COVID-19: How to build smarter employment contracts

The time is ripe to rethink contractual arrangements with your employees

BY John Hilton 27 Oct 2020

Due to the challenges of COVID-19, many employers have been considering strategies to future-proof their businesses.

And if the pandemic has taught organisations anything, it’s that the future of work needs to be flexible and agile.

Already, the likes of big tech companies such as Facebook have announced plans to have at least half their 50,000 employees working from home by 2030.

Twitter, Square and Shopify have also said that they will allow most employees to telework permanently after the pandemic.

Other COVID-related trends such as diminished profit margins, rising unemployment and workers worried about finding a new job in the present climate, have led to a rise in unfair dismissal cases.

In 2019/20, the Fair Work Commission has received over 16,500 unfair dismissal claims – a jump of over 2,600 claims compared to the previous year and proportionally accounting for about half (49%) of the Commission’s caseload.

As organisations scramble to set themselves up to thrive in this new environment, many have been forced to implement sweeping new measures to excel in the future.

On a macro-level, this means building a transient sector in their workforce, so that employers can shed staff in the event of an economic crisis, according to Michael Michalandos, partner, Baker McKenzie.

“In this regard, I expect a greater focus on casual, temporary or contractor relationships,” said Michalandos.

“On the micro-level, employers are also reconsidering their contractual arrangements with staff, to build in more powerful rights to manage their workforce during a pandemic or a financial crisis.”

According to Michalandos, this includes the following:

A right to review remuneration in a severe economic downturn, or at the very least to suspect discretionary pay such as bonus. During the crisis, many employers found themselves stuck with ‘hard-wired’ bonuses, which were tied to personal financial performance, and provided little or no discretion to take into account employer's general performance or a declining market.
A right to require employees to perform alternative duties in circumstances where their usual work has dried up.
A right to require an employee to take accrued leave during a downturn. Under the Fair Work Act 2009, employers can enter agreements in advance about the taking of leave, where the employee is not award covered.
A right to temporarily reduce hours or suspend the employment in certain defined circumstances.
More detailed rights and obligations in relation to working from home, including regular check-ins, reporting obligations, and the extent to which the employer will pick up home office expenses.
More detailed rights in relation to medical testing and the provision of information required to reasonably manage a health crisis.

Michalandos said that some of these provisions are tricky, in the sense that employers need to take care that they do not infringe any rights under applicable awards or enterprise agreements, minimum entitlements under the Fair Work Act 2009, or privacy legislation.

“There also needs to be a fair balance between employer and employee rights,” he added.

“However, it is certainly the time for employers to consider building smarter employment contracts to build and clarify rights and obligations in a crisis situation.”