Employment contracts are legally binding agreements between an employer and an employee, often created with the help of a qualified lawyer. Since employment contracts are legally binding, there can be serious consequences if they are breached.

However, many people don’t realise how serious these consequences can be. In the rest of this article, we’ve covered everything you need to know about what could happen if you breach your employment contract. If you believe you may have broken your agreement, we’d highly recommend speaking with a lawyer as soon as possible to minimise the damage.

One thing that’s worth quickly noting here is that contracts can be breached by employees and employers alike, so keep that in mind.

What Are the Penalties for Employees Breaching a Contract?

Under Australian law, employment contracts are legally binding documents, and there can be significant penalties if you break them. Two of the most common penalties include:

• Being sued for damages can be significant. In one high-profile case in 2009, a former employee was taken to court and ordered to pay over $500,000 in damages to an Australian financial broking company.
• Being prevented from working with a competitor. Many contracts have something that’s called a “restraint of trade provision”, which essentially prevents an employee or former employee from working with a competitor for a specified amount of time.

Unfortunately, complex employment contracts are often written well and indeed in favour of the employer. It’s essential to work through your contract with a lawyers before you sign it. Doing so will help ensure you suffer minimal penalties if you do have to break the contract.

What Are the Penalties for Employers Breaching a Contract?

Although many people don’t realise it, an employer can breach an employment contract just as easily as an employee. Similarly, they can be faced with significant penalties, including:

• Being sued for damages that the employee in question suffered.
• The employee may terminate the contract immediately without warning or penalty.
• Any contractual clauses, including restraint of trade clauses, could become invalid.

As you can see, it’s just as important to employers to ensure they stick to a contract as it is for employees.

What Should I Do if I Feel My Contract Has Been Breached?

Whether you’re an employer or an employee, you should pursue legal action if you feel your contract has been breached. Before you notify the other party, spending time with a lawyer working through the contract and identifying exactly how the breach occurred and what damages it has caused is a good idea.

Final Word

The lesson here is that employment contracts are serious, legally binding documents that must be treated with respect. It’s also essential to ensure you spend some time reviewing your contract before you sign it, otherwise, it may contain clauses or other things that you’re not aware of – and these can lead to you breaking contract without even realising it!