Let’s Make a Deal . . . . .

Preparing a Letter of Offer and a Contract of Employment may be the final step in the long journey of recruiting the ideal candidate, but there are still a number of areas that employers should pay attention to when drafting these documents.

Offer letters vs. contracts

At its most basic, a contract is a legally binding promise. To be legally binding, it needs to include the elements required to form a contract, namely agreement (offer and acceptance), an intention to create legal relations, consideration, capacity, consent and legality.

It is important to note that a contract need not be in writing for it to be a legally binding contract. This means that even a verbal agreement between an employer and an employee is legally enforceable if it contains the required elements.

Interestingly, it doesn’t matter what you choose to call a document; determining whether it is a contract or not is an exercise of legal construction, which cannot be supplanted by a heading.

Therefore the difference between a letter of offer and a contract is usually something as simple as a term that clearly states that the included offer of employment is subject to the parties agreeing to a formal contract of employment, which will be drawn up at a later date.

Misleading conduct

Employers should be mindful of s 31 of the Australian Consumer Law located in schedule 2 of the Competition and Consumer Act 2010 (Cth). This section (broadly) states that a person who offers employment to another must not mislead that person in relation to any matter relating to the employment.

This section specifically applies to an employer’s conduct towards prospective employees, so employers should be wary of making promises that they cannot keep.  

Legislative requirements

The Fair Work Act 2009 (Cth) is the legislative framework for most workplace arrangements in Australia. This Act provides the 10 minimum standards relating to a range of issues affecting employees in the workplace, amongst more. Employers should take care that any contract they draft conforms to these standards, as an absolute minimum.                                            

Another important thing to consider when drafting a contract of employment or letter of offer, is to determine whether the position offered is covered by a ‘Modern Award’ or an ‘Enterprise Agreement’. As a general rule, contracts cannot offer less pay or benefits than would be awarded to employees under a Modern Award or Enterprise Agreement.  Information about Modern Awards and Enterprise Agreements can be found at http://www.fairwork.gov.au.

Employers should also be aware that they are required to provide all new employees with a copy of the Fair Work Information Statement as soon as possible after they commence employment. Employers generally choose to enclose this Statement with the formal Contract, when issued.

Drafting an employment contract is a complex process that requires consideration of many issues dependent upon the type of position being offered and the type of industry an employer operates in. It is at this stage that legal advice becomes essential to your business.

To ensure that your company is operating lawfully, or to discuss any aspect of business or personal law, contact Julia Adlem or Alisha Thompson at Pace lawyers on (08) 8410 9494.