EMPLOYMENT CONTRACTS - EMPLOYEES

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BASIC REQUIREMENTS FOR A CONTRACT OF EMPLOYMENT

The basic essential elements of a legally binding contract , of any type, are:

• offer and an acceptance;
• an intention by the parties to the contract to be bound;
• capacity of the parties contracting;
• consideration moving from the parties;
• lawful objects of the contract; and
• a stipulated place where the contract is considered formed.

INDUSTRIAL LEGISLATION - AUSTRALIAN WORKPLACE AGREEMENTS (AWAs) AND QUEENSLAND WORKPLACE AGREEMENTS (QWAs)

Under Commonwealth (Federal) law and Queensland (State) law an employee and employer can enter into what is known as workplace agreements.

AWA

Under Federal law certain employers and employees can enter into what are known as workplace agreements.

Australian workplace agreements are individual, written agreements as opposed to collective agreements between an individual employee and an employer governing the relation between an employer and employee.

QWA

Under Queensland law certain employers and employees can individually enter into what is known as a Queensland workplace agreement. QWA's are the State equivalent to the AWA's.

Not all employers can enter into QWA's. In some circumstances you may have to make an AWA under the Federal law even though you work in Queensland.

An employer of an employee employed in one of the following may not make a QWA with the employee:

1. Government Department.

2. Public servant.

3. A Government Agency.

4. An employee or officer of any State Court.

Under Queensland law employers are not allowed to make a QWA with an employee who is under 18 years.

Under Queensland law certain provisions must be included in the QWA and it is the responsibility of the employer to include them.

1. Discrimination clause.

2. No provision restricting disclosure of details of the QWA.

3. A dispute resolution clause.

FORMATION OF CONTRACT OF EMPLOYMENT

An employment contract gives rise to legal rights and obligations. However the terms of these agreements are not usually defined precisely.

The area of employment contracts by its very nature is subject to the law of contract.

The essential elements of a binding agreement are:

1. offer and acceptance

2. an intention by the parties to enter into legal relations

3. capacity of the parties contracting to enter into such relations

4. consideration moving from the parties

5. lawful objects of the contract

6. mutuality of obligation

1. Offer and acceptance:

For a contract of employment to exist one party must make an offer to do a particular job and that offer has to be accepted by the other party.

The parties have to therefore be aware of the precise nature of the offer and the acceptance. If there is no meeting of minds (ie there is no agreement as to what the agreement is about) then there is no contract formed.

A advertisement in the paper is not an offer of a position but merely an invitation to treat. An invitation to treat is not sufficient to create binding legal relations. The offer is made when the prospective employee in an interview type of situation is actually offered the position and not when the advertisement is published. The reason for the importance of this distinction is so that the actual subject matter of the offer and acceptance can be identified.

Difficulties with the actual subject matter of an agreement are over come as there are certain implied terms that are imported into contracts of this type.

Rules governing offer and acceptance:

• The contract of employment comes into being when the acceptance of the offer has been communicated to the offeror.
• The difficulty comes when there is a negotiation process whereby there are a flow of offers and counter offers. It's not until there is a meeting of the minds and a consensus as to the substance of the agreement that there is an offer and an acceptance. (note that the giving of a counter offer is an implied rejection of the original offer.)
• The acceptance of an offer must be by a positive act in order for there to be a true acceptance. Silence is not sufficient. The reason why this is important is that it is the precise moment when the offer is accepted is when the contract is entered into.
• An offer may be revoked at any time before acceptance. Generally no contract is entered into unless the acceptance of the offer is communicated to the person who made it.
• If the acceptance is communicated by mail the contract will be deemed to be entered into when the letter is posted - provided that it can be inferred that it was contemplated by the parties that the offer might be accepted in this fashion.
• When acceptance is by phone or fax etc- the courts will regard the parties as being in each other’s presence. The contract is entered into once the words are spoken or when the acceptance is faxed.
• Note also that where a contract is entered into may have ramifications. The conditions in one state may vary as to those in another state as there are differences both in case law and legislation in the various jurisdictions in Australia.

2. Intention of the Parties:

It is necessary that the parties have an intention to enter into a legally binding agreement and not a lesser agreement.

Distinctions need to be made between a legally binding employment relationship and that of voluntary work arrangements; family work and; work experience as the courts have held that there is insufficient intention to enter into legal relations and those arrangements fall short of the threshold required to create a legally binding contract.

3. Capacity to contract:

The parties must be legally capable of entering a contract. Examples of persons/bodies not having capacity are:

1. Minors; and

2. Associations and Corporations

Minors:

At common law a person under the age of 21 is an infant (though this age has been reduced to 18 in the majority of Australian states). An infant’s capacity to enter into a contract and be bound by a contract is limited. The contracts binding on an infant are as follows:

• contract for necessaries
• contracts for the employment or apprenticeship where the contract as a whole is beneficial to the infant

At common law - a contract is:

• unenforceable against the infant, unless ratified by the infant within a reasonable time of attaining the majority;
• enforceable by the infant but not against the infant.

Note however that these common law rules have been modified to some extent by the laws of the various Australian states.

Associations and Corporations:

A corporation by its very nature is a legal entity and is therefore able to enter into contracts in its own name. The corporation can be viewed as a natural person and therefore is liable for the consequences of entering into contracts.

An association in Queensland can incorporate under the Associations Incorporations Act 1981and therefore are able to enter into contracts.

The problems may arise if a person contracts with an unincorporated association. The reason for this problem is that it is often difficult to find the person to sue. That is the person or persons who constitute the employer at law.

4. Consideration

In order for a contract to be binding between the employer and the employee it is necessary that it be supported by valuable consideration. That is to say that one party must promise to do something in return for a similar promise on the part of the other party. Usually in an employment contract the employee undertakes to work and the employer undertakes to pay the employee.

5. Lawful objects:

The courts will not enforce a contract that is made for illegal purposes, as it will be unenforceable due to illegality. Some categories of illegal purposes are as follows:

• contracts which involve the commission of a crime, or a tort or fraud on a third party
• contracts which promote corruption in pubic life
• contracts to oust the jurisdiction of the court. That is to say that the parties cannot contract out of a right of recourse to the courts.
• contracts in restraint of trade will be treated by the courts as prima facie void.

6. Mutuality of Obligation

In order for there to be a binding contract there also needs to be a mutuality of obligation. That is to say that there needs to be obligations by both parties. This requirement is fulfilled if something is done by one party or a benefit conferred on another party. This goes to the question of what is the fundamental bargain of the parties.

FURTHER INFORMATION

Please recommend a solicitor who is experienced in this area of law.

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