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An employee is a worker who is paid a wage by an employer in exchange for an agreed role or scope of work. This relationship will usually be regulated by a contract of employment and the employee will perform work under the direction of the employer. Importantly, the employer is responsible for payment of the employee’s superannuation entitlements, applicable tax and leave entitlements.
A common form of employment will include an ongoing expectation of work, set hours, the provision of all tools and equipment by the employer and a regular method of payment.
Minimum employee entitlements are set out in the National Employment Standards and employees are governed by the Fair Work Act 2009 and their relevant award or enterprise bargaining agreement.
A contractor is an independent worker who is primarily in control of how and when their work is conducted, and they are responsible for quoting and invoicing for their work. There is usually no expectation on the principal to make payment of superannuation and the contractor does not accrue leave entitlements payable by the employer, they are responsible for and obtain payment in return for the tasks they undertake. A contract may exist between contractor and principal; however, this will focus on the contractual obligations of the parties only.
A contractor will ordinarily be registered for their own ABN, be registered for GST and are responsible for declaring and paying tax to the ATO as well as their own insurance. A Contractor will ordinarily have their own tools and equipment and are engaged for a specific task or project.
The main indicator of the difference between an employee and a contractor is the degree of control the worker has over their work; the more the work is at the instruction of an employer, the more likely the worker is to be an employee. Conversely, a contractor is in control of their hours and how their work is conducted.
An employment contract in simple terms is a contract which sets out the rights and responsibilities of both the employer and the employee. These rights include remuneration or wages, work hours, the duration of employment, duties, tasks, entitlements and benefits etc. From an employer’s perspective such employment contracts may cover confidentiality, handling employer’s social media sites and content (communication), non-compete clauses, information on solving disputes at work etc.
An employment contract plays a major role in clearly defining the job and the role offered by an employer or prospective employer. Such contract must not provide less than the legal minimum set out in the National Employment Standard (NES) or any enterprise agreements, other registered agreements or awards that may apply. It is important to note that all employees who are eligible to work in Australia are automatically covered by the NES regardless of whether they sign an employment contract.
Differences exist between employment contracts in each sector because the nature of the work and goals of an employer are different. There are also different types of employment contracts based on whether the employee is a full-time, part-time, casual or fixed term employee.
All persons working in Australia are entitled to general workplace protections. Some of the general protections provided in the Fair Work Act 2009 include workplace rights, the right to engage in industrial activities, right to be free from unlawful discrimination, the right to be free from undue influence or pressure in work places.
These rights are protected from certain unlawful actions such as adverse action, coercion, misrepresentation, unfair dismissal etc. General protections are important to regulate the conduct of such adverse action by an employer against employee.
A general protection claim refers to an action taken by a person whose rights under the general protections have been infringed. There is no minimum employment period for lodging such claim.
There two general protection disputes:
It should be noted that a general protections dismissal dispute cannot be heard by a court without both parties attempting to resolve the issue at a conciliation mediated by the Fair Work Commission. (Commission). If the dispute is not resolved at such conciliation, the Commission will issue a certificate and the party can chose to make an application to court within 14 days of such certificate being issued.
If the claim involves an adverse action against a person (not involving dismissal), such as being demoted, or being denied a pay increase, harassment due to political opinions etc, then such person can chose to make an application to the Commission or make an application to court. Such application can be lodged at the Federal Court or the Federal Circuit Court and should be lodged within 6 years from the date of the alleged adverse or unlawful conduct.
Constructive dismissal refers to a resignation where an employee feels that they have no choice but to leave their place of work because of poor work conditions, bullying and harassment, underpaying, poor treatment etc. This could also refer to situations where they have been offered a resignation instead of a termination and have no recourse but to take it.
The Fair Work Act 2009 provides that a person will be deemed to have been unfairly dismissed if “the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer”.(section 386(1)(b)).
A few examples of constructive dismissal include:
It must be proved by the employee when bringing an action against an employer for constructive dismissal that the employer’s conduct was the principal contributing factor to which led the employee to resign, as they had no other option.
A restraint of trade clause is a clause that could be included in an employment contract which limits employees from working for prospective employers who may be direct competitors of their current employer. Employers often use these clauses as an attempt to protect their business interests or trade secrets. Some clauses may seek to prevent employees from starting up competing businesses for a set period or within a specific location.
Restraint of trade clauses typically operate for a particular period, such as three months six months, or twelve months after the termination of an employment contract and within a geographical area in proximity to the employer’s place of business.
A restraint of trade clause will be enforceable only if the court deems it is reasonable. An employer cannot rely on a restraint clause where the employee has deemed to be constructively dismissed. Restrictive clauses are not an essential component in employment contracts because there is an inherent protection regarding confidential information.