If an employer asks existing employees to sign new employment contracts because it wants to introduce more effective post-employment restraints, there is no obligation on employees to agree to sign. A recent decision of the Fair Work Commission (FWC) highlights the potential legal exposure for an employer that dismisses an employee who refuses to sign the new contract.

In Dupre v Excell Protective Group Pty Ltd (2024), a business development manager in a security services business was presented with a new contract of employment, which included a higher sales target for commission, and non-solicitation and post-termination restraint clauses. The FWC found the employee was dismissed for refusing to sign the new contract, after he raised concerns over the proposed commission structure and restraint clause. No alternatives to signing the proposed contract were offered or discussed with the employee.

The FWC ruled that declining to sign the proposed new contract of employment, absent requested amendments being made to the contract, could not be considered misconduct or unsatisfactory performance.

Moreover, the reason was not a valid reason for dismissal. The employee was denied any opportunity to persuade the employer that dismissal was not appropriate. The employer’s failure to pay the employee his accrued statutory leave entitlements in a timely manner also weighed in favour of a finding of unfairness. Therefore, the dismissal was found to be unreasonable, unjust and harsh.

A better way to introduce restraint clauses mid-way through employment is to make the provision of a benefit to the employee, such as a promotion, pay rise or bonus, conditional upon the employee entering into the new contract.