The contract of employment

Essentially, a contract is an agreement that gives rise to rights and obligations between the parties to the agreement, and such rights and obligations will be protected and enforced by the law. Most people enter into a wide variety of contracts every day of the week, ranging from simple contracts when purchasing goods from the local supermarket to the more complex contract when purchasing a new home. The principles of the law of contract also have application and importance for nurses in relation to the contract of employment between the nurse and his or her employer.

The employer–employee relationship is based on the contract that is created between the two parties when the employer engages an employee to perform work under the employer’s direction and control. Such a relatively simple statement is influenced and constrained by legislation and a range of legal principles as well as the administrative machinery that has been created to deal with issues that arise as a result of the contractual relationship.

An integral part of industrial law is industrial relations. This can be defined as the climate created within the legal framework of the contract of employment in order to achieve a harmonious working environment and maximum benefits to the employer and the employee at the workplace. Industrial relations is not a subject or area of concern that can be put into a compartment within an organisation and called upon as required. It has implications in every facet of an organisation’s activities, because it is concerned not only with demands made in relation to wages and conditions of employment but with human interaction at the workplace. The ability of an organisation to create a working environment which is both harmonious and constructive for the employer and employee is largely determined by the degree of recognition given to the human factor and the individual as part of the organisation.

In any general consideration of industrial law and the employer–employee relationship, it is essential to keep in mind the distinction between an employee and an independent contractor. That distinction has been clearly spelt out in this text in relation to the doctrine of vicarious liability (see Chapter 3). The great majority of nurses working throughout Australia are employees, but those nurses working as private duty nurses, homebirth midwives or, in some circumstances, agency nurses, are more often than not independent contractors. Any dispute on that threshold issue would have to be determined having regard to the facts and circumstances giving rise to the particular situation. Apart from the doctrine of vicarious liability, the major reason it is necessary to make the distinction between the two is that an independent contractor is unable to claim the benefits and conditions of an industrial award or workplace agreement and, in most cases the statutory entitlements of long service leave, annual leave, parental leave and so on.

The legal principles relating to the formation of a contract of employment apply in exactly the same way as they do to the formation of any other contract. The following five conditions must exist:

4. The parties must have the legal capacity to enter into the contract. In the contract of employment relating to nurses there is generally no difficulty on this issue. The issues that affect a person’s legal capacity to enter into a contract may be briefly and primarily categorised at this point as:

persons who are children;

persons who are deemed to be mentally ill or suffer from a developmental disability; or

drunkards or a person so affected by any other drug or substance as to be incapable of understanding the nature of the agreement.

Terms and conditions of the contract of employment

An important part in establishing the contractual relationship is the necessity to determine the terms and conditions of the contract which have the effect of creating obligations on the parties to the contract. Some obligations in any contract of employment arise impliedly (or automatically) by operation of long-established common-law principles. For example, an employee’s obligation to obey all lawful and reasonable directions of an employer. Such obligations do not necessarily have to be written down in a contract for them to apply. In many instances, however, such common-law obligations are often found embodied within contracts of employment.

For most employees, including nurses, the contract of employment is to be found within the award or agreement covering their place of work. The document may be referred to as an industrial award or enterprise agreement or workplace agreement.

There are also statutory provisions that complement the terms and conditions found in industrial awards or agreements. For example, an employer’s obligation to provide a safe place of work is reaffirmed in occupational health and safety legislation in all states and territories as well as Commonwealth workplaces.

While most contracts of employment are in writing in one form or another, it is possible, though unusual, to create a legally binding contract of employment simply by verbal agreement between the employer and the employee. The reason why it is unusual is that the majority of employment situations are covered by an industrial award or written agreement of some kind.

The employee’s obligations

In many instances, the employee’s obligations may or may not be expressly spelt out in any contract of employment, be it an industrial agreement or otherwise. Nevertheless, if not expressly spelt out, they apply as implied conditions or obligations imposed on the employee in the contractual relationship with the employer and may be expressed as:

1. The employee has a duty to obey all lawful and reasonable directions of the employer. The significant words are ‘lawful’ and ‘reasonable’. In most workplaces, many of the employer’s lawful and reasonable commands are conveyed to the employee via written policies, procedures and protocols and the employee is required to comply with them. What would be reasonable would depend on the facts and circumstances of the situation under consideration.

2. The employee has a duty to display due care and diligence in the performance of his or her work and to perform it competently.

3. The employee has a duty to account to the employer for all moneys and property received in the course of employment.

4. The employee has a duty to make available to the employer any process or product invented by the employee in the course of employment.

5. The employee has a duty to disclose to the employer information received by the employee relevant to the employer’s business.

