You don’t have to carry out an extensive investigation on every candidate and even if you do, you don’t need an in-depth detail about every possible issue. If you find yourself starting to do checks with the neighbours or performing credit checks, you need to step back a little.
A note to remember for employers
All employees have the right to know:
- Why the personal information is being requested
- Who will have access to the information and how the data will be used
They also have the right to file a complaint against any third parties who mishandles their information. Other than these general tips, there are particular rules that apply to different types of information: –
- Working with children checks – This type of background check is different from the regular criminal inspection and must be done separately. State and Territory governments are responsible for the administration and operation of child protection services. As such, it is best to refer to the applicable state and territory legislation. For NSW, working with children checks are governed by the Child Protection (Working with Children) Act2012 (NSW).
- Police Checks (otherwise known as National Police Checks or Criminal Record Checks) – You can perform police checks on your prospective employee via three ways
- a) you can direct them to an accredited body or an Australian police agency (if you need police checks on an infrequent basis);
- b) Become a customer of an accredited body (if you need police checks on a more frequent basis);
- c) Become an accredited body and submit police checks on behalf of your employees (if you need a large volume of checks-500 checks in a 5-year period).
Police checks include filling out the appropriate paperwork. Any person 14 or older can request police checks for the purpose of gaining employment.
In addition to the aforementioned background checks, employers can ensure the integrity of their employees by performing qualification checks, credit checks, and reference checks, etc.
When you think about it, it is inconceivable to imagine certain Australian industries such as construction, agriculture and the resources sector (to name a few), continuing to function, much less survive, without the supply of labour via labour hire. Given that many Australian companies utilise labour hire services of some kind either directly or via third party contractors, and the spotlight which is continuing to be shone by unions and regulators on the protection of vulnerable classes of workers in Australia, various State governments have recently enacted legislation to reform how labour hire activities are provided.
In an effort the keep abreast of these developments, this article will examine the labour hire schemes that have been legislated so far in Queensland, South Australia and Victoria.
In September 2017, the Queensland government passed the Labour Hire Licensing Act 2017 (Qld) (“Qld Act”), which commenced operation on 1 March 2018. On 6 April 2018, the Queensland government published Regulations with respect to the Qld Act.
The Qld Act provides that a person (including a company) must not provide labour hire services unless they are registered and hold a license in accordance with the Qld Act, otherwise they will be liable to significant fines and penalties for breach. The Qld Act defines the concept of “provides labour hire services” extremely broadly to include any “person who supplies to another person a worker to do work in the course of carrying on a business”. “Worker” is defined in the Qld Act as an individual who enters into an arrangement with the provider, for the provider to supply the individual to another person to do work, and the provider pays the individual for the work performed.
The Qld Act expressly excludes private employment agencies, the construction industry and exclusions prescribed by the Regulations. The Regulations have not excluded any particular businesses under the definition of “provider” but have made some additional exclusions from the definition of “worker”. As such, the supply of the following “workers” will not be captured by the Qld Act:
- A worker that earns more than the high-income threshold, which is currently set at $145,400 per annum and not covered by a modern award or enterprise agreement;
- An Individual trading through a corporate entity to provide their own services;
- An in-house employee of a provider, whom the provider supplies to another person to do work on a temporary basis on 1 or more occasions and gives an example of a lawyer working on secondment at a client. In this regard, the Regulations provide that an “in-house employee” of a provider is an individual who:
- is engaged as an employee by the provider on a regular and systematic basis;
- has a reasonable expectation the employment with the provider will continue; and
- primarily performs work for the provider other than as a worker supplied to another person to do work for the other person.
Given the very broad definition of “labour hire provider” and “worker” under the Qld Act and the limited exclusions, the Qld Act will cover any person or entity that provides labour to another entity, where the worker is paid by the person or entity providing their labour (whether directly or indirectly), regardless of whether the supplier of the labour would traditionally be considered a labour hire provider. As such, the Qld Act will capture the provision of personnel by any person or entity, in circumstances where the individuals concerned are based at the client’s premises 9other than by way of secondment) and essentially perform all their duties for the benefit of that particular client.
Notably, the Qld Act is expressed to have extra-territorial effect to “the full extent of the extraterritorial legislative power of the Parliament”. It is not entirely clear what is meant by this but, it is clear that the intention is that it will have effect to the maximum extent possible, and as long as there is a nexus between either the worker or the provider of the labour and Queensland, then the Qld Act will arguably apply. To this end, it is very likely that the provision of labour hire services outside Queensland by or through an entity trading in Queensland will be captured. Likewise, if the provision of the labour hire occurs outside Queensland but is for the benefit of a Queensland based entity, then there is an argument that the law will nevertheless apply.
Relevantly, where there is a contravention, the Qld Act imposes both penalties on the provider of labour as well as the recipient of the labour in circumstances where the provider is unregistered. In this regard, it is vital that users of labour hire services in Queensland ensure they are sourcing labour hire from a properly registered provider, otherwise they themselves may be liable to significant penalties. It is clear the Qld Act has been deliberately drafted with reciprocating obligations on both the provider and recipient of labour hire, with a view to ensuring that Queensland businesses do not try and obviate their legal obligations by contracting with foreign or unregistered labour hire service providers who may exploit vulnerable workers.
The Qld Act is fully operational and if labour hire providers do not have a licensee or have not applied for a license prior to 15 June this year, they must not provide labour hire services until a licensee has been granted. This also means that any companies using labour hire services need to check whether their current provider is licensed or has applied for a license prior to 15 June this year.
Similarly, the South Australian government passed the Labour Hire Licensing Act 2017 (“SA Act”), and it commenced operation on 1 March 2018. The definition of “worker” and “labour hire services” are almost identical to that in the Qld Act. The Regulations however, do not contain any additional exclusions to the definition of “worker” as is the case in Queensland. In this regard, the provisions of the South Australian regime appear to be broader than that which applies in Queensland. It is important to note that in this context the secondment of employees may well be covered by the regime in South Australia. The SA Act also specifically states that it extends to conduct whether within or outside South Australia that is in connection with labour hire services supplied in South Australia.
Given there is no limitation to the definition of “worker” under the SA Act, traditional labour hire workers as well as seconded employees may well all be captured by the regime. It is also clear that given the specific extra-territorial reach of the SA Act, that off-shore labour hire would arguably be captured and thus companies who rely on labour hire would need to be vigilant to ensure they are sourcing labour from properly registered and licensed providers.
For completeness, we note that labour hire providers in South Australia have until 31 August to lodge an application for a license. However, it should be noted that under the SA Act, businesses can apply to the Commissioner of Consumer Affairs for an exemption from the SA Act.
On 26 June 2018, the Labour Hire Licensing Act 2018 (Vic) received royal assent and commenced operation on 28 June 2018. However, licensing obligations are not yet in force and will commence in or about early 2019. The primary obligations and definitions are very similar to those contained in the Qld Act and SA Act. The Victorian Act does not, however, provide directly for any exemptions other than to allow for Regulations to deal with such matters. At the present time, no regulations have yet been gazetted by the Victorian government. However, it is important for Victorian companies to ensure they are alive to the requirements of this legislation otherwise they may be liable to significant penalties in circumstances where labour is being supplied by unregistered providers.
Key Considerations for Users of Labour Hire Services
As a consequence of the newly enacted labour hire regimes in Queensland, Victoria and South Australia and the prospect that other States and Territories may soon follow suit and adopt similar legislation, companies who rely on labour hire should do the following:
- Audit your current providers to ensure they are properly registered and are licensed to provide labour hire services in Queensland and South Australia;
- Review your current procurement processes to ensure that your labour hire service providers have their registration status and continue to comply with their renewal obligations which can be checked via the Regulator’s website;
- Review your current labour hire contracts so as to ensure they include contractual obligations requiring providers to maintain registration under the regime and provide evidence of such registration upon request; and
- Consider your broader obligations under the regimes and the implementation of procedures and protocols to manage associated risks including the obligation to report any provider attempting to supply labour through an avoidance arrangement.
Key Considerations for Labour Hire Providers
If you are a provider of labour hire services or, at times, second or outsource your employees to clients to perform particular functions, then you need to think carefully about how your business interacts with the new regimes and ensure you have, if necessary, obtained appropriate registration and are licensed to operate as a labour hire provider. In addition, we note that providers of labour hire services on a national scale will need to consider the territorial differences between the separate regimes and take extra care to ensure they are licensed to operate in each applicable State.
With respect to licensing, the applicable fees to obtain a license in Queensland depends on the licensees’ actual (or in the case of a new business, projected) annual payroll liability and is calculated accordingly. In South Australia, the fee is based on a scale. Victoria has not as yet published its regulations and consequent fees. National providers will need to be licenses separately in all the States in which they operate (currently being South Australia, Queensland and in 2019 Victoria). When applying for a license, there must be a “nominated officer” named on the application who is responsible for the day-to day carriage or management of the business to which the license relates.
To obtain a license, the applicant must satisfy the Regulator that:
- the applicant is financially viable (this will require detailed financial information both relating to the provider and any related companies or close associates);
- the applicant, any nominated officer/s and (for corporations) the executive officers of the corporation are “fit and proper persons” (as defined in the Act);
- other details regarding the business including:
- the type of labour hire services proposed to be provided, and where they will be provided;
- workers’ compensation insurance information;
- the existence of any work health and safety undertakings, prosecutions or convictions;
- whether any other licenses or accreditations have ever been suspended, cancelled or had conditions imposed;
- criminal and conviction history of the applicant and/or their associates;
- visa and migration arrangements regarding workers; and
- whether any sexual harassment complaints have been made against the applicant or their associates.
Once a labour hire provider has been granted a license, they will need to:
- comply with the license conditions, including any industrial obligations and paying a yearly renewal fee;
- report to the Regulator every 6 months. Among other things, this report must include detailed information as to:
- accrued leave entitlements;
- details of any accommodation provided to workers;
- details of any fees required to be paid by the workers to the licensee;
- the number of notifiable incidents under work health and safety laws; and
- whether any applications for workers’ compensation have been received.
If you or your business is impacted by the new labour hire regimes, whether as a supplier or user of labour hire services, please do not hesitate to contact us for specialist advice or assistance.
This alert is not intended to constitute, and should not be treated as, legal advice.
Ordinarily, there is nothing very comic about legal contracts. In particular, employment contracts can be long, difficult to understand and full of legalese. As a way of tackling this, there is an emerging trend to think outside the box when it comes to contract law and expressing legal concepts. In this week’s client alert, we discuss the creative innovations that are being considered in contract design, specifically through the use of illustrations, diagrams and other comic-book like imagery.
Law is traditionally communicated through words, and the inclusion of pictures to convey legal substance is frowned upon. However, visualisation in law to convey key legal concepts seems to be an emerging trend that is gaining a stronger foothold both within Australia and the international legal community.
Comic Books forming legal relationships
The idea of comic book contracts was initially explored by Professor Camilla Andersen of the University of Western Australia (“UWA”). She was approached by a Professor in the Engineering Faculty of UWA to draft contract terms to assist engineering students understand their obligations while working on UWA projects for external engineering businesses. Professor Andersen, who had already been pioneering this movement, seized the opportunity to persuade the Professor to use comic strips to create a full non-disclosure agreement and IP Protection for the students. Since then, Professor Andersen has also been working on a variety of other “comic” like legal contracts and agreements.
In particular, Professor Andersen recently assisted engineering and infrastructure consultancy company, Aurecon (a merger of Australian company Connell Wagner and South African enterprises Africon and Ninham Shand) to introduce the country’s first visual employment contract to its employees. Aurecon hopes to have the visual employment contracts signed by 1200 employees by the end of this year. The company has stated that they are enthusiastic for the new initiative, believing it would lead to easier onboarding and a more open and transparent employee relationship.
The concept of comic book contracts is also attracting worldwide attention. For instance, a lawyer from South Africa, Mr Robert de Rooy created a comic book employment contract for a farming business who employed seasonal fruit pickers. The workers employed by the farming business are usually low income and vulnerable employees, many of whom were illiterate. Mr de Rooy explained that during harvest time, the workers would usually undergo an induction where they were provided a lengthy contract in English even though that was not the native language. The business would then have a representative translate the entire contract to the workers and the induction process would take approximately 4 hours. However, Mr de Rooy’s comic book employment contract was completely picture based and used illustrations to communicate ideas in a graphic novel style. The pictorial contract portrayed what the workers could expect from the business and what was expected of them in order to have a successful relationship. The workers still had the opportunity to go through the visual contract and ask any questions. The use of the pictorial contract reduced the induction process to 40 minutes. Mr de Rooy explained that the company in this instance chose to use the comic book style contract because they believed it was important for employees to clearly understand the expectations upon them. It was also beneficial for both parties to understand their respective rights and obligations. An example of Mr de Rooy’s contract can be accessed by following this link https://goo.gl/images/Du51ko.
A further example of how this growing trend is being utilised in other fields has been demonstrated by an American artist, Mr Robert Sikoryak. At this point, it may be interesting to ask our readers to think back to the last time you purchased a new mobile phone. While you were excited to get started with your new phone and commence the set-up process, the telecommunications service provider’s terms and conditions of use would have undoubtedly got in the way of this. The question here is whether you read the entirety of the long drawn out terms and conditions or do you quickly scroll down and click the box that states “I agree”? We think it would be safe to say the majority of people all scroll down quickly and tick that box in order to move onto the next step without having an inkling at all as to what they had just agreed to. In this regard, Mr Rikoryak took up the challenge of condensing Apple’s 20,669-word terms and conditions into an easy to read graphic novel incorporating images of the late Steve Jobs transformed into famous comic characters such as Snoopy, Homer Simpson, the Hulk and a variety of other superheros. As a result, Mr Rikoryak has been praised for making Apple’s terms and conditions of use more accessible, readable and easy to understand for ordinary people.
Comic Books and the Law
Now, you may be wondering whether an illustrative legal contract would be considered legally binding. A former Chief Justice of Australia, Robert French recently stated at the Inaugural 2017 Comic Book and Creative Contracts Conference that as long as the meaning of the pictures can be interpreted and given meaning to, the Court should be able to deal with comic book contracts and they would be considered, in his view, capable of having legal force.
The concept of comic book contracts or any illustrative contract, takes contracting to a new level. It is easy to see the benefits of creative contract designs and the use of comic books and other illustrations to express legal concepts to assist everyday people, and in turn make the law more approachable. Visualised contracts are aimed to drive behaviour rather than legal obligations and as such is intended to reduce conflict as all parties are able to easily understand their rights and obligations. Illustrative contracts can also create tone and feeling, for example, by depicting management and workers on the same level or height to portray a non-hierarchal organisation, and/or workers and management smiling at each other to illustrate the organisation’s inclusive culture. In addition, there have also been discussions at local government level of utilising illustrative contracts, in particular with vulnerable demographic groups (such as Indigenous Australians) in order to explain key legal concepts.
