Employees can make or break a business – so how do you get it right for both the employer and the employee?
You have gone through an extensive selection process for hiring your next employee in order to get the right person for your business. The things you want the employee to do and what you have offered the employee have been discussed and evaluated in detail, and you are both excited about the potential opportunities. All you need to do now is work out the commencement date. Right?
In the last instalment in the ‘Legally Fit’ article series, we discussed some of the minimum terms and conditions which automatically apply to most fitness industry employees, but also recommended that written employment agreements be put into place. This is, in part, to help avoid misunderstandings which may adversely affect the development of the new employer/employee relationship.
In this instalment we look at some of the issues that should be considered when implementing employment agreements as part of the hiring process. To read previous articles in this series search ‘Legally Fit’ at fitnessnetwork.com.au/resource-library. Some of the issues may also be relevant to the engagement of independent contractors.
Implementing employment agreements
Both employers and employees will have rights and obligations on commencement of employment, but there is generally no obligation on either party to enter into a written employment agreement after employment has commenced.
Sure, as an employer, you can get a new employee to sign an employment agreement after they have started employment, but getting (ahem, coercing) them to do so if there is disagreement about some of the terms which were intended to apply is not the best way to start a new relationship. Any intended probationary period may also not apply. It could also potentially lead to a breach of the Fair Work Act 2009 (FWA).
It is therefore important to ensure that written employment agreements are implemented as part of the hiring and offer of employment process rather than after the employee has commenced work.
The basic terms of employment agreements generally include: position, duties, status (full-time, part-time, casual), days and hours of work and remuneration.
In addition to those things, and depending on the nature of the fitness business and the position, it is also recommended that a number of other matters be considered.
A detailed position description specifically tailored for the position, including responsibilities and duties, should not only be created to assist in the hiring process, but should also form part of the employment agreement to make it quite clear about (some of) the expected responsibilities and duties (and related matters).
Right to alter terms of employment
Notwithstanding the creation of a detailed position description, it is not uncommon for the nature of a position of an employee to change over time. This may be because of changes in the business or the professional development of an employee, or because the employee is not suited for all the originally intended responsibilities and duties.
While employees generally have a duty to follow reasonable and lawful instructions and an employer would not be able to unilaterally change some of the fundamental terms of employment (such as decreasing salary) without the employee’s agreement, a right to alter (some of) the terms of employment (such as duties and responsibilities) should also be included in order to avoid disputes about whether the employer has the right to do so. Such provisions may also protect against an employee being dismissed (for ‘unfair dismissal’ purposes) as a result of such an alteration.
The alteration of terms, such as duties and responsibilities, may also give the employee the best chance to succeed.
The requirement to comply with company policies (such as codes of conduct, use of social media and workplace health and safety), as well as the right to vary existing and introduce new company policies, should be included.
Expected budget and performance requirements and the basis for any bonus and other incentives should be clearly spelt out in the employment agreement in order to avoid potential disputes, particularly in instances where an employee’s employment has ended.
For instance, should there be an entitlement to a pro-rata bonus where an employee voluntarily ceased employment during the bonus period?
Confidentiality (during and post-employment)
Consideration should be given to the types of confidential information (including financial information, business and marketing plans, systems and procedures and other trade secrets) an employee should be required to keep confidential both during and after the period of employment.
It may also be appropriate that the requirement extend to not disclosing certain information to other employees. For instance, it may not be productive for employees to discuss their own salaries (or the salaries of others if they have access to them) with other employees.
Most businesses have valuable intellectual property of some form. Intellectual property can include copyright (in logos, brochures and other works created by an employee), trade marks, designs, patents, trade secrets and confidential information. Such things created by an employee may not automatically belong to the employer, so appropriate intellectual property provisions should be included.
Would you be happy about an employee starting their own business and using the copyright materials you paid them to create in your employment?
Non-competition provisions (during and post-employment)
Are there particular clients, suppliers, competitors or other activities that an employee should be endeavoured to be prevented from engaging with during or following their employment?
Pre-existing injuries should be disclosed, particularly given the nature of employment in the fitness industry. For instance, the failure of an employee to disclose a pre-existing injury or disease may result in the employee not being entitled to workers compensation as a result of a recurrence or exacerbation of that injury or disease.
While the FWA provides that employees must complete a minimum employment period (one year for an employer that employs fewer than 15 employees or six months for an employer that employs 15 or more employees) before they will be eligible to make an application for ‘unfair dismissal’, it is recommended that an appropriate probation period still be included.
Notice of termination periods
The FWA provides for minimum periods of notice to be given by an employer to terminate an employee.
Consideration should also be given to whether an employee should be required to give a specified period of notice if they are not covered by the Fitness Industry Award 2010 (or other award which requires an employee to also give a minimum period of notice of termination) or whether, given their importance to the business, an employee should be required to give a longer period of notice than that prescribed by the FWA.
Depending on the nature of the position and the fitness business, there may be other issues that need to be addressed in an employment agreement. Essentially, if something is important to you or you have had problems with certain issues in the past, you should consider addressing them in future employment agreements to reduce disputes down the track.
This article has provided a general outline only of some of the issues relating to employment agreements. It does not constitute legal advice and should not be relied upon as such. Specific legal and financial advice should be obtained in relation to the specific details of each proposed employment arrangement.
Leon Ponte, Juris Doctor (Law) is the founding principal of Ponte – Business Lawyers for Business and is in a select group of approximately only 110 lawyers accredited as specialists in business law by the Law Institute of Victoria. He has a strong personal interest in the fitness industry, holding Certificates III and IV, and has provided advice to the industry. ponteblfb.com.au