In the absence of an employer contract 

An often felt emotion for small business owners, particularly in real estate,  is a strong attachment to the operations of their business and the staff that they employ. 

This strong relationship can be conducive to success because both parties are motivated to succeed due to the close attachment to the business. 

When things are tough and the relationship sours though, that same emotion can cloud the judgement of small business employers and can result in decisions being made on an emotional basis rather than being made objectively with disastrous results. 

So what mistakes can be made? 

The first one is not having a contract of employment with your employee.  It seems obvious doesn’t it.  Of course you should have a contract of employment.  However, it is amazing how often this is not the case.  You know the drill.  You’ve found someone to help you in your business, you go for a coffee, get to know and like them and you start the employment relationship with a handshake.  No need to formalise the arrangement right? 

The problem arises when one party has an expectation of what was agreed to that the other party doesn’t.  When that expectation isn’t fulfilled, disappointment and anger can arise.  Now, we are off to the races as the relationship sours, disputes occur and that strong bond and attachment that I mention earlier starts to disappear. 

Always ensure that you reduce what you and your employee agree to writing.  Subject to any legislation, industrial awards or legally binding statutory enforceable agreements the parties to a contract are free to agree to any terms that they wish to impose upon themselves – subject to those terms not being unlawful.  To avoid doubt at a later stage, a written contract should be entered into. 

Another problem is that the Real Estate Award requires you to enter into a written arrangement with your staff.  By not having a contract of employment you are breaching the award. 

The second mistake that small business employers can make is not knowing what is contained in their contracts with employees or awards and legislation that cover them.  This can be very costly because it is usual for the lack of compliance to only come to light when an employee leaves or there is a dispute or breakdown in the relationship and the non-compliance has gone on for some time.  Don’t guess what your obligations are, know them! 

If your sales representatives are on a retainer/commission contract, the retainer must be paid regardless of their performance.  This does not mean that poor performing employees cannot be performance managed.  It does mean, however, that they cannot be ‘punished’ for poor performance by not being paid their entitlements. 

The final mistake discussed today resulting from an emotional decision is when small business employers suspect employees have misconducted themselves, particularly serious misconduct such as theft.  Usually these suspicions arise during periods where the business is not performing well.  Quite often, quick emotional decisions are made to dismiss the employee without due process resulting in unfair dismissal claims.  A recent example of this is illustrated in a decision from the Fair Work Commission. 

In this case, a small business employer was ordered to pay an employee it had dismissed $30,000 in compensation.    The employer, whose sales and income was declining, after being told the employee had been printing sales reports, came to conclusion without any corroborating evidence, that the employee had been stealing money from the business.  Instead of taking the time to consider and properly investigate the suspicions, whilst providing the employee with procedural fairness, the employer summarily dismissed her.  It was clear from the summary of facts contained in the Commission’s decision that the employer had made a decision based on his emotions. 

The Commission found that there was no basis for the employer’s assertions that the employee had been stealing and the accusations had been fabricated. 

REEFWA can help employers avoid the pitfalls associated with termination and drafting of contracts of employment. For expert advice regarding these matters or for representation at unfair dismissal proceedings please contact the Employee Relations Advice Centre on (08) 9365 7660 or advice@cciwa.com 

Elton v Acupuncture Australia Pty Ltd [2015] FWC 864 (Feb 4) 

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