Employment Agreements: Why Are They Important?

We regularly assist businesses resolve all types of complex disputes however we often find that many of these disputes could have been avoided or minimised if a proper written contract was entered into between the parties in the first instance.

Employment disputes are no different.

We would like to give you an example of an unfair dismissal dispute that could have potentially be avoided.

What is an employment agreement?

An employment contract is an agreement between an employer and employee that sets out terms and conditions of employment.

An employment contract can be in writing or verbal.

The scenario

The board of directors of a company engaged us to represent the company in an unfair dismissal claim brought by one of the company’s former employees.

The company dismissed an employee in a senior role. There were multiple reasons for the dismissal, including the employee’s continual breach of the company’s work policies. The company’s directors had given the employee a number of verbal warnings however after finding the employee’s actions had not changed and they continued to breach the company’s policies, they terminated the employee.

After the termination, the employee lodged an unfair dismissal claim with the Fair Work Commission claiming that there was no valid reason for their dismissal.

Unfortunately, the company did not have a written employment agreement with the employee nor did they have any written policies surrounding the company’s disciplinary and termination procedures.

The dispute in the Fair Work Commission was a time consuming, stressful and costly exercise for the company which could have potentially been avoided with some proper documentation and procedures.

How an employment agreement and policies could have minimised the scope of this dispute

It is likely that the dispute between the company and their former employee may have gone in an entirely different direction if the company had an employment agreement and proper employee policies in place.

The purpose of an employment agreement is not just to cover the employee’s entitlements, but it provides both the employer and the employee a clear understanding of the employee’s role and what is expected of them in their position. An employment agreement states the terms of employment and governs the rights of the parties both during employment and after the employee’s employment ends.

Similarly, employee policies are necessary in any business to govern the employer’s business policies and practices, including the employer’s expectations and include directions about how the employees are to conduct themselves during their employment.

In this scenario, the employee raised arguments disputing their position requirements and what was expected of them. If the company and the employee had entered into an employment agreement many of these arguments raised by the employee, would not be in dispute.

Further, the employee raised arguments about their termination, in particular that it was not conducted in accordance with the company’s policies and procedures. Similarly, if the company had clear written employee policies in place, explaining their disciplinary and termination procedures, the employee would not have been able to raise the majority of these arguments.

What is the lesson?

It’s pretty simple: have the necessary written contracts and policies to prevent or minimise the scope of a costly, lengthy and stressful dispute.

We deal with disputes similar to this one on a regular basis and so in order to assist other businesses and prevent or minimise similar issues from arising, we have produced employment contracts and employee policies for businesses that focus on preventing or minimising scenarios like this one.

If you own a business please contact us to discuss implementing the necessary employment documents into your business that aim to reduce the chances or the scope of an employment dispute.

We can provide you with employee policies and guidelines for all your staff to follow. This may include policies including an employee handbook, office manual, network policy or a statement of service, if relevant to your business.

Alternatively, if you have found your business in an employment dispute regarding any issues related to unfair dismissal, termination or redundancy, contractor dispute, misconduct, or breach of restraints of trade or breach of confidentiality, please contact us to discuss how we can resolve the dispute.