Who can use this contract

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 — 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 (otherwise known as a 'fixed term contract'). You will be able to tailor 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.

The contract is not intended to apply to 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; deductions, superannuation; 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 this 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 will be making a 'true fixed term contract'. 

If you do not want to make the contract a true fixed term contract, so that 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, you should use the Contract of Employment — Not Fixed Term, available to Workplace subscribers on the Agreements and Contracts page of our website.

The inclusion of those types of clauses makes the contract at law, not a true fixed term contract. If the contract provides a broad or unconditional right of termination during its term (ie either party terminating by the giving of notice, or a probationary period), the period of the contract is indeterminate and will not provide protection for the employer from an unfair dismissal claim.

A corollary of the above is that creating a true fixed term contract means the only way in which it can be terminated before the end of the expiry date is generally for reasons of serious misconduct, by agreement or where there is, at law, frustration of the contract. 

If a true fixed term contract is terminated during its fixed term by the employer on notice without there being an act of default (such as serious misconduct), it may result in the employer being required to pay the employee their remuneration for the duration of the fixed term. 

Subscribers should be aware that whilst employees engaged under a true fixed term contract are ordinarily excluded from bringing an action for unfair dismissal and receiving severance pay on termination of the employment, judicial bodies such as a court or commission may ignore such arrangements as being a 'sham' where the substantial purpose of the engagement was to avoid unfair dismissal or severance pay obligations. Careful consideration should therefore be given to the reason for implementing such contracts. Additionally, where the contract is terminated by the employer before the expiration of its fixed term, the employer will lose the protection of exemption from unfair dismissal claims.

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

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 include a post-employment restraint in the contract. If you retain the restraint, you should seek to customise it 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 which impose an unreasonable restraint of trade on an employee or that 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 that 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.

Withholding amounts from employees

The contract indicates that the employer can withhold remuneration from the employee where the employee fails to return the employer's property in a fair condition (including tools and uniforms). The general rule is that clauses withholding remuneration are not enforceable unless the employee specifically authorises the deduction. As such, this clause has been drafted to contain such an authorisation.

You should be aware, however, that if you exercise your rights under the clause, it is possible that the employee may complain to Fair Work Australia, a court or industrial tribunal alleging that your organisation has not paid his or her appropriate accrued entitlements or his or her guaranteed remuneration. Additionally, federal laws require that any deduction must be reasonable in the circumstances, and as such you should give careful consideration in each instance where a deduction is made. 

We recommend you seek legal advice if you are considering withholding remuneration from an employee. There may be other options available which can be explored.

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.