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Contract of Employment - Not True Fixed Term

Version 1.2 Updated 2 Feb 2023
Contract Recruitment

Who can use this correspondence

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

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

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


Commentary

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

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

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

Coverage

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

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

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

Particular matters to consider

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

The form and content of a contract of employment will differ depending on the circumstances. This will, in turn, affect what clauses you put into the contract. Care should be taken in using the document, and advice sought if there is any uncertainty as to the applicability of any clause.

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

Particular matters to consider — fixed term contracts

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

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

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

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

Post employment restraints

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

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

The particular restraint clause included in the contract includes provisions enabling a court, if it is to review the contract, to read down the covenants in relation to the employee if they are found to be void, invalid or otherwise unenforceable. ‘Reading down’ the strict wording of an unreasonable clause means to modify it until the clause is expressed in a way that is legally enforceable. For example, a court may read down a restraint from 12 months to 6 months.

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

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

Although we have drafted the restraint to include these cascading provisions, the post-employment restraint provisions must be very carefully considered, especially with respect to the geographic scope clause. Care must be taken to ensure that the restraints match the specific circumstances of your business. If there is any doubt about the drafting of the clause and its applicability to your circumstances, we strongly recommend that you seek legal advice.

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

Policies and procedures

There is an increasing willingness by courts to incorporate policies into employees’ contracts of employment. Contracts of employment which do not expressly exclude such incorporation may cause problems for employers. Whilst the contract contains an express exclusion, it is important that employers both comply with their policies and procedures and broadly word their policies and procedures, to further reduce this legal risk. If employers don't exclude the policies and procedures they run the risk of a situation where by breaching their own policies and procedures they may breach an employee's Contract if it is incorporated.

Accrual of leave

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

Other leave

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

Fringe benefits tax

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

COVID-19 Vaccinations

In response to the COVID-19 pandemic, we have included a clause that allows employers to mandate vaccination for new employees if that is a path your business wants to take.

Mandating vaccinations is easy for new employees as you can make vaccination a condition of employment (subject to the applicant having a genuine medical contraindication which will need to be assessed on a case by case basis). Mandating vaccination for existing employees is trickier and may requires an assessment on whether that mandate is a reasonable and lawful direction in the circumstances.

If your business plans to collect evidence of vaccinations, your business will also need to consider the requirements of the Commonwealth Privacy Act 1988 and the Australian Privacy Principles. 

This is obviously a new and difficult area so you may want to seek legal advice before implementing such a vaccination mandate.

Fair Work Information Statement

Remember, you also have to provide a copy of the Fair Work Information Statement to a new employee before they commence employment or as soon as practicable after the employee commences employment.  This is a requirement of the National Employment Standards.

Other matters

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

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

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