A $10,00 Penalty for no Employment Agreement?

The key risk arises if there is a dispute. The first place to go to in order to resolve a dispute is the Employment Agreement. A sound, well worded agreement is instrumental in making terms and conditions clear for both parties.

If the dispute progresses to a personal grievance, and there is no Employment Agreement, irrespective of the rights and wrongs of the grievance, the employer will lose part of the likely claim (i.e. no Employment Agreement).  Even if the employer wins on every other aspect of the claim, they will have to pay costs.

An employer is also potentially liable for a $1,000 infringement fee for not providing an Employment Agreement as well as a penalty of up to $10,000 from the Employment Relations Authority. This is per employee without an agreement. Therefore if you have five employees without a signed Employment Agreement, the fine could be up to $5,000 and the penalty $50,000.

The key issue is usually holiday pay and entitlement to annual holiday, sick leave and bereavement leave.

If you have been paying your ‘casual’ employee holiday pay as you go (i.e. paid an extra 8% on top of their normal hourly rate), and never changed this despite their regular hours, the employee is still entitled to take four weeks paid annual holidays on their anniversary date. Their anniversary date is when they began the regular hours. An employer cannot claim the leave has already been paid because the entitlement is to have leave from work on pay. The employee will also possibly have become entitled to paid sick leave and bereavement leave. You should go back through the leave records to ensure they were paid appropriately if sick leave was taken.

A permanent, a fixed term and a casual Agreement are the three key types of Employment Agreements. Each cover a specific type of employment arrangement and they are not interchangeable. Taking a permanent Agreement and changing the title to ‘fixed term’ does not make it one. There are a number of terms that are specifically required in a fixed term Agreement and equally terms in a permanent Agreement that are not appropriate in a fixed term Agreement.

No, you cannot make an employee sign an Employment Agreement. The best way to get signed Agreements is to ensure that any employment offer is subject to the employee returning a signed Employment Agreement prior to commencing work. No signed Agreement – no job.

That doesn’t work for people who are already your employee. And before you ask, no, you cannot simply stop employing someone who is already your employee, because they don’t have an Employment Agreement and won’t sign a new one.

If you have an existing employee, next time you are negotiating a pay increase, make that increase conditional on signing an agreed Employment Agreement. Do ensure you have not included any new, unreasonable terms and you provide the employee with the opportunity and time to seek independent advice before signing the Employment Agreement.