However, on the other side of the coin, there is a certain apprehension in relation to relying on visual and creative contracts. Lawyers traditionally aim to anticipate as much as they can when drafting contracts and attempt to cover every possible scenario that may arise during the legal relationship. In this regard, there is concern that as soon as contracts are oversimplified in order to translate comprehensive legal concepts into simple images, the contract can lose nuance, significance and meaning. Furthermore, while it is good to simplify employment arrangements, many problems can arise if employment contracts are not carefully drafted or lack specificity. It may be risky for an employer to rely completely on a visual employment contract as traditionally the Courts have been reluctant to imply meaning when interpreting and giving effect to the legal arrangements between contracting parties. For instance, when an employer seeks to enforce a restraint of trade, the language used in the contract becomes significant to the exercise undertaken by the Court in determining whether the restraint provisions are enforceable. A better approach in these circumstances may be to use a written contract that is drafted in plain language, rather than imagery that is more susceptible to subjective interpretation.
In light of the increasing rise for both lawyers and businesses to consider new ways to create contracts, it will be interesting to see whether this movement will be widely adopted. In particular, organisations who employ vulnerable workers (such as where English is their second language and/or people with disabilities) may consider utilising creative ways to explain their contracts in order to bridge language and/or education barriers. Our view is that the concept of pictorial contracts should be used to supplement the written contract, rather than replace the contract entirely. It will also be interesting to see how the Australian Courts interpret and deal with comic book style employment contacts when disputes arise.
In our view, there is no safer form of protection for employers other than to implement comprehensive and robustly drafted employment contracts. That is not to say such contracts should contain legalese or verbose language and should be drafted in plain English for the sake of all parties. We are not convinced, however, that comic-book style illustrations have a place in the contract of employment when expressing complex legal concepts, although we believe there is merit in employers using such creative mediums and other innovations to simplify auxiliary workplace documents such as policies and procedures, recruitment forms and induction materials.
If any further information in relation to any aspect of this alert is required, please do not hesitate to contact our office. We otherwise look forward to hearing from you in relation to your views regarding the concept of comic-book style contracts.
This alert is not intended to constitute, and should not be treated as, legal advice.
Hiring a new employee is a crucial decision in any business. However, deciding on the most appropriate employment relationship for a growing business can be a daunting prospect. With so many types of employment arrangements now available such as full-time and part-time permanent employment, casual employment, temporary employment, internships and fixed term employment to name a few, each with their own respective advantages and disadvantages, it can be difficult to know which is the most appropriate arrangement to use for your business. It is crucial for employers to understand the differences between the respective ways in which an employee can be engaged, so as to enable the business to make an appropriate decision regarding the make-up of its workforce. In addition, incorrectly classifying an employment relationship can have serious detrimental consequences. In this article, we provide a summary of some of the most popular employment arrangements and how they can be used.
Full-time or part-time permanent employment
The Fair Work Act 2009 (Cth) (“FWA”) provides the definition for full-time and part-time employment. Employment status is classified based on the ordinary hours of work per week of the employee. A full-time employee usually works an average of 38 hours per week under an ongoing employment contract, while a part-time employee usually works less than that. The actual hours of work for an employee in a particular job or industry are agreed between the employer and the employee and/or set by a modern award or other industrial instrument.
Both full-time and part-time employees must receive the benefits of the minimum standards as set out in the National Employment Standards (“NES”) in the FWA. This includes:
- Maximum weekly hours;
- Requests for flexible working arrangements;
- Parental leave and related entitlements;
- Annual leave;
- Personal carers leave and compassionate leave;
- Community service leave;
- Long service leave;
- Public holidays;
- Notice of termination and redundancy pay;
- The Fair Work Information Statement.
Full-time and part-time employees will also be entitled to superannuation payments in accordance with legislation.
The key difference between full-time and part-time employees, other than the fact that part-time employees work less than 38 hours per week, is that a part-time employee will accrue their minimum lawful entitlements on a pro-rata basis based for the hours of work they perform.
If employers do not require an employee to work at least 38 hours a week, it would be advisable that the employee is engaged as a part-time employee and this is made clear to the employee when they commence. It is also important for both the employer and employee to make clear the part-time hours and whether these are set or flexible, to some extend if flexible part-time hours are preferred, this often can replace a casual employment arrangement.
A casual employee is usually understood to mean an employee who works only on demand by an employer, and there is no ongoing expectation of work. A casual employee works on an ad hoc needs basis and does not have regular and systematic working hours. Casual employees do not receive all the entitlements available to permanent staff such as paid leave. However, all modern awards provide for the payment of a casual loading (usually 25% of the minimum award wage) as compensation for not receiving the usual employment entitlements provided under the NES and in recognition that casual employment is, by its very nature, a precarious type of employment.
Although under the FWA casual employees do not have access to paid leave entitlements under the NES, they are entitled to two days unpaid carer’s leave, two days unpaid compassionate leave per occasion and unpaid community service leave.
Notably, the Fair Work Commission recently handed down a decision to insert a clause in many modern awards to allow casuals who have worked regular and systematic hours over a 12-month period, to request their employer to convert them to a permanent position. Employers are able to refuse the request but only in reasonable circumstances.
Employers tend to favour casual employment in circumstances where they cannot predict the amount of work that will be available or in the mistaken belief that casual employment provides them protection from unfair dismissal laws. This is not in fact the case. Casual employees who have worked regular and systematic hours and have a reasonable expectation of ongoing work will have access to the unfair dismissal regime. It may therefore be far more cost effective, not to mention increase employee engagement and morale if regular casual employees are engaged as permanent part-time employees, or fixed term employees.
Fixed term contract
Fixed term employees are individuals who have an employment contract where both parties agree employment will be for a specified period of time or for the completion of a specific task.
A fixed term contract may be appropriate when the business needs an employee only during a seasonal period or if the company requires a specialist for a given project. Companies may also consider offering a fixed term contract to cover maternity leave or extended sick leave, or to fill other temporary absences.
Contrary to opinion, a full-time or part-time employee under a fixed term employment contract have similar entitlements to that of a permanent employee including the minimum conditions set by the NES, except for notice of termination and access to the unfair dismissal regime. It is important to remember that a fixed term contract should specify when the employment ends. It is also generally understood that where a fixed term contract gives either party an unqualified right to terminate the contract on notice rather than at the end of the term, or with payment in lieu of notice, it may not be considered a fixed term contract for the purposes of the exemption to the unfair dismissal regime. As such, the employee may be entitled to make an application under the unfair dismissal provisions of the FWA. To prevent this, the contract needs to be carefully drafted.
Employers should also be cautious when engaging employees under a series of fixed term contracts. If it becomes the practice that the fixed term employment is being continuously renewed, it may be open for a Court to conclude that a continuing employment relationship exists and there is an expectation of ongoing employment. In all circumstances of re-engagement, the employer must ensure that there is a relevant and appropriate contract of employment in place. The failure to do so may mean that the employee is able to argue that they are entitled to reasonable notice on termination, and not subject to any previous expired contracts, including any restrictive covenants contained in them.
Independent contractor arrangement
A person who enters into a contract of service is an employee, however where there is as an arrangement that provides for a contract for services by an individual or entity, this may be an independent contractor arrangement. The difference between a contract of services and a contract of service (or in other words an employment relationship versus an independent contractor relationship) are complex and beyond the scope of this article. Unlike employees, independent contractors are not subject to the provisions of the NES and not entitled to the benefits of employment including the operation of Modern Awards, leave, superannuation and the like.