6. The employee has a duty to be faithful and loyal to the employer’s interests.

7. The employee has a duty to indemnify the employer for financial liability incurred by the employer on his or her behalf under the doctrine of vicarious liability. As already explained in Chapter 3, this common-law duty is generally not enforced by the employer and, in New South Wales and South Australia, specific statutory provisions have been introduced to prohibit the employer from enforcing the employee’s duty to indemnify.¹

The employer’s obligations

Generally speaking, an employer’s obligations have been almost totally reinforced by the creation of industrial agreements and by statute. The employer’s obligations may be generally expressed as:

the duty to pay salary or wages and provide any other conditions of employment agreed upon or expressly provided for by statute or otherwise;

the duty to provide a safe system of work; and

the duty not to discriminate against people in employment on various grounds such as sex, religion, race or disability.

Discrimination

A duty is imposed on the employer by statute not to discriminate against people in employment on various grounds such as sex, religion, race or disability. For example, in New South Wales, such provisions are to be found in the Anti-Discrimination Act 1977; while in Victoria, the Equal Opportunity Act 1995 is the relevant statute. Complaints made in relation to this issue are generally referred to the appropriate board or tribunal established under the statute to deal with such complaints. The Commonwealth has the Human Rights and Equal Opportunity Commission to which complaints may also be made pertaining to various bases of alleged discrimination such as race, sex and physical disability.

The creation of an industrial award or workplace agreement

As already stated, one of the employer’s obligations in the contract of employment is to pay wages and to provide any other conditions agreed upon between the employer and the employee or as provided by legislation. That obligation has, in most cases, long been embodied in industrial awards and agreements, the latter also known as enterprise agreements or workplace agreements. In some circumstances it may be an individual contract between the employer and the nurse concerned.

Industrial awards or workplace agreements apply to almost 80% of employees in Australia. (People who are self-employed and professionals whose associations set their scale of fees do not belong in this category.)

As a statement of general application, an industrial award or workplace agreement is a document setting out the wages and conditions of employees who are employed in a particular industry and who are deemed to be covered by the particular document in question.

In Australia, the creation of industrial awards and workplace agreements has, until relatively recently, been overseen by industrial tribunals of the states, territories and the Commonwealth within the constraints of their respective constitutional powers and supported by an associated legislative framework.

Until relatively recent times, the majority of the states and territories had their own independent industrial tribunals to determine wage rates, together with conditions of employment and associated ancillary matters for employees working within state/territory-based industries. For example, in New South Wales, the Industrial Relations Commission of New South Wales exercised that power. In relation to Commonwealth employees and those employees who, as a general proposition, were employed in an industry that went beyond the borders of one state or territory, the Commonwealth’s Australian Industrial Relations Commission (AIRC) did likewise.

The role of the AIRC was also to determine the National Wage rate on an annual basis. Generally speaking, the decision of the AIRC in setting the national wage was used by the state and territory industrial tribunals to determine any adjustments to the minimum rate applicable in state/territory-based industrial awards and workplace agreements.

Since 2006, much of that has been significantly altered as a result of the Commonwealth utilising the corporations power within the Constitution to assert its dominance over the states and territories in relation to the regulation of industrial relations in Australia.

In 2005, in a significant extension of its powers in relation to the legislative underpinning of industrial relations in Australia, the Commonwealth amended the Commonwealth Workplace Relations Act 1996 to insert into it what is generally known as the WorkChoices amendments. The legislation is titled Workplace Relations Amendment (WorkChoices) Act 2005. It was formally proclaimed to take effect from 27 March 2006.

The major changes effected by the new legislation has been to expand the federal system of industrial regulation at the expense of the states and territories and, in doing so, to give employers greater freedom in the terms on which they can hire and fire workers. The major changes effected by the WorkChoices amendments include:

removing the no-disadvantage test, so that a broader range of award and statutory entitlements may be bargained away;

making workplace agreements much simpler to register and removing any need for their terms to be scrutinised and approved;

retaining awards, but reducing their scope still further and ensuring that they cease to have any effect once workers have become subject to a workplace agreement;

stripping the AIRC of key functions such as wage-fixing (now to be performed by the Australian Fair Pay Commission) and approval of agreements, and denying it any power to resolve disputes other than by the consent of the parties;

forcing unions to hold secret ballots as a precursor to taking protected (i.e. lawful) industrial action, and making it much easier for businesses to get such action stopped; and

exempting any organisation that employs 100 or fewer workers from unfair dismissal claims, and limiting such claims even against larger employers.

In November 2006, the High Court, by a 5–2 majority, dismissed all of the challenges to the constitutional validity of the WorkChoices legislation.²

In effect, all employees in Australia employed by a corporation will now be covered by the WorkChoices amendments. As a result, the only employees exempted from the provisions of the WorkChoices amendments will be Crown employees, public sector employees in some states and territories and those people employed by unincorporated bodies such as a small business.

In relation to nurses, the situation varies as between the states and territories and as between nurses employed in the public sector and nurses employed in the private sector.

