Archive for November, 2016

Does your Employment Contract measure up?

employment-contract-imageIf you are entering into an employment contract do you know what should be included? If you are an employer and using an old contract, should it be reviewed first? It is clear contracts should be individually structured to meet the needs of those involved and in reality both employer and employee should seek legal assistance first before offering or accepting an employment contract.

This article is intended to provide a starting point only and attempts to clarify some of the important information all parties should know.

What terms should always be in an Employment Contract?

Naturally there are some preliminary matters. For example, the identity of the parties needs to be set out as well as the duration of the contract (if fixed).

The contract then needs to specify the terms.

Before the terms are considered, the application of any statutory provisions or award or collective agreement must be considered. Generally speaking, employers and employees cannot contract out of such instruments unless the instrument itself facilitates that.

The following are critical to mention and the particular entitlements need to be specified, including:

  • The remuneration;
  • The frequency of remuneration reviews;
  • The period of the contract (if fixed term);
  • The basis of remuneration adjustment and performance management/appraisal;
  • Termination conditions;
  • Any professional indemnity;
  • Specific employment conditions including
    • hours of work;
    • annual leave;
    • annual leave loading;
    • public holidays;
    • long service leave;
    • superannuation;
    • reimbursement of expenses;
    • sick leave or carer’s leave;
    • parental leave; and
    • other leave.

Depending on the nature of the employment and industry it may be important to also include:

  • Intellectual property;
  • Restrictive covenants;
  • Professional development and training; and
  • The location of employment.

A statement of duties should be attached to the contract. For this attachment to itself become part of the terms of the contract, it should be expressly incorporated into the contract by a statement which makes it part of the contract in the body of the contract itself or as an annexure.

Workplace policies

Some workplace policies will be incorporated into the contract because of the nature of their content, some will not, and it is often hard to know what matters a court will find are incorporated. If an employer definitely wants to incorporate a policy into the contract, they can expressly do so by reference in the contract.

Employees and contractors

There is often ambiguity in a workers’ status, as to whether they are a true employee of an independent contractor. Employment law differs from other law, such as tax law, on these questions.

There are also significant legal consequences of incorrectly assuming an employee is a contractor, or vice versa. The true nature of the working relationship should be considered at the time of drafting an employment contract or a contract for services.

Superannuation

The employer is responsible to ensure that appropriate superannuation contributions are paid into the employee’s nominated superannuation fund. Generally a contractor will be responsible for their own superannuation contributions.

Implied entitlements

Some entitlements and obligations that exist in the employment relationship are implied. This means that they are not written down or stated, but they still exist.

The implied terms include:

  • An employee must exercise reasonable skill and care in their performance of duties;
  • A general duty exists for an employee to obey all lawful and reasonable directions by their employer;
  • There must be fidelity and confidentiality within the employer/employee relationship; and
  • If no provision for termination within the contract then “reasonable notice” for termination must occur unless in circumstances of “serious misconduct”.

Conclusion

When negotiating an employment contract it is essential for both employers and employees that the contractual arrangements should be specific to the individual and the terms say what you want them to mean. Parties entering into these arrangements are wise to seek legal assistance beforehand to ensure they are right.

 

If you want to know more or if you run a business and would like your draft employment contracts reviewed please call us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.

 

 

Business Structures: Company

When commencing a business venture, it is necessary to consider the most appropriate type of business structure to put in place. Different business structures have different benefits and disadvantages. This article looks at companies – how to set one up and the pros and cons of a company structure.

Key Features

A company is a separate legal entity capable of holding assets in its own name and liable for its own obligations. A company is owned by shareholders. The liability of shareholders is usually limited to the amount of their shareholding guarantee. This means that shareholders can limit their personal liability and are not generally liable for the debts of the company.

Directors manage the day to day business affairs of the company. There are a number of duties and obligations for company directors including an obligation that a director must act in the best interests of the company.

In Australia, the most common forms of company are:

  • Private company (or a proprietary limited company): this is a company which does not sell its shares to the public and cannot raise money from the general public through share issue.
  • Public company: is a company whose shares are owned by the public at large, with the company’s shares usually listed for trade on a stock exchange.

Companies are regulated by the Australian Securities Investment Commission (ASIC) and governed by the Corporations Law.

How to Set up a Company

An Australian company must be registered with ASIC. When ASIC registers a company, the company will be given an Australian Company Number (ACN). An application must nominate a principal place of business and registered office for the company.

Prior to lodging an application for registration, consideration should be given to:

  • the proposed company name. A check should be undertaken to confirm the availability of the proposed name. If no name is specified in the application, the company will be referred to by its ACN.
  • what rules will apply to govern the company. This can generally be the replaceable rules from the Corporations Act (which means that the company does not require its own written constitution), a constitution or a combination of the two.
  • who will be the shareholders and directors of the company.

A company needs its own Tax File Number, which can be obtained online from the Australian Taxation Office (ATO) and an annual tax return must be filed.

A company must be registered for GST if its annual turnover is $75,000 or more. An Australian Business Number (ABN) is required to register for GST and can be obtained online.