However, despite the obvious attraction of engaging workers as independent contractors, doing so inappropriately when in fact the worker is an employee can mean significant liability and cost for the employer. The FWA has specific penalty provisions for sham contracting designed for the very purpose of preventing and discouraging the misuse of independent contractor arrangements. This issue of contractor arrangements has been prevalent in the headlines, with many cases of contractor arrangements being deemed as sham contracting by the Federal Court. It is extremely important that if your business intends to engage a contractor, that the relationship is in fact one of a genuine independence. The consequences of having a relationship deemed as a sham contract may include significant costs including back pay of entitlements owed to the employee (including back pay, leave entitlements, overtime and allowances and superannuation), penalties against the company and its directors, and tax liability and penalties for breach of the relevant tax legislation.
It should be remembered proper independent contractor arrangements do have some protections including pursuant to the Independent Contractors Act 2006 (Cth) and the FWA. The Independent Contractors Act 2006 allows independent contractors to sue the principal where the contract is unfair, harsh or unconscionable and goes some way to protects the rights and entitlements of independent contractors.
The failure to properly address the working relationship and ensure employees are engaged correctly can have significant adverse consequences as is illustrated by the decision in Balemian v Mobilia Manufacturing Pty Ltd & Anor  FCCA 743. In this case, Judge Hartnett ruled that Mobilia, its predecessor company Austcraft Contructions and its sole director misrepresented the working relationship of a worker. The employer had underpaid the worker by more than $230,000 through recklessly disguising the true legal nature of a 20 year plus employment relationship by classifying the worker as an independent contractor.
The worker had begun at Austcraft in 1994, but never entered into a written contractual arrangement with the business. The worker asserted the arrangement was “one of word of mouth and trust” but he considered himself an employee. The worker said he never discussed his working arrangements in greater detail because he was “very naïve” and was “embarrassed” to ask about his pay and entitlements. Hartnett J accepted there was simply an absence of agreement or discussion about the employment relationship other than the agreement that the worker would be paid hourly and could use the company car.
Her Honour held that the company had the power to direct the worker to perform work of its choice and controlled important aspects of his working arrangements and day-today activities. He was also not free to use his own discretion in relation to how he performed the work and this was clearly demonstrative of a contract of employment.
Judge Hartnett found the worker had missed out on 425 days of annual leave and more than 18 weeks long service leave. Her Honour calculated that the worker suffered a financial loss of $231,326.95, because of the employer failing to pay him at the correct rate (a shortfall of more than $26,000), or to pay for annual leave (more than $102,000), public holidays (more than $51,000), long service leave (more than $22,000) and superannuation (more than $29,000).
Lessons for employers
Prior to hiring, a business should consider the most appropriate type of employment it requires. To do this, the business should assess their current and future needs and clearly identify and define the role needing to be filled. If the role is short term, and required to fill an immediate unpredictable need, then casual employment may be appropriate. If however, the role is short-term but the hours are fixed and certain, a fixed term contract may be advisable. If the role is ongoing but requires the person to work less than 38 hours a week, a part time permanent contract would be recommended. On the rare occasion that a specific assignment or service is required for a very specific or identifiable purpose, an independent contractor arrangement may be suitable. In all circumstances, once the correct relationship has been identified, it is essential that an appropriate and carefully considered and drafted contract is provided to the individual concerned.
If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to your employment relations framework, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.
With the arduous task of conducting performance appraisals out of the way, many employers understandably think the hard yards have been done. Although carrying out performance reviews may necessitate both positive and negative conversations with employees, depending on the kind of feedback being provided, many employers often disregard a fundamental and imperative step in the process to consolidate such discussions. By this we are talking about the implementation of appropriate paperwork to reflect the outcomes of individual employee performance reviews, regardless of whether such outcomes are positive or negative. For example, if an employee has received criticism and feedback about concerns regarding their performance or behaviour, such matters should be set out in writing to the employee. Further, if an employee is given a warning (or some other form of counselling), this ought to be clearly articulated together with an outline of the way in which the parties have agreed to move forward. Alternatively, where an employee has received glowing praise or a promotion as a result of a performance review, it is equally important to set out the relevant changes to the employment (such as salary increases, changes in title and so forth) and often employers need to consider whether a new employment contract or contract variation letter should be issued.
Although there is much to be said about contract administration, including ensuring that the contract has been appropriately prepared and vetted for the candidate in question, all necessary financial information has been forwarded to payroll and confirmation has been received from the employee indicating their acceptance of the employment offer, for the purposes of this alert, we will explore some of the less obvious and more subtle nuances of employment contract administration. From the outset, it should be noted that the four most fundamental (and frequently overlooked) rules of contract administration in an employment context are:
1. the employment contract should be in writing;
2. the identity of the employer and the employee should be correct;
3. the employment contract must be signed by the employee (or accepted in some other reliable way); and
4. the employment contract should be securely filed in an accessible location.
Whilst for many of our readers the steps described above will seem obvious and self-explanatory, it is startling how often clients are unable to produce a signed employment contract, and in some cases any employment contract at all despite being of the belief the employee had signed and returned the contract around the time they commenced their employment. In these circumstances, without being able to rely upon a signed contract of employment, the employer may face unnecessary significant challenges in terminating the employment relationship and seeking to protect their confidential information and commercial goodwill after the employment has ended. For this reason, it is essential that employers diligently implement proper administrative procedures with a view to ensuring that employment contracts are signed and returned by the employee, and have been correctly saved in electronic format to the system and the hard copy kept in a safe location. Not only is it important for employers to ensure they can locate employment records (such as an employment contract), the Fair Work Regulations 2009 (Cth) impose obligations on employers to keep such records which specify, among other things:
1. the employer’s name;
2. the employee’s name;
3. whether the employee’s employment is full-time or part-time;
4. whether the employee’s employment is permanent, temporary or casual;
5. the date on which the employee’s employment began; and
6. on and after 1 January 2010–the Australian Business Number (if any) of the employer,
during the employment and for a period of 7 years following the date of termination.
The next fundamental aspect of contract administration in an employment context is to review the agreement on a regular basis to ensure it is up-to-date and consistent with the role being performed by the employee during their employment. This step helpfully ties into the performance review period by ensuring that employees who receive, among other things, career advancement opportunities, salary increases, modified duties, promotions (or demotions) or warnings are given appropriate supporting documentation. This is especially important in circumstances where the employment contract does not contain a clause indicating that the terms and conditions will apply to the employee in whichever position they hold. In any event, even where the employment contract expressly says it will continue to apply regardless of the employee’s role within the organisation, employers are encouraged and could do worse than to provide employees with a letter confirming the performance review outcomes and any agreed actions going forward. In addition, where there are substantial changes to the employees’ terms and conditions of employment, it is advisable to provide the employee with a contract variation letter reflecting the relevant changes including any additional terms which the employer considers is appropriate as a result of their progression to a more senior role within the organisation. Such terms may include, for example, broader confidentiality and post-employment obligations and employers should consider the measures available to them to protect the business from loss of key personnel. In order to mitigate this risk, we recommend employers include well drafted restraint of trade clauses in their employment contracts and continually review these as employees are promoted.
Finally, you may have the most comprehensive contracts of employment, all appropriately signed by the relevant employees, and also procured the necessary variation letters, warnings and the like, but if they cannot be located they are as good as useless. We often hear from our clients that they cannot find the relevant signed employment contract, or that the variation letter was prepared but not given to the employee (or on most occasions, there is no reliable evidence showing the document was provided to the employee). This is often what creates enormous practical problems for the organisation. In an unfair dismissal environment, if you cannot prove that you provided the employee warnings (because you do not have them in writing or they cannot be found), the employee will almost certainly be successful. Similarly, if you wish to rely on a restraint provision, but find that the employee has been promoted into a different role but no new contract has been retained or it cannot be found, the business will not be able to protect its goodwill including its customer connections and confidential information. It is therefore vital for all employers to establish reliable and secure processes for maintaining, retaining and recovering essential employment documents.
