Employment Contracts and Policies

Based on the contribution of Craig Dowling and Neill Campbell for The Law Handbook 2016, published by Fitzroy Legal Service, originally amended by ClareMcKenzie for the NT Law Handbook, as amended by Bradley Allen Love Lawyers, Canberra, by Gabrielle Sullivan, May Oboodi and Robert Allen and current to March 2018.

All employees have a contract of employment. The contract can be written or oral (or partly written and partly oral), however most employees have a written contract of engagement with their employer which sets out key employment details such as wages and benefits.

The rights and obligations of the parties to the employment contract can be found in the express terms of the contract of employment as well as implied terms of the contract of employment arising in statutes and from the common law (law created by judges when cases are decided).

In addition to the document that was signed by the employer and the employee, some workplaces have specific rules or employee handbooks that are handed to workers when they start their employment or displayed on notice boards. In some circumstances, these rules may become express terms of the employment contract. For this reason, it is generally advisable for employers to follow their own HR policies and procedures.

Express terms

The express terms of a contract of employment are those terms that have specifically been agreed to by the employer and the employee. These terms may be varied by agreement between the employer and the employee over time.

Employment Policies that have been in incorporated into a contract of employment are considered to be express terms of the contract.

Implied terms

Implied terms of a contract exist without being explicitly stated or written down. Broadly speaking, there are two types of implied terms that are applicable to employment contracts. Firstly, contractual terms can be implied in fact. A term implied in fact is a term which is presumed the parties would have agreed upon had they considered it. It is quite rare for a term to be implied in fact and whether or not a term has been implied in fact depends on the specific circumstances of the case in question.

Secondly, contractual terms can also be implied in law. Terms implied in law can place obligation on both employees and employers alike.

The following employee duties are implied in law into every contract of employment:

1. An employee must take all reasonable steps to carry out what has been promised under the contract of employment. Sometimes this is described as 'the duty to serve and cooperate’;
2. An employee must obey lawful and reasonable directions;
3. An employee must exercise reasonable care in the performance of their work, consistent with the skills the employee professes to possess;
4. An employee has a duty of fidelity to their employer. This means they must:
   a. not promote their personal interests by pursuing a gain where there is a real conflict with the interests of the employer;
   b. not engage in other inconsistent employment;
   c. not misuse their position to advantage the themselves or a third party, or to cause detriment to the employer (the no profit rule);
   d. not misuse or misappropriate the employer’s property; and
   e. not misuse the employer’s information.
5. An employee must not engage in acts incompatible with the continuation of the employment contract (e.g. drug use, consuming alcohol at work, fighting, and using abusive language).

The following employer duties are implied in law into every contract of employment:

1. An employer has a duty of good faith to an employee to perform its obligations and exercise its powers and discretions in a manner that does not deny the employee the essential benefits of the contract;
2. An employer must pay the wages promised at the times agreed;
3. An employer must take reasonable care for the safety of an employee while the employee is at work;
4. An employer has to indemnify (pay on behalf of) an employee for loss or damage caused to others in the course of the employee’s work, unless the employee's action amounts to serious and wilful misconduct. Also, an employer must indemnify an employee who is acting within the scope of their authority as agent;
5. An employer and employee also have a mutual duty to cooperate.

Varying an employment contract

Sometimes, during the course of employment, an employer will attempt to alter an employee's working conditions, classification or grading, rate of pay or other employment terms. Generally, this cannot be done without the employee's agreement. Before taking any action or making assumptions about their rights to vary a contract of employment, an employer and employee should obtain expert advice from their employer association or union, the Fair Work Ombudsman or a solicitor.