Employment Agreements - Part 1

The basics on an Employment Agreement.

With the shock of the fire on top of his golfing mishap, Farmer Freddy is taking longer than planned to recover. Jack also needs some time out and has taken three months' leave.

So Freddy has employed a couple, Bill and Judy, to help out for three months.

Freddy sees Bill managing the farm with Judy helping to milk the cows and doing other odd jobs around the farm. As part of the deal, Freddy provides Bill and Judy with a house. Freddy and Bill shake hands on the deal and then Bill and Judy move in and start work.

In the meantime, Freddy gives Bill a standard employment agreement he's used occasionally for other farm workers in the past (Freddy doesn't give Judy a draft agreement). Bill notices that the agreement says nothing about the three-month time period or the house or about Judy.

He is a little concerned about these issues but he figures everything will be OK, so he sticks it - unsigned - in his "to do" pile, without raising his concerns with Freddy.

What might have been

If Freddy had sought legal advice at this point, he would have been advised that this is, potentially, a complex employment relationship. He should have agreed separate written terms of employment with each of Bill and Judy. And, because a house is involved, there should also have been a written Tenancy Agreement.

Employment Agreements: The Basics

Section 65 of the Employment Relations Act requires employment agreements to be in writing and to contain, as a minimum:

  • Names of the employee and employer.
  • Job description.
  • Work location.
  • Indication of hours.
  • What wages/salary the employee will be paid.
  • A plain English explanation of the services available to resolve problems between the employer and employee, with specific reference to the 90-day limitation on an employee raising a personal grievance.

Because Freddy is employing Bill and Judy for a fixed term, section 66 of the Act is also relevant. This requires agreements for fixed terms to set out specific reasons why the term is fixed (for example, for a specific project or purpose), as well as when and how the employment relationship will end.

The agreement also needs to include an employment protection provision (in case Freddy decides to sell his farm or contract out the work Bill and Judy are doing) and a provision that sets out what Bill and Judy will get paid if they work on public holidays (eg, Christmas Day).

And new laws around work breaks mean that if Freddy wants Bill and Judy to have breaks that are different from those set out in the Act, this needs to be covered in the agreement too!

Tenancy as part of Employment

Residential tenancies that form part of an employment relationship (service tenancies) need to be linked to the employment agreement and they need to be in writing. Unlike a standard residential tenancy, which requires a 90-day notice period, the employer/landlord can terminate a service tenancy with 14 days' notice.

Trouble ahead

Unfortunately, Freddy has not got the basics right. Over the coming weeks, we'll see what happens when the employment relationship starts to unravel!


The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.
If you would like further information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.
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