The recent decision of Crowe Horwath (Aust) Pty Ltd v Loone  VSC 163 demonstrates the importance of appropriate contract administration. In this particular case, Mr Loone was employment by Crowe Horwarth (Australia) Pty Ltd (“CHA”) pursuant to a written employment contract as Managing Principal of CHA’s Launceston accounting office. CHA was acquired by the Findex Group, who then commenced restructuring the business. As part of this restructure, CHA significantly changes Mr Loone’s duties, such that he argued he was no longer the Managing Principal.
Mr Loone had contributed significantly to CHA’s successful acquisition of another accounting firm in 2014 and 2015. Mr Loone believed the associated profits from the acquisition should have been considered as part of CHA’s calculation of his yearly bonus. However, on 1 July 2017, Mr Loone was informed that those profits would be excluded from the calculation of the bonus pool for the Launceston office. In light of these circumstances, and substantial changes to his position, Mr Loone considered that the actions in failing to consider his efforts in procuring the sale, breached the bonus clause in his contract, which required CHA to take into account his personal efforts in determining the bonus payable to him. He considered the breaches as fundamental and constituting a repudiation by CHA of his contract of employment. Mr Loone terminated his employment on the basis of repudiatory breach by CHA.
Among other things, the contract contained a restraint of trade clause that prevented Mr Loone from soliciting CHA’s clients, and from conducting any business similar to or in competition with CHA within a 5km radius of the office for a period of 12 months following termination. In turn, CHA filed proceedings to enforce Mr Loone’s post-employment obligations.
The Court held that despite the fact, for the most part, that the restraint of trade clause was enforceable, and Mr Loone’s employment contract provided CHA absolute discretion to determine the bonus, the contract required CHA to consider Mr Loone’s personal performance and failure to include the acquisition in Mr Loone’s bonus calculation, meant it had failed to consider his performance in beach of a fundamental obligation under the contract. In addition, the Court found CHA’s actions in changing Mr Loone’s position without consultation as required by the contract constituted a repudiation of the contract. As a result, both the trial judge and the Court of Appeal held that CHA had repudiated the employment contract and could not rely on the post-employment restraints.
In light of this decision, it is important for employers to not only ensure their restraint of trade clauses are well drafted but also to be mindful that their own actions do not lead to the employment contract being held inoperative, thus making the restraints unenforceable. Of particular importance is the role appropriate contract administration may have had in preventing the outcome faced by CHA. Had CHA consulted with Mr Loone regarding changes to his role and made a written record of these discussions, it would have been able to show it had not breached the contract. In addition, had they made a record showing they had considered Mr Loone’s performance when considering his bonus, again they would have defeated his claim. It is likely however, that CHA was not even aware of the terms of Mr Loone’s contract when making these decisions, and they certainly did not look at his contract prior to making the decisions regarding his bonus and position.
If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to your employment relations framework, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.
Employers generally want to ensure that a potential employee is honest, trustworthy and have the right attributes for the role. A prudent employer will also want to ensure that they are not employing someone who may not be the right fit for the business, or who does not have the skills and attributes that it requires. The costs associated with the performance management and termination of an employee who should not have been offered the role to begin with, are far outweighed by the minimal investment of time and effort involved in appropriate pre-employment screening. We receive several enquiries regarding when and how an employer can conduct pre-employment screening and have considered some of the issues such screening may cause in this article.
Pre-employment screenings should be a robust system to ensure that not only are the employee’s skills and qualifications accurate but that they are a suitable employee. We suggest that at a minimum pre-employment screening should include the following:
- conducting checks on qualifications of the employee by reviewing academic transcripts and records from applicable professional or other registering bodies;
- past employment reference checks;
- personal reference check;
- criminal history report;
- review of social media accounts;
- If the employee will hold a senior position, an ASIC register check; and
- medical clearance, if the employee’s duties may create a risk to his or her health or exacerbate a pre-existing health condition.
Both Federal and State Legislation offers protection to applicants for employment and promotes the principal of equal opportunity by prohibiting discrimination based on certain protected characteristics. The grounds on which it is unlawful to discriminate against a person may vary in each jurisdiction but generally include race, ethnic origin, sex, marital status, age, transgender, non-specific gender, pregnancy and physical or intellectual disability. It is therefore important for employers to ensure their pre-employment screening does not leave them open to possible claims of discrimination. If employers choose to rely on pre-employment screening to assist in their recruitment, they should ensure that the use of such information adheres to the national privacy principles and any decisions made based on information collected, has a clear connection to the inherent requirement of the position, and the ability and suitability of the employee for the role. Information such as an employee’s age, gender, marital status, relationship history, race, religion, union affiliation and the like should not be relevant and should form no part of the pre-employment screening an recruitment process, unless the employer is able to rely on an exemption in the anti-discrimination legislation.
Privacy and Pre-Employment Screening
The Privacy Act 1988 (Cth) (“Privacy Act”) applies to federal government agencies as well as some private sector organisations including bodies corporate who use or disclose personal information in the course of carrying on a business. In March 2014, the Privacy Act was amended to introduce thirteen legally binding Australian Privacy Principles (“APP”) which apply to personal information held by Australian government agencies and most Australian companies. In this regard, it is important to note that personal information handled by a private sector employer is exempt from the APP if it is directly related to:
- a current or former employment relationship; or
- an employee record relating to the individual employee concerned.
“Employee record” refers to a record of personal information relating to the employment of a person, such as information about the employee’s:
- engagement, training, disciplining or resignation;
- terms and conditions of employment;
- personal and emergency contact details;
- performance or conduct;
- taxation, banking or superannuation affairs.
However, the exemption does not include information otherwise collected about candidates when determining to offer employment and in this respect, employers must ensure that any personal or sensitive information collected about a prospective employee is not used unless the employee consents and the information is reasonably necessary for one or more of the entity’s functions or activities. In addition, employers must ensure that the means of collecting such information is only by lawful and fair means. In most cases, organisations are required to provide candidates with written notification of the intended collection or use of sensitive or personal information including the primary purpose for which the information will be obtained.
Once a job candidate, however, is offered and accepts employment a private sector employer is exempted from the APP in the Privacy Act when handling current and past employee records for something that is directly related to the employment relationship and can refuse access to personal information for many reasons, including on the basis that giving access would have an unreasonable impact on the privacy of other individuals. As such, this means that an employer does not have to grant an employee access to their employee records under the Privacy Act. Whilst this may be the case legally, even if the employee records exemption does apply, employers should take steps to protect the confidentiality of employee records and review the security systems they have in place to achieve this. The APP in particular now requires organisations to take such steps as are responsible in the circumstances to destroy information or de-identify it when it is no longer needed for any permitted purpose. Employers are able to determine under the new privacy regime how long they keep employee records but it is good practice to destroy those records no longer needed in a timely manner.
Although, past criminal activity and a criminal record are not protected attributes under anti-discrimination legislation, before conducting criminal history police checks an employer should consider why the police check is necessary. Secondly, an employer wishing to conduct a police check should inform the applicant of the requirement and ensure the information collected is treated confidentially and disclosed only to those persons required to have the information in order to make a decision regarding the suitability of the candidate for employment. An employer should also ensure the information is stored and destroyed in an appropriate secure manner.
Criminal record discrimination is not unlawful under federal law or NSW state law. However, the Australian Human Rights Commission may investigate complaints of discrimination in employment based on a criminal record. It is not discrimination if a person’s criminal record means that he or she is unable to perform the “inherent requirements” of a particular job. This must be determined on a case by case basis, considering the nature of the job and the nature of the criminal record.
