Updating employment contracts

We are updating employment contracts. How do we handle employees who refuse to sign the new agreement? If they continue to attend work do we take this as them accepting the new agreement?

All terms of employment contracts are by agreement between the parties. This is in contrast to the terms of modern awards and enterprise agreements, which generally apply to all employees that they cover without requiring express agreement.

This means that in order to change the terms of an employment contract, an employer needs to have the agreement of individual employees. It is not enough to let the employee continue to attend work and assume that they have accepted the new terms. In the circumstances described, if the new contract is not signed, the old contract will continue to apply.

Risks

If one or more employees refuse to sign the new contract they cannot be forced to do so. They also cannot be threatened with disciplinary action or dismissal for this refusal. Taking action against an employee in these circumstances might lead to a general protections claim, or that the employee has been unfairly dismissed. Even if an employer does not actually dismiss the employee, threatening to do so or threatening to disadvantage the employee if they refuse to sign the contract may allow the employee to claim that they have been constructively dismissed.

Strategies

There are a number of strategies that an employer can use to encourage employees to sign a new agreement. The strategy that will work best in negotiating a change in contract will depend on factors such as the industry in which the employees work, the existing entitlements enjoyed by the employees and whether the employees are covered by an award/agreement or are award/agreement free.

If an employer is considering a change to a new contract and has concerns about securing employee agreement, some factors to consider beforehand are:

• How different is the new contract from the old?
• Are some of the matters raised in the new contract issues which are better dealt with in a workplace policy?
• Is the new contract offering an additional benefit to the employee, or only to the employer?
• Does the contractual change coincide with a change in the workplace, such as the commencement of a new project or a restructuring of the business? If so, employees may be more likely to accept the change in contract.
• Is the employer willing to have some employees on the new contract, and some on the old if not all employees agree?

The answer to these questions may impact the strategy that an employer may wish to take in the circumstances.
To discuss the best strategy for your business, please call the Ai Group Workplace Advice Line on 1300 55 66 77.