Common Employment Agreement Problems

We often review employment agreements for people who have been offered a new job. We’re seeing emerging areas of concern:

• Agreements and offers of employment that are conditional upon the employer completing background checks, or other processes, after you have signed. If something goes wrong this means that you could end up with no job. Our advice is to ensure that your new employer has completed all of their processes before you accept an offer of employment.
• 90 day trial periods – these are bad enough when you are starting a new job; however, we are seeing employers trying to force them on to existing employees. If you are a new employee you should try to negotiate no trial period as they can be abused. If you are an existing employee they don't apply and employers should not be trying to get you to sign agreements with these provisions.
• Long notice periods – anywhere between one week and one month is normal. We are seeing increasing numbers of agreements where the employer has inserted a longer period of notice – for example, three or six months. This might make you feel secure; however, it may be very difficult to get a new job if you have to give this amount of notice in your old job. For most people long notice periods are undesirable.
• Restraint of trade clauses – don’t ignore these and then find out after you have accepted a new job that you can’t actually start at the new job because of your restraint of trade. These clauses are the ones that are most commonly misused and which cause problems for both employees and employers down the track. The best time to look at these clauses is when you have been offered a new employment agreement. If the clause is for too long a period of time, or for too large an area, it needs to be dealt with. Some clauses are fair – for example, if you are a hairdresser, it is probably reasonable that your employer has a restraint of trade preventing you setting your own salon up next door for one month after you resign. On the other hand, it is unreasonable if such a restraint of trade covers the whole of the Auckland area, or it runs for one year. People have to be allowed to work, while recognising that employers have the right to have their legitimate interests protected. Employers sometimes think they’ll be better off by having a very extensive restraint of trade clause. This is incorrect as the more extensive such a clause is, the greater the risk that it is illegal and will be struck down, potentially leaving the employer with no protection. We also find that many clauses are badly worded leaving loop holes for employees.

Please ask if you have any questions about your employment agreement.