Pros and Cons

The advantages of forming a company include:

  • liability for shareholders is limited
  • easier to raise finance for expansion
  • ownership can be easily transferred
  • taxation rates can be favourable

The disadvantages include:

  • expensive to form, maintain and wind up
  • reporting requirements can be complex
  • must publicly disclose key information
  • owners cannot offset losses against other income

Conclusion

A company might be a suitable business structure for unrelated parties who want to commence a business venture together, where there is a degree of risk and limited liability is wanted or where there is a desire to list the company on the stock exchange.

Establishment of a company and ongoing administrative and compliance costs associated with the Corporations Law can be high. An accountant or lawyer can help you understand the cost and risks of a company and explain whether a company structure would be suitable for your business going forward.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.

business-structures-imagebusiness-structures-image

Airbnb Legal tips for property owners

air-bnb-image

If you have looked at booking holiday accommodation recently chances are you have come across Airbnb or maybe you know someone who rents out their spare room and is always talking about the extra money they are making.

But what is Airbnb exactly, how does it work and what are the potential pitfalls and legal implications of making money out of your spare room on a casual basis?

What is Airbnb?

Airbnb styles itself as a “Community Built on Sharing” and an easy way in which people can make money from their extra space. The idea of making money out of spare space or an empty property is not new. The difference with Airbnb is that both hosts and guests must create a profile which is rated after every stay. So both hosts and guests are rated.

Airbnb started in San Francisco in 2008 and from quite modest beginnings has grown to a worldwide network of both hosts and guests with in excess of 2 million listings in over 34,000 cities worldwide. Airbnb claims to have had in excess of 60 million guests use its services.

So how does it work?

Both hosts and guests start by creating an Airbnb profile. If you are planning to host you then add details of the accommodation you wish to offer.

Accommodation options currently offered on Airbnb range from rooms in private home with shared facilities through to sole use of a castle and everything in between.

The price for the accommodation is set by the host and Airbnb add a service fee to every booking.

Is it legal?

When you sign up as a host on Airbnb you agree, under the terms and conditions that any accommodation you list will not breach any lease or rental agreements or any homeowners’ association rules and that you are complying with all applicable zoning laws that govern the renting of residential properties. But is this true?

At the present time whether you are likely to run into strife with your local council will depend on where you live and whether your neighbours lodge a complaint about you, as Mr Wally Salinger, a resident in the popular inner west suburb of Annandale in Sydney recently found out.

Mr Salinger recently received a notice from his local council threatening him with a $1.1 million fine for using his home as an Airbnb rental after a neighbour lodged a complaint. Mr Salinger sought advice from the council as to what he needed to do to make sure his property could be legally rented out on Airbnb but met with a brick wall in terms of any clear solution.

Presently different council areas have different rules governing what they will and won’t allow in terms of home sharing and short term rentals. There is pressure on state governments to clarify the rules around home sharing so that there is consistency. Some councils will allow bed and breakfast arrangements (with appropriate approvals) and some councils prohibit these types of short term rentals altogether.

In Victoria and other states there is also a similar level of uncertainty. Although a recent decision of the Victorian Civil and Administrative Tribunal (“VCAT”) may bring some comfort to would be Airbnb hosts.

VCAT recently held that the owner’s corporation at the Watergate Apartments located in Melbourne’s Docklands area did not have the power to make a rule which prohibited stays of less than 30 days paving the way for Airbnb style rentals to be permitted in that particular complex.

What about insurance?

While noting on its website that it provides a “Host Guarantee” for certain types of damage done to a host’s property, Airbnb’s terms and conditions stress that any agreement between a host and a guest is strictly between those parties and that Airbnb is simply a limited authorised payment collection agent for the host for the purpose of accepting the guest’s payments.

Airbnb recommends that hosts obtain appropriate insurance for any accommodation they are offering and also that hosts review their insurance policies to make sure the insurance coverage extends to the property when it is being rented out.

Importantly, the Host Guarantee is not insurance and should not be considered to replace the host’s own home or renters insurance. The Host Guarantee does not protect cash and securities, pets and personal liability and certain types of property such as jewellery and artwork have more limited protection than say furniture.

What if someone is injured while staying at an Airbnb property?

A recent tragedy at an Airbnb rental in Texas highlighted the potential issues that can arise with this type of rental. In a tragic accident a man died after a tyre swing that he was sitting on fell when the tree trunk that it was tied to broke in half and fell on the man’s head.

In that particular instance the man’s family did not pursue a claim against Airbnb as the host’s homeowner’s insurer responded to the claim and there was no commercial activity exclusion on the policy. If the host’s insurance policy had not responded then the host could have faced potential financial ruin if a claim had been made by the family. Whether a claim against Airbnb would have succeeded remains untested.

It is always best to check first

If you are thinking of renting your home out for short term accommodation it is important to sort out all necessary insurances and permits before you offer the accommodation to potential guests. As regulations vary widely between local government areas it is always a good idea to seek legal advice first rather than waiting until a complaint or some other problem arises.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.