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Much like your car or vehicle needs to be serviced regularly to ensure that it is still fit for purpose, it is easy for your business’ employment agreements to fall behind changes in employment law. If it has been several years since your business has changed its template employment agreement, there is a good chance that your agreements are no longer compliant. This puts your business at the risk of fines for breaching the law.

There are many things to check when you review your business’ employment agreements and see whether they need to be brought up to date. This article outlines how you can check whether your employment agreements:

  • include all mandatory requirements;
  • have legal trial periods; and
  • should include additional clauses to protect your business.

Do Your Employment Agreements Include All Mandatory Terms?

Employment law has evolved over the past decade and more, increasing the number of compulsory terms to include in any employment agreement. When commencing any tune-up of your business’ agreements, you should start by making sure they include all of the terms that they need to include by law. Some of these are easy to forget. Ensure your agreements include:

  • the name of your business and the employee;
  • some description of the work the employee will be performing. This will also strengthen your business’ position in the event that an employee does not perform their work;
  • the set hours of work. This includes the number of hours, an indication of start and finish times and the days of the week the employee will work. This is a very common detail to leave out;
  • the employee’s place of work, such as an office location. This does not have to lock an employee into a particular place or prohibit flexible working, but your agreements should give some idea;
  • the agreed wage or salary and the way the business will pay it; and
  • processes to resolve employment relationship problems.

Checking The Legality of Your Trial Periods

A key change in the last three years has been trial periods’ legality. Trial periods allow businesses to see whether an employee has the requisite skills to do the job, and assess their abilities with the safeguard of the trial period if there is a bad fit with the employee.

However, trial periods are now only valid and enforceable for businesses with 19 employees or fewer. If your business has more than 19 employees or is quickly growing and likely to employ more employees soon, you should change your employment agreements as you will not be able to legally rely on trial periods. Here, you might consider replacing them with probationary periods.

Additional Terms to Protect Your Business

While you are checking your employment agreements, you may want to consider whether there are additional terms that you should include to protect your business in the future. There may be changes to your business that merit these extra clauses.

For instance, potentially, you have more employees working on developing your business’ intellectual property.

If so, your employment agreements should have a clause specifically outlining that your business will own any IP your employee:

  • developed;
  • improved; or
  • created during the course of employment.

IP also needs to be clearly defined under the agreement. You may like to get an employment lawyer’s help with drafting this clause if it is key to your business.

You can also consider adding a restraint of trade clause to protect your business’ commercially sensitive information. These clauses restrict your employee’s business activities when they stop working for you.

There are two main types of restraint of trade clauses, including:

  • non-competition clauses, preventing your former employees from working for a competing business for a limited period of time and geographic area; and
  • non-solicitation clauses, restricting a former employer from soliciting their former clients (your business’ clients) or former colleagues.

Key Takeaways

It can be easy to forget that employment law is constantly evolving, with repercussions for your employment agreements’ legality and validity. We recommend that you regularly check to ensure that your business’ employment agreements include the mandatory terms. You must also check that any changes to the law are reflected in your agreements. For instance, trial periods, which are now restricted for larger businesses. During this tune-up, it can also be a great idea to check to see if any additional terms could be included in your agreements to protect your business in the future. If you want to know more about employment agreements or would like help in updating yours, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

Is it a legal requirement to keep employment agreements up to date?

Yes, your business’ employment agreements must be legally valid – such as by including the terms that are required by law.

Are employment contracts the same thing as employment agreements?

Yes, these are two terms for the same document.

When is it illegal for a business to use trial periods?

When businesses have 20 employees or more, any trial periods in their employment agreements will no longer be valid or enforceable. However, those businesses can consider probationary periods. 

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