Unsigned employment agreement still valid

Employers are required by law to provide a signed employment agreement to employees. Ordinarily, both parties sign the agreement as reflecting the terms to that employment relationship. But what happens when an employee does not sign? Is the agreement valid? A recent Employment Relations Authority decision confirms that an employment relationship may exist, irrespective of an unsigned agreement.

In McEnaney v Eustruct Ltd, Nigel McEnany accepted work with the company as a carpenter. There was agreement to his salary and roster. When travelling to begin work on the construction site for the first time, Nigel was given a written employment agreement and asked to sign it. Nigel said that he wanted to seek advice on the document before signing. That evening he spoke with his wife about the agreement and identified some issues for discussion. On his next trip to the site, Nigel was asked for a copy of the signed agreement. He responded that there were some issues he wanted to discuss before signing. Nigel then commenced work on site. For whatever reason, no subsequent discussion was had between the directors and Nigel and the agreement remained unsigned.

Several months later, an unrelated incident arose between the parties and Nigel’s employment was terminated by the company. Nigel raised a personal grievance alleging unjustified dismissal. The company’s response was that the unsigned agreement meant that the document was ineffective. Therefore Nigel was treated as a casual employee. The Authority found the company’s position to be wrong.

The Authority held that the company had offered Nigel permanent employment, which he had accepted. Even though the document was unsigned, the parties had agreed to the essential terms of their relationship. The agreement clearly indicated Nigel was a permanent employee. The result was that the actions taken by the company in terminating his employment were contrary to both the terms of agreement and the actions required of a fair and reasonable employer in the circumstances. Nigel had been unjustifiably dismissed and suffered hurt and humiliation as a result. Accordingly, the company was ordered to pay compensation to him.

This case is a reminder to all employers that it is best practice to confirm the terms of agreement in writing prior to an employee commencing work. An employee who begins employment without a finalised contract still enters into a formal employment relationship with the employer. The result is that the employee is afforded all benefits and protections conferred by law.

(Article first published in Waikato Times, 18 April 2009) These publications are necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in these publications