Furthermore, almost all states and territories, and the Commonwealth have statutory Spent Conviction Schemes (“Scheme”). The scheme allows an individual to refrain from disclosing certain past criminal convictions. The police will not release information to an employer about a spent conviction on a police check unless the conviction comes under a relevant exemption, for example where the candidate will be working with children. In such circumstances, a candidate is not required to disclose a spent conviction even if they are requested to disclose prior convictions by a prospective employer.
The decision of MR CG v State of NSW (RailCorp NSW)  AusHR 48 demonstrates that employers may be subject discrimination claims by potential applicant’s due to their criminal record. Mr CG had been convicted for a middle range drink driving offence in 2001 and also convicted in 2008 for a low range drink driving offence. However, when Mr CG applied for a position as a Market Analysis with RailCorp in 2009 he was advised he was not offered the position due to his criminal record, despite meeting all the selection criteria and previously working for RailCorp for eight years. RailCorp denied that the decision not to offer Mr CG constituted discrimination in employment and stated that his criminal record made him unable to perform the inherent requirements of the Market Analysis job. Ms Branson of the Australian Human Rights Commission found Mr CG’s criminal record was irrelevant as it had no connection to his employment and had not occurred during work hours or that he had been driving as part of any work activity at the time of the offence. Ms Branson found that RailCorp had in fact discriminated against him and recommended RailCorp pay $7,500 in compensation. It was also recommended that RailCorp should review its recruitment process and their human resources should undertake anti-discrimination training to prevent further discrimination on the basis of criminal record.
Pre-employment Medical Checks
Whether a pre-employment medical examination complies with equal opportunity or privacy laws will depend on a number of factors, including the nature of the job, whether a medical condition is relevant to the performance of the job, and what the employer does with any information obtained from a medical examination. The most significant risk for employers who medically screen applicants is potentially breaching the Disability Discrimination Act 1992 (Cth) (“Disability Discrimination Act”).
The Disability Discrimination Act prohibits employers from discriminating against prospective employers on the basis of their disability in the arrangements made for the purpose of determining who should be offered employment and the terms and conditions on which employment is offered. The Act does include an exemption if an employer can show that, because of the person’s disability, they would not be able to carry out the inherent requirements of the particular work, even if the relevant employer made reasonable adjustments for the person to accommodate their disability.
The potential risk in discriminating against a potential applicant due to a medical condition can be seen in the decision of Vickers v The Ambulance Service of NSW  FMCA 1232. Vickers had applied for a position as a trainee ambulance officer, however, failed the medical examination due to his type 1 diabetic condition. Federal Magistrate Raphael ordered the NSW Ambulance Service to allow the Applicant to proceed to the next stage of the recruitment process and ordered the Ambulance Service pay him $5,000 in compensation. His Honour found the Ambulance Service had breached the Disability Discrimination Act by discriminating against the Applicant on the grounds of his diabetes and rejected the defence that the applicant would not be able to perform the inherent requirements of the position. His Honour found that the Applicant had successfully managed his condition during his previous work engagements, including four years as a registered nurse in a hospital.
Lessons for Employers
Employers who are using, or contemplating using, pre-employment checks need to consider carefully the purpose of such checks, what is being assessed, how the information will be used and how it will be treated for privacy purposes. Pre-employment checks that are implemented appropriately can be a useful tool for employers to assist in determining whether a candidate is suitable for employment. In this regard, pre-employment screening can be a powerful tool for employers to authenticate academic qualifications and previous stated job performance, as well as ascertain whether they are fit and of good fame and character to join the organisation.
In this regard, employers should consider the following matters:
- Clearly identifying what the job requirements are and what the pre-screening questions will be used for;
- Ensure that questions relate directly to the performance of the job or duties required to be performed;
- Ensure that any pre-employment questions do not appear to be discriminating against a particular class of person and ensure any questions are not intended to “weed out” applicant’s with disabilities; and
- In the event an employer receives unfavourable information that gives them any reason for concern during the pre-screening process, it is advisable to consider the relevance of the information to the role being filled.
Given the complexity of pre-employment screening and the benefits of the process when completed correctly, we suggest that employers consider the implementation of an appropriate policy about pre-employment checks and include contractual covenants to ensure that prospective employees being offered employment consent to such information being used and collected.
If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to your employment pre-screening procedure, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.
For employers, casual employment has a number of distinct advantages. It provides significant flexibility, allowing employers to rapidly adjust staffing levels when required. For employees, casual employment may provide similar opportunities for flexibility through greater work-life balance and ensuring that personal commitments and family responsibilities can be sustained. If casual employment provides benefits all-round, why is this mode of employment such a contentious industrial relations issue.
In order for employers to truly understand the risks associated with entering into casual employment relationship, it is imperative to first deconstruct the meaning of the term “casual employee”. This proposition is all the more difficult as the phrase is not defined anywhere within Australia’s national employment relations legislation, the Fair Work Act 2009 (Cth) (“FW Act”). What is perhaps clear from reading the FW Act is that casual employees do not receive the same benefits available to permanent employees, such as paid statutory leave entitlements, paid public holiday, severance pay in circumstances of redundancy and minimum periods of notice of termination by the employer. To compensate casual employees for not having access to these entitlements and therefore having less job security, they generally receive a “casual loading” in the form of higher minimum rates of pay than permanent staff.
From a historical perspective, the most common understanding of casual employment was that a casual employee is someone hired on an informal, uncertain and irregular basis with no guaranteed hours of work or guarantee of ongoing work. Significantly however, this is no longer the only situation in which casual employment arises as there are now recognised casual employees working regular patterns of work with a single employer over an extended period of time. Given the lack of definition as to the meaning of casual employment, the Courts have traditionally adopted a narrow construction of the term, viewing it as work performed on demand for short or irregular periods. More recently, however, case law suggests a broader approach to the concept of casual employment, which supports the proposition that casual employment can be ongoing. This approach, some would argue, reflects the current industrial reality of casual employment in Australia. Despite the two opposing schools of thought, no certainty can be obtained from judicial reasoning to discern a universal understanding of the term.
Accordingly, the determination of whether an employee is a casual (or otherwise) will be judged on a case-by-case basis – in other words, the Court will examine the actual substance of the employment relationship rather than its characterisation by the parties. The common law test of casual employment which, traditionally, starts from the premise that casual employment has no continuity of engagement and is required on ad-hoc or needs basis. Other factors then considered to ascertain whether the employment is one of a true causal relationship include:
- the regularity and certainty of work and hours of work including the existence of an organised roster;
- the existence of consistent start and finishing times for shifts;
- whether the employee follows a particular pattern of work, and the predictability of those hours;
- the mutual expectation of continuity of employment;
- how wages are paid – casual employees are generally paid by the hour rather by salary;
- whether the employee was notified of the casual nature of the employment; and
- how long the employee has worked for the organisation.
Whilst casual employment is a convenient option for many small business employers, particularly to fill short-term needs, employers need to exercise caution when thinking about hiring staff on a casual basis as there are several potential significant risks and dangers associated with the utilisation of this type of employment. Most notably, the main risk for employers is that an employee labelled as a casual may, if a dispute ever arose, be found by a Court to be a permanent employee. Where, for example, an employee has worked under the title of a casual employee over the long-term when in fact they ought to have been legally classified as a permanent employee, the employer may be subject to substantial claims for unpaid entitlements. This may include long service leave, severance pay, notice of termination and depending on whether a modern award applies and its terms, entitlements to overtime, weekend penalty rates, paid public holidays and allowances.
