Employees who are asked to sign an employment contract cannot be asked to sign away any of their inherent workplace rights or to agree to any act that would be deemed illegal. Any employer who makes the mistake of including an illegal work term in an employment contract can face legal action and potential legal penalties for doing so.

Every employment contract must meet the minimum legal standards as set out by the Fair Work Act of 2009 and National Employment Standards. 

These standards apply to various aspects of every employment contract and include the following;

• Maximum weekly hours that can be worked
• Flexible work arrangements
• Changes in employment status
• Types of leave including parental, annual, holidays and family sick leave
• Notice of termination

If, for example, an employment contract exceeds and/or demands more than the maximum work hours allowed by law, the contract would be considered to contain an unfair employment term. Other examples include denying annual leave, requiring an employee to work on a national holiday or not giving proper notice to an employee who is being terminated. 

What about casual employees?

Some employees, such as casual employees, receive somewhat fewer protections under the NES, but they are still entitled to the following;

• Opportunities or offers of change of employment status
• Unpaid leave for caregiving, compassionate or community service leave
• Some additional benefits are available to casual employees if they have worked for an employer for more than 12 months, including unpaid parental leave and flexible work arrangements

Therefore, if you are contracting with a casual employee it is important to be sure you have a full understanding of their minimum legal protections also.

What about restraint of trade clauses?

Be wary of creating a restraint of trade clause. A restraint of trade clause limits an employee’s range of new employment options due to the employee being in possession of sensitive information that might be valuable to competitors. If a restraint of trade clause is overly restrictive a court can potentially strike it down. 

Therefore, if you are going to include a restraint of trade clause be sure that you do not exceed the following with regard to future employment;

1. Do not set an unreasonable amount of time, subsequent to leaving your employment, before an employee can work for a competitor
2. The limit of the geographic location that an employee can work for a competitor must not place an undue burden on the employee’s ability to earn a living. Hence, indicating that an employee cannot work for a competitor within a 15-mile radius would probably be considered reasonable. However, a 60-mile radius might not be so favorably looked upon
3. It is reasonable to prevent a departing employee from taking other employees with them, but you cannot forbid other employees from leaving of their own accord
4. Soliciting clients to leave with a departing employee can be prohibited. But again, if a client chooses to leave with a departing employee, they are entitled to do so.

While most employment contracts are very straightforward and in compliance with the minimum legal requirements, it can be tempting to create limitations that you believe will protect your business. To ensure you’re not violating the law it's prudent to have any contracts reviewed by a professional who specialises in employment law.