Unsigned employment contracts; what is the effect?

I am sometimes asked (most often when an employee is seeking to evade the effect of a restraint of trade) whether an employee is bound by an employment contract which was provided to the employee but which was never executed by him or her.

The answer is generally yes, because it is difficult for the employee to avoid the conclusion that he or she accepted that he or she would be bound by it irrespective whether it was signed.

Here is the principle explained by a judge in a case.

““Notwithstanding the absence of any copy of the letter bearing the defendant’s endorsement, subject only to one possible qualification, both parties conducted their relationship on the basis that the contract was governed by the letter dated 30 June 2014. Importantly, the defendant was paid, and he accepted that he had no entitlement to be paid more than, the reduced salary package for which the letter provided. In cross examination, he readily accepted that he had not, before commencement of the proceedings, disclaimed the contractual force of the terms contained in the letter. In giving evidence, he also freely conceded that he was not prepared, on oath, to deny that the terms of his contract with the plaintiff were to be found in the letter………..I am satisfied that, even if it be the fact (which I am not in a position to accept or reject) that the defendant was not paid annual leave entitlements due to be paid by the plaintiff, that fact does not stand in the way of a finding (which I make) that, by conduct, the defendant accepted the offer conveyed to him by the plaintiff in the letter dated 30 June 2014.

The absence of a copy of the letter signed by the defendant does not preclude a finding that the plaintiff’s offer was in fact, by conduct, accepted: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523.

The defendant’s acceptance of his salary reduction can be explained only as an acceptance that the terms of his employment on and from 1 July 2014 were governed by the documentation dated 30 June 2014. That he gave the plaintiff two weeks’ notice of termination of his employment might be said to be consistent with both the letter dated 30 June 2014 and the parties’ earlier contractual documentation, but the salary reduction cannot be explained away. If (despite Mr Hughes’ denial) the plaintiff did not pay to the defendant annual leave entitlements, that assumed fact is not, of itself, inconsistent with the letter dated 30 June 2014 having contractual effect.”


Thinkstorm Pty Ltd v Farah (2017) NSWSC 11 per Lindsay J