If an employee is found to be a permanent employee despite being classified as a casual, they may be eligible to bring an unfair dismissal claim in circumstances where their employment is germinated. In fact casual employees who have been employed on a regular and systematic basis with an expectation of ongoing work, will be entitled to bring an unfair dismissal claim as long as the other jurisdictional requirements set by the FW Act are met. As such it is critical that organisations give proper and due consideration to the actual role and purpose for which a casual employee will be performing work, particularly with respect to long-term casuals, to ensure they are engaged and remunerated correctly.
In a significant recent decision by the Fair Work Commission, it was held by Senior Deputy President Drake and Deputy President Lawrence (Commissioner Cambridge dissenting) that periods of regular and systematic casual employment before an employee converts to permanent employment status, will count towards the calculation of redundancy entitlements. Although the decision was heavily influenced by the language used in the employers Enterprise Agreement which specified that a 25% loading received by casual employees compensated them for notice and redundancy benefits, among other things, the majority in this decision found that redundancy pay was calculated according to periods of continuous employment, which under section 22 of the FW Act would include periods of regular and systematic casual employment (see AMWU v Donau Pty Ltd  FWCFB 3075)
Although this decision has far-reaching and practical consequences for the particular employer in this case, more generally, the decision demonstrates that emerging line of authority that where a casual employee is performing predictable, systematic or regular hours of work, they are entitled to be treated as a permanent employee and be remunerated as such.
To safeguard against the risks associated with causal employment, it is important that employers ensure that appropriate employment agreements are issued to the employee upon commencement of his or her engagement, and that the circumstances of the relationship as they evolve are carefully monitored. Without more, monitoring the hours worked by casual staff and ensuring they are properly remunerated can reduce the risk of successful backpay claim and further eliminate the potential threat of being subject to unfair dismissal laws.
We regularly advise employers in relation to causal employment issues including by assisting to draft appropriate casual employment agreements and workplace policies. If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.
Do I need to have a probationary period in my contract of employment? What is the difference between a probationary period and the minimum employment period? What does a probationary period actually mean? These are some of the questions we are routinely asked in relation to what is normally a fairly standard contractual term.
In our experience, there is considerable confusion about the difference between a probation period and how this relates to the minimum employment period in the Fair Work Act 2009 (Cth) (“FW Act”).
Probationary periods are contractual clauses which have no statutory force, but provide both the employee and employer an opportunity to assess the employee’s suitability for the role for which they have been recruited. From the perspective of the probationary employee, there is an appreciation that their work performance will be under review and they do not have a guarantee of ongoing employment.
Many probationary clauses provide a lesser notice period for termination of employment during the probationary period as opposed to after the expiration of the probationary period. However, the notice period for termination during a probationary period cannot be less than the minimum periods prescribed in the NES (one week for less than 12 months’ service).
Generally, a probationary period will be for a period of three, six or twelve months (but must be reasonable given the circumstances of employment). You can only extend a probationary period if the contract provides for that extension at the outset of employment, or the employee agrees to the extension at the time it is proposed. However, if the probationary period goes beyond the expiration of the minimum employment period prescribed by the FW Act, unfair dismissal laws will apply.
Probationary employees are not exempt from FW Act unfair dismissal laws unless they are within the minimum employment period(“MEP”) prescribed by the FW Act. The FW Act’s predecessor, the Workplace Relations Act, exempted employees serving a reasonable period of probation from unfair dismissal laws. Probationary employees enjoy the same rights and entitlements as non-probationary employees. They are entitled to all the FW Act National Employment Standard (“NES”) conditions, including paid annual leave, paid personal/carer’s leave and minimum notice periods.
Separate and distinct from the concept of a probationary period, which can apply to any level of employee, the FW Act provides that employees who would otherwise have a claim for unfair dismissal cannot bring such a claim if they have been employed for less than the minimum employment period. For employers with less than 15 employees, that period is 12 months, and for all other employers that period is 6 months. That is the case regardless of whether the employment contract includes a probationary or qualifying period.
Many employers are aware of the minimum employment period requirements and believe it serves to preclude any employee from making claims under the FW Act in circumstances where the employment is terminated within the qualifying period. This is a common misconception and can have significant ramifications for employers, given its limited application. Even if the employee is precluded from commencing an unfair dismissal claim, there are other ways that the dismissed employee can challenge the dismissal. For example:
- General protections application under 365 of FW Act: the decision to dismiss was motivated by an activity or attribute of the employee proscribed as a reason for dismissal under the FW Act general protections provisions (e.g. the employee queried his or her pay or entitlements or made some complaint about his/her employment s 341(1)(c)(ii)). This means that when you decide to dismiss a probationary employee or employee with less service than required by the MEP you should still formulate the reason for dismissal, verify that it is a lawful reason, and be in a position to prove that this was the reason).
- Breach of employment contract: provisions in the employment contract that may entitle the employee to make a claim for breach of contract despite the MEP. This is the reason that probationary periods can be so valuable, as they reduce the risk of such claims.
We regularly advise employers in relation to contract formation and termination issues. If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.
In last week’s client alert we discussed the importance of forming strong employment relations from the outset and the need to have carefully drafted employment contracts in place that appropriately reflect the parties understanding of the bargain. What protections, however, does the law provide when a prospective employer is less than frank about the affairs of the business in which the employee is going to be employed, and makes misrepresentations about the level of earnings, profitability and potential career trajectory of a prospective employee.
If an employee relies on those misrepresentations in making a decision to leave secure employment on the expectation that they will be better-off under the employment of the prospective employer, and the opposite in fact occurs, can they sue their employer? When this does occur, an employee may be entitled to bring a claim under Schedule 2 of the Australian Consumer Law of the Competition and Consumer Act 2010 (Cth) (“ACL”). This provision allows an employee to argue that they relied on false or reckless representations made by their employer in the pre-employment stages of the employment relationship, which as a result caused the employee to suffer a detriment sounding in financial damages.
In an important decision by the Federal Court in April of this year, Justice Bromberg found that a senior insurance executive lost more than $300,000 in earnings when she was encouraged to take up a general manager’s position with Johns Lyng Insurance Building Solutions Pty Ltd (“JLI”) at a lower base salary, and leave her secure employment, based on deceptive inducements by JLI. JLI represented to the employee that she would boost her future earnings through a profit-share scheme if she accepted the role, based on the projected revenue and profits of JLI for which the employee’s share was 2.5%. However, JLI failed to disclose to the employee its true financial position, which was such that it could not support the representation made.
In the decision, Justice Bromberg observed that the employee, who had 30 years’ experience in the insurance industry, joined JLI following a successful 6-month courting period while she was employed by Pattersons Insurerbuild Pty Ltd (“Pattersons”). The employee argued that had the true financial position of JLI been disclosed to her during her contractual negotiations, she would have remained at Pattersons (or been employed elsewhere on comparable terms) and not accepted the offer of employment from JLI at a base salary of $100,000 less than she received at Pattersons. While the employee’s base salary was significantly less that she received at Pattersons, she claimed that JLI indicated that the difference in remuneration would be made up by way of a percentage of net profit, and that her profit share would increase from 2.5% to 5% after six months of employment.
In the proceedings, evidence was led that JLI’s directors made statements that the profit share system was a “successful model” and had been operating for some time. The employee was able to demonstrate that the representations as to the success of the profit share model were supported by emails as to how the model worked and the profit share results paid in the 2011 and 2012 financial years. The email evidenced predications by a director of JLI that profit for the 2013 financial year was expected to hit $4.270 million. Based on this figure, the employee’s profit share would have amounted to approximately $106,000. However, JLI’s revenue during the 2013 financial year plummeted and the predictions conveyed to the employee during contract negotiations were considerably less than estimated.
