A typical employment contract can contain items that seem harmless until you look a little further. If you’re not careful you can quickly find yourself in hot water. Here are answers to some common questions to help you better understand what you are signing up for.

When do your obligations end?

Employees often assume that their obligations under their employment contract end when they stop working for their employer. This is not always the case. Ordinarily, restraint of trade, confidential information and intellectual property clauses will continue to bind you even after you have terminated your employment contract and moved to a new job.

Are there any restraints of trade?

Most employment contracts create restraints of trade. Restraints of trade can restrict your ability to start and work for another businesses once your employment has ended. They include:

  • Non-compete’ clauses, which prevent you from setting up or working for a competitor who operates within a defined geographical area for a particular period of time; and
  • Non-solicitation’ clauses, which prevent you from contacting your employer’s clients to seek their business, or from enticing other employees to join a new or different business.

Although they are not always enforceable, these clauses can make it difficult for you to take the next step in your career after you leave your current job.

Who gets the intellectual property?

Many employment contracts have clauses under which your employer can take ownership of the intellectual property in any inventions or original works that you develop while you are on the job. Some employment contracts give employers rights over an even broader range of intellectual property. This is particularly important for employees who work in the creative industries. If you are bringing your existing IP with you to a new job, make sure that your employment contract does not mean that your new employer takes ownership of that IP.

Is your annual salary legal?

Employees who are covered by a Modern Award are generally entitled to be paid an hourly or weekly rate for ordinary hours they work, and a special penalty rate for any overtime hours that they work. Sometimes, employment contracts give you an annual salary instead. Most Modern Awards require various formal steps to be taken until this can be done. They also require you to be ‘better off overall’ by receiving your annual salary than you would have been had you received the hourly or weekly rates and penalty rates payable under the Modern Award.

Are you entitled to your bonus?

Many employment contracts give employees the opportunity to receive a performance bonuses. These bonuses may take the form of extra money, shares or other benefits. Employment contracts often say that an employee will not always be entitled to a bonus, and that the employer has a ‘discretion’ to pay them. While this is true, most employment contracts will be interpreted to require the employer to act reasonably when deciding whether or not to pay a bonus. This is particularly so where the bonus is linked to objectively verifiable performance metrics. If you have clearly met the criteria for a bonus, you may be entitled to it even if the employer exercises a discretion not to pay it to you.

How can we help?

Get in touch with us if you are starting a new job and want your new contract reviewed. We can also review your contract with an existing employer to help you work out what you can and cannot do in the future.

John Morrissey