In New South Wales, nurses in the public sector continue to be covered by state industrial awards determined by the Industrial Relations Commission of New South Wales. In all other states and territories, federal awards or agreements apply to nurses in the public sector.

In relation to the private sector, in all states (including New South Wales) and territories, where the employer is a corporation, the Commonwealth’s WorkChoices amendments will prevail. Health industry employers in the private sector, be it a private hospital, nursing home, medical- or a community-based care centre, are invariably operating as a corporation which is the catalyst for invoking the Commonwealth WorkChoices amendments. Accordingly, such nurses would be covered by the terms and conditions of a federal award or workplace agreement.

There would also be a number of nurses in the private sector, particularly in relatively small medical centres and/or general practice areas, who would be employed pursuant to a federally registered individual contract or agreement.

Whatever the circumstances of employment are, a nurse should, at the commencement of employment, take steps to ascertain the nature of the employment contract and its terms and conditions. In most circumstances, particularly in the public sector, it will be an industry-wide award or enterprise agreement. In the private sector, it may be an agreement relating just to the individual hospital or nursing home or it may be an agreement relating to all nursing staff employed in private hospitals or nursing homes owned and/or operated by an industry-wide corporation; for example, Hospitals Corporation of Australia in relation to private hospitals owned by that group or the Uniting Church in the nursing home industry.

In all states and territories, advice about employment wage rates together with terms and conditions can be obtained from the state or territory branch of the Australian Nursing Federation (known as the New South Wales Nurses’ Association and the Queensland Nurses’ Union in those states).

In addition to any role an industrial tribunal may have in the determination of industrial awards or workplace agreements, the industrial system is also called upon to deal with other industrial issues that arise out of the contract of employment. In general terms such industrial issues come about as a result of a disagreement or dispute that arises between the employer and the union on behalf of an individual employee or on behalf of all of the employees covered by a particular award or workplace agreement. Such disputation can arise for a variety of reasons; for example:

disagreement over the proper interpretation of an award or workplace agreement provision;

disciplinary measures implemented by the employer against an individual employee that are believed to be harsh and unreasonable — for example, termination of employment or demotion; and

disagreement between employer and employee about increases or changes in wages or conditions of employment.

On occasions, employees may go outside the formal industrial process and impose industrial action in the form of strikes, work bans and limitations in order to force the employer concerned to accede to employees’ demands in relation to a particular matter. When that occurs, the employer will normally seek the intervention of the appropriate industrial tribunal requesting that the employees concerned be ordered to return to work or lift bans. In such a situation, the industrial tribunal will endeavour to resolve the conflict between the parties by calling them together in proceedings known as a compulsory conference. At a compulsory conference the parties are encouraged to discuss the issues openly and frankly in an attempt to reach agreement. If that should fail a recommendation or order as to what should be done by both parties may be made.

How the contract of employment is terminated

All contracts that are entered into, whether it be a contract of employment or otherwise, ultimately come to an end either by the operation of law or by the actions of either party to the contract. As far as the contract of employment is concerned, there are a number of ways that employment will be deemed to have terminated. Once again, the common-law principles concerning the termination of employment have been modified by statute or by industrial awards. The situations that will give rise to a termination of the contract of employment are set out below.

Termination by notice

If a period of notice is not expressly stated, the presumption is that a contract of employment may be terminated by reasonable notice of either party. Once again, statute and particular awards have modified this presumption so that all awards now state a specific period of notice which either party must give in order to terminate the contract of employment.

The period of notice required to be given can vary, but for most employers and employees the requisite period is one or two weeks.

The obvious exception to the necessity to give notice is where the employer has the right to summarily dismiss an employee on the grounds of misconduct. There is no general legal definition of misconduct as each case would have to be looked at in the light of its own particular facts and circumstances. The type of conduct that has, in the circumstances of each case, justified summary dismissal has ranged from:

a wilful refusal by an employee to obey a lawful and reasonable direction from the employer;

insubordination;

breach of confidence in disclosing an employer’s trade or other secrets;

drunkenness affecting the employee’s ability to work;

fraud or dishonesty by the employee in his or her employment; and/or

conviction of a crime, but only if the conduct constituting the crime is inconsistent with the proper performance of his or her duties as an employee.

Apart from circumstances that would warrant summary dismissal, there is still the right of the employer or the employee to terminate the contract between them. As far as the employer is concerned, that right has been constrained to some extent by the statutory power given to state, territory and Commonwealth industrial tribunals to reinstate employees. The major factor that has to be established in asking an industrial tribunal to reinstate an employee is that the employee’s dismissal is harsh and unfair. In other words, whatever the employee did or failed to do did not warrant the ultimate penalty of dismissal. In certain circumstances a tribunal may order compensation to the employee in lieu of reinstatement.

Stay updated, free articles. Join our Telegram channel

Join