What employers need to know about employment agreements


Employment ContractsEvery employee in NZ must have a written employment agreement.  If you employ staff and you do not have a written agreement in place you might be liable for a fine of up to $20,000.

That is certainly one incentive to have a written agreement in place, but even without that potential slap on the hand, it is simply good business practice to have a robust employment agreement that has provisions designed to protect the employer.

Employment agreements date back to ancient Rome, and the consistency and discipline these contracts provided contributed to Rome’s success.   In those days, the employers had all the power and they ensured that this was reflected in their agreements.

Fortunately (or unfortunately, depending on who you are) those days are long gone and employers need to ensure that the protections available to them are included in the employment agreement.

It is tempting, especially for small business owners, to download an agreement off the internet and use that to cobble something together themselves.   The problem with this is that the types of agreements available online are typically drafted from an employee’s point of view and do not have the provisions, that an employer is entitled to put in, to protect the business and to avoid a personal grievance.

Personal Grievance Claims
The two words that no employer wants to see at the top of a letter received is personal grievance but these claims are becoming more common.  Awards by the Employment Relations Authority for hurt and humiliation alone can be up to $15,000.  Add on an average of 13 weeks lost wages, legal fees and $20,000 penalties and the cost to the business can be severe.

However, a personal grievance claim can be avoided just by making things clear in the employment agreement.   So, why not take a leaf out of the Romans’ book and use the employment agreement as a mechanism to protect your business.

Extra clauses to protect you, the employer
This is where an experienced employment lawyer can assist.  We can look at the worst case potential situation and protect our clients from those issues with careful drafting, as much as it is possible to do so.  Specific clauses can be included that relate to the particular business, its mode of operation and the type of employees it typically employs. The types of clauses that can be utilised are:

 ·                     90 day trial periods;
·                     probationary periods;
·                     dismissal for medical reasons;
·                     mandatory drug testing;
·                     driving licence status;
·                     qualifications;
·                     work permit;
·                     secondary employment; and
·                     specific definitions of serious misconduct.

An employment lawyer can also advise you on the inclusion of specific clauses to protect your business assets.  The types of clauses that achieve this are:

·                     confidentiality clauses;
·                     restraint of trade clauses;
·                     non-solicitation clauses; and
·                     protection and ownership of intellectual property clauses.

The key factor to keep in mind is that if it is not in the agreement then it can’t be relied on for your benefit. 


In accordance with our obligations under the Lawyers and Conveyancers Act 2006, we cannot provide legal advice unless you have become a client of Smith and Partners and have received our Terms & Conditions of Engagement and Info for Clients. 

If you would like advice on any employment law related matters, please contact Suzanne Sumner, Personal Assistant to employment law expert, Carolyn Ranson to find out how you can become a client of Smith and Partners and to set up an appointment to discuss your employment matter with Carolyn. 

Suzanne Sumner

Ph: 09 837 6840

Email: Suzanne.sumner@smithpartners.co.nz

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(Please note we do not offer no win – no fee payment arrangements)