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Having No Employment Agreement Costs Professional Company Thousands of Dollars

Published 18 May 2012

Reminder of the Importance of Employment Agreements.

In an Employment Relations Authority (ERA) case last year, (Kruthoffer v DRK Chartered Accountants Ltd) the ERA awarded the Employee $3000 because the Authority accepted that the Employee had been unjustifiably disadvantaged through non-provision of an employment agreement.  The Authority held that confusion about the employee’s hours could have been avoided if an employment agreement had been provided and that the employer acted in breach of good faith by not providing one.

Mrs Kruthoffer worked for DRK Chartered Accountants Ltd since 2008.  The role was advertised as 25 hours per week, with some flexibility, but could be up to 40 hours in peak times.

In 2009, Mrs Kruthoffer requested additional work and her role was expanded to include other general accounting work and her hours increased significantly. Six months later, the level of accounting work reduced.

She later claimed that in 2010, she then verbally applied for a vacant full time position at the Company, to which she said she was appointed. The weekly hours increased to 40.

The employer later stated that he had not offered a full-time permanent position and there was no documentation given to Mrs Kruthoffer confirming the alleged appointment, there was no announcement to staff and also that he did not have the authority to make such an appointment – only able to adjust hours of work.

Subsequently, when the level of available work decreased, the employer decided to reduce her hours by advising that she was no longer to perform the general accounting work.

Mrs Kruthoffer subsequently resigned from the Company. A personal grievance was raised and the Case was heard by the ERA.

Summary of ERA Hearing

The Employee claimed
•        she was unjustifiably disadvantaged by the Employer;
•        her hours were unjustifiably reduced.

The Employer claimed
•        the business experienced seasonal variations;
•        the Employer gave Employee additional hours and extra tasks during busy period.

The Employee claimed
•        the Employer agreed to Employee’s appointment to vacant full time position.

The Employer claimed
•        the Employee merely asked for extra hours as she had done previously;
•        the Employee’s hours reduced;
•        that initially there was no guarantee of hours to be worked.

The ERA found
•        no grounds for the Employee’s expectation that full time hours initially intended, advertised or discussed with Employee;
•        any reasonable person in Employee’s position would have believed director had authority to offer full time position;
•        lack of documentation of Employee’s appointment did not support Employer’s contention no appointment took place;
•        the Employee’s hours were unilaterally reduced;
•        implementation of reduction fell short of standards expected of fair and reasonable employer. – Unjustified disadvantage.

The Employee claimed
•        she was unjustifiably denied option to work ‘glide time’;
•        she was previously allowed to work flexible hours;
•        the Employer removed flexibility by requiring Employee to work three hours per day;
•        significant implication in terms of travelling time and expenses.

The ERA Found
•        the Employer did not act deliberately to cause Employee’s resignation;
•        a fair and reasonable employer would have acted in good faith and consulted with Employee about change. – Unjustified disadvantage

The Employee claimed
•        she was unjustifiably disadvantaged through non-provision of employment agreement.

The ERA Found
•        the Employer acted in breach of good faith by not providing an Employment Agreement;
•        the confusion about Employee’s hours could have been avoided if covered in the Employment Agreement.. - Unjustified disadvantage


The Employee sought reinstatement to full time employment
The Employer claimed Employee was never employed on full time basis

The ERA Found
•        the Employee is to be reinstated to full time employment;
•        the parties to determine reimbursement of lost wages;
•        $6,000 compensation for humiliation etc for reduction in hours;
•        $1,000 compensation for removal of option to work ‘glide time’;
•        $3,000 compensation for failure to provide Employment Agreement.

The ERA recommended the Employer issues the Employee with an employment agreement.

Ensure you are using the latest Employment Agreements from Employers Assistance. Get a 12 month subscription to our Employment Agreements Online Package for $86 plus GST ($98.90) from the web at or by emailing Please note, this is bundled in the products available to Employers Support Package subscribers.