In simple terms, an employment contract is an agreement between an employer and employee. Its purpose is to clearly set out the terms and conditions of employment in writing, helping to avoid misunderstandings and providing clarity for both parties.
The outcome of an employee refusing to sign a contract can depend on several factors, including:
- Is the employee an existing employee being asked to sign a new contract with less favourable terms?
- Is the employee being asked to sign an updated contract to reflect legislative, award, or policy changes?
- Is the individual a new employee who has started work but has not yet signed their contract?
- Is the individual a prospective employee who has accepted a verbal offer but has not yet commenced employment?
While obtaining a signed contract is considered best practice, the absence of a signature does not automatically mean there is no employment relationship. Under the Australian workplace relations framework, a contract of employment may be established through verbal agreement, conduct, or acceptance of an offer of employment.
As an employer, it is important to understand that workplace rights and obligations can still apply even where no written contract has been signed. Employees may still be entitled to minimum standards under the National Employment Standards (NES), applicable modern awards, and other workplace protections. Understanding the circumstances surrounding a refusal to sign is essential to determining the most appropriate and compliant course of action.
Is a signed employment contract required?
Under Australian law, an employment contract can be written, verbal, or implied through the conduct of the parties. This means a legally enforceable employment relationship can exist even where no formal employment contract has been signed.
The NES apply to all employees regardless of whether their employment terms are recorded in writing. If an employer offers a position, the employee accepts the offer, commences work, and receives payment, a contract may be formed through conduct. When determining whether an employment relationship exists, courts and tribunals will generally consider the practical reality of the arrangement rather than focusing solely on whether a signature appears on a document.
While a signed employment contract is not legally required, it remains best practice as it provides clarity around employment terms, expectations, and workplace obligations, helping to reduce the risk of disputes in the future.
Why an employee might refuse to sign
There may be several reasons why an employee is reluctant or refuses to sign an employment contract, including:
- Disagreement with specific contract terms, such as pay, benefits, bonus arrangements, leave entitlements, or flexible working conditions.
- Concerns about restraint of trade, confidentiality, intellectual property, or non-compete clauses.
- Uncertainty regarding remuneration, salary reviews, or discretionary bonus arrangements.
- A belief that the role, duties, or conditions outlined in the contract differ from what was discussed during the recruitment process.
In most cases, a refusal to sign does not necessarily mean the employee is rejecting the offer of employment. It may simply indicate concerns with particular terms that require further discussion. To help reach a mutually beneficial outcome, employers should seek to understand the reasons for the employee's reluctance before considering any further action.
Explaining the details of the contract:
It is important to address the refusal directly with the employee. Ask why they are reluctant or unwilling to sign and clarify any concerns they may have about the contract terms. In many cases, providing additional information or context can help resolve misunderstandings and alleviate concerns.
Amending the contract:
If the employee has concerns about specific clauses, it may be appropriate to consider amendments to reach a mutual agreement. Any agreed changes should be documented and confirmed in writing to avoid future disputes.
Employers should also keep records of all discussions and correspondence and provide employees with a reasonable opportunity to review and respond to the proposed contract before signing.
What can an employer do if the contract is not signed?
If an employee has not yet commenced employment, an employer may decide not to proceed with the appointment. However, this decision must be made lawfully and not for a discriminatory, adverse, or otherwise prohibited reason.
Whether an employer can withdraw an offer will depend on the circumstances and whether a binding employment agreement has already been formed. Importantly, a signed contract is not always required for an employment relationship to exist. In some cases, a contract may be established through a verbal agreement, acceptance of an offer, or the conduct of the parties.
If the employee has already commenced work, is receiving wages, and is being treated as an employee, the situation becomes more complex. An employment relationship may have been created through conduct, even though the written contract remains unsigned.
Before taking any action, employers should seek to understand why the employee has not signed the contract and attempt to resolve any concerns. Open communication can often lead to a practical solution while reducing the risk of workplace disputes or legal issues.
Can an employer withdraw the employment offer?
Before acceptance:
Generally, an employer can withdraw a job offer before it has been accepted by the candidate. Under ordinary contract law principles, a binding agreement is not usually formed until the offer has been accepted.
After acceptance but before commencement
Once a candidate accepts an offer of employment, a binding contract may arise, even if a formal employment agreement has not been signed. Acceptance can occur verbally, by email, or through other clear forms of communication. In these circumstances, withdrawing the offer may expose the employer to a potential breach of contract claim, depending on the terms of the agreement and the surrounding circumstances.
After employment has commenced
If the employee has already started work, the matter must generally be managed as an existing employment relationship. Attempting to withdraw the offer at this stage may effectively amount to terminating the employee's employment and could create legal risks, including unfair dismissal or other workplace claims, depending on the circumstances.
Does the employee receive entitlements?
In most cases, yes.
A signed employment contract does not determine whether an employee is entitled to minimum workplace rights and protections. Australian employees are generally covered by:
- The Fair Work Act 2009 (Cth).
- The National Employment Standards.
- Any applicable modern award or enterprise agreement.
These minimum entitlements cannot be excluded simply because a contract has not been signed. Employees may still be entitled to:
- Minimum pay rates.
- Annual leave.
- Personal/carer's leave.
- Public holiday entitlements.
- Superannuation contributions.
- Notice of termination.
- Redundancy pay (where applicable).
Once a person is performing work as an employee, statutory rights and employer obligations will generally apply regardless of whether a written employment contract exists or has been signed.
Can an employer require an employee to Sign?
An employer can request and encourage an employee to sign an employment contract, particularly where it contains important terms relating to confidentiality, intellectual property, workplace policies, and post-employment restraints.
However, an employer cannot force an employee to sign a contract. If an employee refuses, it is important to consider the circumstances and assess:
- Whether the employee has accepted the role through their conduct, such as commencing work and performing the duties outlined in the contract.
- Which contractual terms may still be enforceable, despite the absence of a signature.
- Whether continuing the employment relationship is commercially and legally appropriate.
- Whether any performance management or disciplinary action is justified and lawful in the circumstances.
Before taking any adverse action against an employee who refuses to sign an employment contract, employers should seek appropriate workplace relations or legal advice.
A refusal to sign does not automatically mean there is no employment relationship. An employee may still be entitled to wages, leave, superannuation, and other workplace entitlements, even where a formal agreement has not been signed.
The best approach is to provide, explain, and obtain signed employment contracts before an employee's commencement date. Where a contract remains unsigned, employers should carefully consider the facts of the situation and take steps to minimise the risk of future disputes.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.