Sham Employment Contracts:

Sham employment contracts may exist where a contract is illegal or contains illegal terms. Employment contracts are not unlike other contracts -- certain problems may arise that render the contract void. There is an important distinction between contracts that are void and ones that are voidable. A voidable contract is one that may be cancelled by the parties involved. In other words, a situation may arise -- such as breach -- that can cause one or both of the parties to rescind the contract. However, a void contract is actually not a contract at all. Void contracts are null from the start, particularly if they include illegal terms or terms that are contrary to public policy.

All contracts require "consideration," which is defined as a benefit. An employment contract that asks an employee to agree to its terms without providing the worker a benefit, such as a promotion or a raise, lacks consideration and is automatically null. A request to agree to a new employment agreement may be subject to a ‘no disadvantage’ test. Consideration is an integral part of any employment contract, as employees must be given the "benefit of the bargain." If there's no benefit for the employee, the a court may deem it too one-sided.

A trade restraint term that is overly broad may be considered void. For example, an employee who doesn't have access to proprietary information, such as client lists or trade secrets, should not be asked to sign to a confidentiality agreement. Employees may be asked to sign agreements trade restraints which restrict their ability to compete in the same industry or within a large geographical zone- these may be illegal if there are excessively onerous in the limitations stipulated.

Any illegal term in an employment contract is automatically void. This can include clauses to waiver rights under Fair Work Act or its regulations, to waiver employee entitlements mandated by statute, award or an industry code. It may also be a term that requires the employee to relinquish any rights or remedies available to them under civil law, these may be terms that parties are not permitted to exclude by contract.

Terms in the contract may not accord with legislations such as those dealing with awards and the Fair Work Act.  The contract may be deficient in the leave entitlements, it may not meet the award standards in terms of minimum wage, hours, working conditions may not comply with the Fair Work Act. Terms or conditions that discriminate between persons without having direct relationship to the performance of a contract may also be illegal, such as terms that incorporate age, sex or racial discrimination.  Proper legal advice in this area of law may be necessary to ensure that you thoroughly understand the legality of terms in an employment contract.

If you seek further assistance or legal advice regarding your employment contract, please make an appointment to see one of our employment solicitors. You can contact us on (02) 9233 4048 or send an email to info@navado.com.au.

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