New Zealand: Pitfalls to watch out for when signing an employment agreement

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fgvwefrretCongratulations, you’ve scored yourself a new job! Before you get too excited there are some formalities that need to be addressed, specifically the terms of your employment.

In New Zealand it is a legal requirement for all employees to have a written employment agreement, it outlines the terms and conditions of your employment and what is expected of you. What is offered in an employment agreement cannot be less than what is required by the law, while the law is favourable towards the employee, an individual employment agreement is usually written in a way that is advantageous to an employer.

It may seem like the employer holds the control, but one of the powers of an employee is being able to negotiate to be in a better position, and legally an employer must engage in this with good faith. Do you know what you might want to negotiate or what parts of an agreement might be disadvantageous to you as the employee?

Without you knowing it the items below could be a pitfall in an employment agreement.

90 Day Trials – If you agree to this clause, during the first 90 days of your employment your employer can terminate your employment without giving a reason and you have no right to bring a personal grievance for unfair dismissal. This is something that must be agreed to by the employee and needs to follow strict application rules or it will not be valid.

Catch all phrases – The inclusion of phrases such as “or other duties as may be determined by the employer” can open an employee up to having their duties changed to suit the employer and the business needs. The wording of these clauses are usually included to cover any future changes the employer wants to make without having to give the employee consideration.

Limitation of flexibility to change – Employment agreements state quite specific terms, if these are going to be varied then there needs to be agreement between the employer and employee. Usually they are written with a flexible scope for an employer to change operations and duties as required, however if an employee wants to change terms such as hours of work or pay rate then they need to request this from the employer and it could be declined.

Availability clause – by default you don’t not have to accept any work that is more than what is guaranteed by your employer. If your employer wants you to be available over and above the guaranteed hours in your agreement then they must have a genuine reason and they are required to pay you compensation for your time. Availability clauses were commonly used for zero hour contracts, these are now unlawful in NZ so ensure that if there is an availability clause in your employment agreement it meets the required criteria.

Casual contracts – This type of agreement can only be used when work is intermittent and irregular and the casual nature of the employment must be stipulated in the agreement. An employee has the right to turn down any offer of work without being disadvantaged in future offers and an employer is under no obligation to offer any work; if a clear pattern of work develops then you may not be a casual employee any longer and could be disadvantaged by being on the wrong agreement type. A casual employee does not have the same right to some types of leave that a permanent employee does, and the payment of annual leave can differ.

Temporary or fixed term contracts – In order to use an agreement of this type there needs to be a genuine reason for why your employment is not permanent, this must be written into the employment agreement and should include an event or date that will end the employment relationship. An employer cannot use this type of contract to negate their obligation to follow correct termination processes. Depending on the length of your agreement will also depend on the way that leave entitlements are paid, this should be outlined in the agreement.

Intellectual property clauses – If you create something new and amazing while in employment then a clause like this means you don’t get to keep it, it becomes the employer’s property. For most jobs this won’t be too much of a problem however if your role involves creative thinking and idea development then this type of clause could limit your rights to those ideas.

Restraint of trade – Your employer can restrict you from being able to work for competition for a certain period of time and/or within a certain distance. What is stipulated in the clause must be reasonable, however if you breach this clause then they are able to bring legal action against you and your new employer. A clause like this should not stop you from being able to earn a living however it will stop you from using any specific knowledge gained from that employment.

Non-solicitation – This stops an employee from poaching clients and other employees. This wouldn’t usually be a problem, however can cause issues in industries where building and maintaining a client base is important, for example the beauty therapy industry.

Restraint of trade and non-solicitation clauses can also get your new employer in trouble so it is important to check whether they will apply to you before you leave your current employment.

Once you have your agreement in hand make sure that you take a reasonable period of time to carefully read it and seek independent advice, especially if you are unsure of any aspect. Remember, you are able to negotiate any aspect of the agreement right up until it has been signed and the terms have been accepted by both parties. Now that you’ve got the agreement sorted you can get back to celebrating your new job.

Published by Kidal Delonix (687 Posts)

Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.

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