As a result, the employee claimed that she was never told that JLI was unlikely to meet its sales and profitability targets. In fact, the Court found that the opposite was held out to her in that the employee was led to believe the business had been profitable and projections showed JLI would achieve a greater bottom-line figure than the two years preceding the employee’s employment. In finding that JLI misled the employee and contravened the ACL, his Honour accepted that while unforeseeable events may unexpectedly intervene in the normal course of business to disrupt the flow of revenue, it was reasonable for the Court to accept that the representations made by JLI in combination with the email evidence conveyed that a positive profit share outcome was “likely”.
The Court ordered JLI to pay the employee $333,422 in compensation for lost earnings and damages, and invited the parties to make submissions on costs.
This case is significant for employers, and is an important reminder that comments made by employers to entice employees can give rise to significant legal consequences.
So much is clear from this decision that an employer who overreaches by making representations in relation to, for example, the nature of an employee’s role, longevity of their employment, the value of contingent remuneration benefits, any future career opportunities, the company’s financial prospects or other material aspect of any business activity may be exposed to a deceptive and misleading conduct claim where reliance on such representations results in some kind of detriment being sustained by an employee.
For employers, this decision highlights the importance of the contract of employment in setting out the agreed legal obligations of both employer and employee. Even if during the course of contractual negotiations an employer makes anticipatory statements about future prospects or the likely advancement of an employee, it is important to bear in mind that the Court would ultimately need to examine those representations with regard to the employment contract agreed at the time. Having a well drafted contract of employment may assist to defeat claims by an employee that they were misled when accepting a role with the employer, and emphasizes the importance of including clauses in the body of the employment contract in which the employee agrees that all prior communications, understandings, agreements and representations are superseded by the employment contract which reflects the obligations owed by the parties in totality.
Another important lesson for employer’s illustrated by this decision is the importance of using appropriate language during the recruitment process, and avoiding the adoption of promissory statements when discussing terms of employment with a prospective employee. To avoid claims in this area, employers should consider language that outlines possibilities rather than promises, assurances and guarantees that may not become reality. Employers need to also take care not to oversell the success of their businesses or their future or current financial position to prospective employees. Lastly, just as important as what is said during the pre-employment phase, is what is not said. The courts have recognised and accepted that misrepresentations can be made by not saying anything. In other words, for example if an employer fails to disclose the true financial position of its business and leads the prospective employee to believe they are joining a thriving business and this is not the case, there will be a misrepresentation by omission.
If you wish to further discuss the steps that can be taken to mitigate the risks in this area or have an employment matter for which you require assistance, please do not hesitate to contact us for specialist advice.
This alert is not intended to constitute, and should not be treated as, legal advice.
Many people believe that if they do not have a written employment contract, they are not bound by a contract with their employer at all. This is a common mistake, as an employment contract exists whether written or not, the moment the employer and employee agree on terms of employment. The contract terms can be either express, that is written or verbally agreed, or implied by law, or a combination of both.
It is common for employers to have written contracts of employment setting out the express contractual terms of the employment relationship, and the duties owed by the employee when performing work. In addition, there are a number of terms implied into the employment contract regardless of the parties’ intentions. Implied terms can be implied by operation of law, as a result of custom and practice, implied by fact or by statute. These terms include, for example, the employees’ duty of fidelity and good faith, and an employer’s duty of care. In circumstances where an employment contract does not have an express term of notice, a term of reasonable notice will also be implied.
The contract of employment is essentially the legal foundation of the employment relationship which defines rights, obligations and expectations between the parties, and should act as the foundation of any good employment relationship. Unfortunately, this fundamental element of the relationship is so often overlooked or given cursory attention. By way of example, no-one would build a house without ensuring the foundations have been properly laid, the dimensions of the house agreed and the cost of building understood. So to should the employer and prospective employee approach the employment contract in this way. The crucial elements of the employment relationship should be discussed and set out in the contract before the employee commences.
There is no prescribed form that an employment contracts must follow, and many different styles are used, including letters of offer, formal executive service agreements, and covering letters accompanied by a standard terms and conditions sheet. Generally, the nature and specificity of a written employment contract will vary depending on the seniority and duties of the employee, and whether they are covered by an industrial instrument such as an enterprise agreement or Modern Award.
Whatever the style, to ensure that the contract of employment is complete and legally sound, there are a number of recommended matters which ought to be dealt with, including:
- Position description (what is it you actually want the employee to do and will this change over time)
- Salary review and appraisal (how you maintain the relationship)
- Discretionary benefits such as bonuses and other incentive payments
- Duties (what is expected of the employee and the scope of the role, including behavioural requirements)
- Term of the contract- which may be indefinite or fixed
- Probationary period
- Location of the employment
- Policies (and how they are to be treated)
- Termination with notice and termination without notice
- Restraints of trade (to protect the employer’s goodwill on termination)
- Confidentiality clauses
- Intellectual property and moral rights
- Company property (and its treatment on termination)
- Variation of the contract terms (like all matters things change over time, so should there be an ability for the contract to do the same)
- Exclusion of other terms and representations (no one wants to be blind-sided by something they said or did prior to commencing the relationship)
- Governing jurisdiction (if it all ends unhappily, where will the claim be brought)
Litigation over the meaning and intention of contractual terms in employment contracts is becoming more frequent in Australia, and the Courts are regularly being asked to determine disputes about breach of contract claims in a variety of employment related situations. These include, but are not limited to, unlawful termination claims, policy incorporation claims and reasonable notice claims where the contract is silent as to notice for termination, or the contract is out of date and no longer applies to the position or duties being performed by the employee at the time the employment comes to an end. Breach of contract claims can be notoriously expensive to defend, and may prove very fruitful for an employee where they can show breach.
Another contentious area, which employers need to consider when engaging managerial level staff, is the best structure for payments to executives including an appropriate mix of remuneration, incentives benefits and termination payments to ensure that their contracts of employment do not oblige them to make termination payments which could put the company at risk of breaching the Corporations Act 2001 (Cth) provisions, and ASX Listing Rules. Benefits that are payable to company officers and executives on termination are now, except in limited circumstances, capped unless shareholder approval is obtained. For listed companies, seeking shareholder approval (particularly, outside annual general meeting season) can be costly, and potentially damaging to reputation, if unsuccessful. Well drafted clauses in executive service agreements can spare employers lengthy and costly exit negotiations with departing executives, and provide the necessary flexibility for making payments on termination that conform with the Corporations’ legislation without the need to seek shareholder approval.
Ensuring that all bases are properly covered when preparing contracts of employment can be difficult. As a starting point, we recommend that employers think about the following matters carefully to guide their contract creation and administration procedures:
- Establish a standard contract template that can be tailored as appropriate;
- Nominate a person authorised to amend and issue contacts;
- Ensure contracts are signed and returned by the employee prior to commencing employment;
- Issue updated contracts when employee’s change position or other significant changes in terms and conditions occur;
- Store signed contracts in a central location;
- Ensure that any variations are agreed in writing and kept with the original employment contract; and
- Review contract templates regularly to ensure changes in law are reflected, and compliance with minimum legislative and modern award requirements is being maintained.
Hopefully if you follow these basic principles, you will build a successful and fruitful employment relationship on a sound and secure foundation that will nurture growth and profits for both employer and employee.
If you require advice or assistance to review and update your contract of employment templates, or have a particular contractual dilemma you wish to discuss, please do not hesitate to contact our office for specialist advice.
This alert is not intended to constitute, and should not be treated as, legal advice.