Employment Contracts & Policies

Employment Contracts & Policies

At MKI Legal, we can help prepare employment contracts, workplace policies and other documents to protect your business and reduce the risk of your business breaching workplace laws

Restraint of Trade

Restraint of trade clauses protect your business from unfair competition.

It's important that the restraint of trade clause is properly drafted. We see many restraint of trade clauses in employment contracts that are deficient.

At law, the starting position is that a restraint is not enforceable unless it is reasonable. The duty is on the employer to prove this. This test is essentially that the restraint of trade clause goes no further than necessary to protect the legitimate interests of the business.

If the restraint clause goes too far, it can be struck out. In Western Australia, and elsewhere in Australia except New South Wales, if the restraint cannot hold up without the struck out clause, then it's likely the entire restraint will become unenforceable. This is because the Court does not rewrite clauses - only strike them out.

In New South Wales, the court does have the power to “rewrite” or read-down a restraint of trade clause that is found to be deficient. So this gives more room to save an invalid restraint clause. However, Western Australia does not have this luxury.

Some general categories of protection that are common in restraint of trade clauses are:

  • Restricting employees from competing against the business. This can include working for a competitor or setting up their own business.
  • Restricting employees from poaching clients, customers or patients - including prospective clients.
  • Restricting employees from poaching staff, including employees and contractors.
  • Restricting employees from dealing with or poaching suppliers or other key stakeholders in the business.

Award Compliance

It's also important that an employment contract complies with any modern award that covers employees of the business.

Many awards have an express obligation that an employer must notify the employee in writing of their classification level, working hours, pay rate etc.

We often see employment contracts which don't take into account the award terms. If this occurs, then the business can be in breach of the award and can be subject to penalties.


An employment contract can also include some important preconditions such as obligations on the employee to pass a medical, to pass a criminal record check, to have certain qualifications etc.

It's important to have these properly set out in the contract to ensure that no employment relationship starts until these conditions are satisfied. You don't want to have a situation where the employee argues that the employment relationship started and demand payment of entitlements, even if certain important conditions have not been fulfilled.

Confidentiality & Intellectual Property

Another important aspect of employment contracts is to ensure that the company's physical property such as laptops, computers, motor vehicles, intellectual property and confidential information are adequately protected.

We draft employment contracts to make it clear that

  • the company owns the intellectual property,
  • We make it clear that the employee has a duty to maintain confidentiality and that the confidentiality provisions apply even after the employment relationship ends.
  • the company's property belongs to them and the employee has an obligation to return all the company property. We sometimes put optional clauses to require the employee to sign a statutory declaration to ensure that they have returned the property.

Set off

It's important that the employment contract also has a proper set off clause.

A set off clause is used in most cases to set off award entitlements. For example, if a business is paying an employee a rate higher than their award classification, then the excess payments can be used to set off other award entitlements.

It's important that this set off clause is drafted properly because if it's not, then the business may not be able to set off the excess payments against other award entitlements. This could result in an underpayment claim and if a business underpays an employee then the business. and any other individuals involved in the contravention, are exposed to civil penalties.

Other Contract Terms

There are many other terms that go into an employment contract including

  • location of work
  • conflict of interest
  • Setting expectations for employees, including their duties
  • Ensuring employees do not perform unauthorised work for another business or a competitor during employment.
  • referring all opportunities to the business,
  • disclosure obligations on employees
  • workplace surveillance (eg to obtain proper consent so the business is not exposed to criminal charges under the Surveillance Devices Act)
  • drug and alcohol testing requirements including carefully drafted terms which specify that if the employee fails a drug and alcohol test, they are deemed unfit for work and won't be entitled to any payment
  • Many more custom terms unique to your business

Workplace Policies

Workplace policies are essential for a business. They serve a number of purposes including helping:

  • employees understand what is expected of them and the appropriate steps that they need to follow; and
  • protect businesses from claims including bullying, discrimination and sexual harassment claims.

Workplace policies are generally not legally binding on the employer, however they are binding on the employee (provided the policies have been set up correctly). This means a business can have flexibility regarding the terms it includes in it, without fear that the policies give the employees a contractual right (eg a right to sue for breach of policies).

Policies deal with a vast array of issues including

  • IT use including social media
  • Permitted leave
  • Anti-discrimination
  • Conflict of interest
  • Drug and alcohol policy
  • Grievance and dispute resolution
  • Anti-harassment and anti-bullying
  • Performance management policy
  • Other customised policies the business requires to undertake successful operations

Protection from Discrimination, Harassment and Other Claims

A well-drafted policy clearly sets expectations for employees. These expectations deal with issues such as making it clear to the employee that the business does not tolerate any discrimination, sexual harassment or bullying. The policies will also help explain and give examples of what constitutes this type of conduct.

The policy should also have procedures in place on what an employee should do if they feel that they've been discriminated against, harassed or bullied. This is essential because a business can be liable for the sexual harassment or discriminatory acts of its employees if it didn't take reasonable steps to prevent that conduct from happening in the first place.

Having well drafted policies is one of the steps normally required for a business to prove to the court that it took reasonable steps to stop this behaviour from happening. There are other expectations on the business such as ensuring that negative behaviour is properly dealt with and providing ongoing training to staff about these issues.