CONTRACT of EMPLOYMENT

INTRODUCTION

A Contract of Employment is one of the most important documents in the employer-employee relationship. This contract establishes that contractual relationship. There can be no employment without a contract. The contract is based on the principle of mutual trust and confidence. An employment contract is also an exercise of good faith between the parties (Commonwealth Bank of Australia v Barker [2013] FCAFC 83).

OFFER of EMPLOYMENT: WRITTEN or VERBAL

An offer of employment should be clear. It should also be a definite offer and be clear in relation to a range of matters including various entitlements and relative benefits. As well as these aspects, there is the expectation of performing the duties and responsibilities (both parties) that accompany the acceptance of the offer. The prospective employee should consider the terms of the employment contract. Having considered and assessed the offer, that person then accepts or rejects the offer. An accepted contract therefore = offer, consideration and acceptance.

Any amendment to a contract should be by agreement between the parties and in writing.

While the contract should be set out as a written document, verbal contracts do arise.

An verbal contract attracts a number of difficulties in that proof of a matter can be difficult to assess in terms of what had been agreed on.

EXPRESS and IMPLIED TERMS

Two other elements require attention: express and implied terms. Both express terms and implied terms are important ingredients in the interpretation of an employment contract and issues should they arise.

The express term is one that is set out in clear written form expressing the commitment and intention of the parties. There should be a consistency between a commitment and an expression. An implied term is not set out in the employment contract but is considered to have been agreed to between the parties and should not be inconsistent with an express term.

An implied term has the potential of causing more difficulty in the interpretation of its wording and intentions when compared to where the term is an express term. This principle would similarly apply when assessing the situation of a verbal contract versus a written contract.

BREACH

Breach of contract can lead to monetary penalties (having regard to the nature of the conduct): see PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15 @ 187 – where the pecuniary amount was reduced.

Disclaimer: Richard Krajewski’s articles are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication.