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Common problems with employment agreements
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Agreement must be in writing
Some employers continue to employ workers on oral agreements, and appear to be ignorant of their obligation to have them in writing under Section 65 of the ERA.
Worker must be given copy of intended agreement and opportunity to seek advice prior to starting work
Section 64 of the ERA requires that before a worker enters into any individual employment agreement the employer must
- give that worker a copy of the intended agreement
- advise the worker that he or she may seek independent advice about its content
- and provide him or her with a reasonable opportunity to seek that advice.
Must be entered into before worker starts work
Some employers are still continuing to give workers an employment agreement after the worker has commenced work. Some are also insisting that the agreement be signed on the spot without allowing any opportunity for the worker to seek independent advice about its content.
Agreement fails to correctly identify the name of the employer
Section 65(2)(a)(i) requires that every individual employment agreement must include the names of the employee and employer concerned.
Companies must use the name on their certificate of incorporation, and not trading names.
As mentioned in my last column, company directors who fail to comply with this requirement may find themselves personally liable for the performance of any obligation, or the payment of any money, owed under the employment agreement.
Agreement has no job description
Section 65(2)(a)(ii) requires that all individual employment agreements must include a description of the work to be performed by the employee.
In other words, the employment agreement must have a job description.
Although it is not mandatory, employers should also state in the employment agreement how, and to what extent, the job description can be changed in the future.
Agreement fails to record place of work
Section 65(2)(a)(iii) requires that all individual employment agreements must include an indication of where the employee is to perform the work.
This requirement should not be a problem for employees who are employed at a particular place of work.
However, some employees, such as sales people who have a geographical territory, work at various locations.
In such cases, the employment agreement should record the place where the employee normally works from (usually the employer's place of business), and the fact that the nature of the work may require the employee to work off site.
Agreement fails to record hours of work
Section 65 (2)(a)(iv) requires that all individual employment agreements must include an indication of the arrangements relating to the times the employee is to work. Statements such as "the employee will work such hours as are required to complete the work" do not meet this requirement.
Agreement fails to record the wages or salary payable
Section 65(a)(v) requires that all individual employment agreements must include the wages or salary payable to the employee. Arguably, this would also include commission and bonus schemes, which all too often are placed in other documents such as policy manuals.
Employers also need to amend employment agreements to reflect any pay increases the employee may receive.
Agreement fails to provide for the resolution of employment relationship problems
Section 65(2)(a)(vi) requires that all individual employment agreements must include a plain language explanation of the services available for the resolution of employment relationship problems, including a reference to the 90 time limit for the raising of personal grievances.
The First and Second Schedule of the Employment Contracts Act provided comprehensive procedures for the resolution of personal grievances and disputes. Some employers appear to think that the ERA has re-enacted those procedures and, as a result, have put clauses in their employment agreements that state "personal grievance and disputes will be dealt with in accordance with the procedures set out in the First and Second Schedules of the Employment Relations Act."
The First and Second Schedules of the ERA do not deal with personal grievances and disputes. In fact, the ERA does not provide any procedures for the resolution of personal grievances and disputes. Instead, it makes "services available for the resolution of employment relationship problems", namely the Mediation Service, the Employment Relations Authority and the Employment Court.
Also, the ERA requires that employment agreements include a plain language explanation of the services available for the resolution of "employment relationship problems." Employers need to be aware that personal grievances and disputes are specific types of "employment relationship problems", and they must provid a plain language explanation of the services available for all types of employment relationship problems, not just personal grievances.
Summary
Overall, the ERA imposes new and different requirements regarding the form and content of employment contracts/agreements than the
Employment Contracts Act did.
For employers, it is not a simple matter of taking their old employment contracts and replacing the words "Employment Contracts Act" with "Employment Relations Act" wherever they appear. Instead, employment contracts/agreements need to be re- drafted to ensure compliance with the ERA.
The honeymoon period is over and the Employment Relations Authority is expected to take a harder line with employers who fail to comply with their obligations under the new Act, including imposing substantial penalties for non-compliance.
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