The replacement of statutory agreements with common law contracts will provide the parties with more freedom and flexibility, particularly in cases where remuneration is at or above $100,000 a year, because these contracts will only need to adhere to the prescriptive ‘safety net’ of minimum standards. In this way, the impact of the legislative changes may be seen in a definite increase in the use of these contracts.
Not only would it be advantageous to an employer of a worker who is earning at least $100,000 a year not to have to remain aware of all applicable awards in that industry sector, but this type of instrument would also effectively ‘de-unionise’ that category of worker, because if most of the workforce is on individual common law contracts, it would not be worth the union’s while to engage in litigation on behalf of one employee at a time (however, if all of these workers were on AWAs prior to 2010, this situation would have existed prior to 2010 as well).
The reforms that will be implemented by the 2008 legislation will, in all probability, have a significant impact on the content of common law employment contracts. But it is also essential to keep in mind that, apart from these dramatic changes to the legislative regime, the common law position on employment contracts continues to evolve It would seem that all of the doom-ness visited upon Workchoices will now be visited upon anyone on more than $100,000 per year. That either means that the criticism of Workchoices was exaggerated, or they are “only pretending to care”. It is as if this Government will do more to reduce the role of the union movement than the previous one dared to.
Positively, when Governments create vacuums, the Courts fill them. There have been many benchmarks set in recent times by the Federal and State Courts which create protections for the general middle-management-and-above community, which the Government has chosen not to give them by legislation.
Contractual terms
Common law contracts are the means of engagement already for most people – award or non- award. That is because award standards have so completely fallen behind community standards in most occupations over the past two decades (eg, under the State Clerical and Administrative Award, the “executive rate” above which you cease to get overtime is about $38,000). Awards can be completely avoided so long as the common law contract ensures that its clauses are not undercut – a simple task in most cases. With the new legislation, that will not even be necessary for those on $100,000 or more.
If one was advising an employee on more than $100,000, prima facie, that advice would be to get nothing in writing and to sign nothing. That is because if you write down a right, or define it, you automatically limit it to what is written. The idea of “reasonable standards” is thus much abridged by a written contract. It could be said that the best contract is an unwritten one, as in that case the parties necessarily leave it to the courts to determine many of the specifics of the contract.
For everything that is not written, (or verbally ‘express’ – hard to prove when in dispute) the common produces terms which are held to be ‘implied’ into the contract, if not expressly written into the contract.
Implied terms
Historically, the courts have come up with two categories of implied terms: those implied by law for reasons of policy (for example, the requirement that the employer will take reasonable care of the employee’s health and safety while at work is intended to safeguard the working public’s health and safety) and those implied by fact (for example, the custom, practice and usage of many industries requires reasonable notice of termination to be at least four weeks).
In determining whether a term is capable of being implied into an employment contract, the courts have formulated the following conditions:
• The term must be reasonable and equitable
• It must be necessary to give business efficacy to the employment contract
• It must be ‘so obvious that it goes without saying’
• It must be capable of being clearly expressed
• It must not contradict an express term elsewhere in the contract.
In this manner, the common law has discovered many implied terms to exist within the employment contract, conferring definite duties upon the contractual parties – employee duties such as: obeying all reasonable and lawful commands of the employer; disclosing all necessary information to the employer, but not disclosing any confidential business information to others; furthering the employer’s interests, or at least not frustrating the employer’s interests.
And the common law has found some of the employer’s duties to be: providing the employee with prescribed wages and conditions; paying redundancy pay to eligible employees; and advising employees of superannuation and resignation requirements and arrangements. And some implied terms have created mutual duties, which are borne by the employee and the employer. One such mutual duty is the obligation of mutual trust and confidence, which has its origins in the ancient fiduciary duty owed by a servant to their master.