Employsure have taken the business world by storm providing workplace relations support to business owners and employers using a marketing and sales process that is quite compelling and disrupting the HR space to a large extent. However the experience of some of our clients has found a gap between expectations and the practical realties of service as well as finding themselves locked into long 5 year contracts.
The business owner pays Employsure a fixed monthly sum for an initial term of up to much as five (5) years for access to the service. The experience of some of our clients is that they find that the service they receive from Employsure does not meet their expectations or that changed cashflow conditions make the expenditure no longer feasible. Five (5) years is a long time to be locked into an unsuitable contract.
These clients have been often asked whether they can get out of their Employsure Contract. In this article we investigate some of the considerations that might apply to you and your Employsure Contract.
Like most businesses, Employsure updates its terms and conditions from time to time. This means there is no ‘one’ version of the Employsure contract. Your rights and options regarding your contract will depend on the contract you signed.
The first step is to obtain a copy of the terms and conditions that apply to your contract. You may need to contact Employsure to obtain a copy of your terms and conditions. The terms and conditions are the ‘fine print’ and is usually a different document to the contract schedule or invoice you receive.
Your terms and conditions may be different to the versions we discuss here, and so it is important you have checked this or sought legal advice.
Termination before expiry of five (5) year term contracts
Employsure charges a termination payment for early termination before the expiry of the five (5) year term. The nature of this termination payment depends on the version of the contract. Historically, the Employsure contract required that 100% of the balance of the total contract sum (for the remainder of the five-year term) be paid on termination or default by the business owner. If enforced, this payment would make it impractical to terminate the contract.
The lawfulness of this Employsure contract provision came under scrutiny in the case of Zintix (Australia) Pty Ltd v Employsure Pty Ltd  NSWCA 924. In that case, the termination payment was deemed an unenforceable “penalty” because the amount is not a genuine pre-estimate of loss and damage. Zintix won that case and was not required to pay the penalty.
Employsure has since updated later versions of its contract. In recent versions of the contract applying to new contracts commencing from 7 January 2019 – the termination payment has been reduced down to 30% of the remaining contract balance, provided termination takes place after the initial 12 months. This new termination payment clause has not been tested in court at this time and its lawfulness will depend on your specific circumstances.
However, this does open the possibility of making a calculated decision to pay 30% of the contract balance, rather than paying 100% of the contract balance.
Employsure contracts will also generally contain an ‘Automatic Renewal’ clause. In the version of the contract discussed in the Zintex Case, this means that it is the business owner’s responsibility to notify Employsure at least six monthd prior to the end of the initial term if the business owner does not want the contract to renew. Failure to do this will result in the term rolling over for a further five (5) years. More recent versions of the contracts require at least one month’s notice prior to the end of the initial term.
If you are unhappy with your Employsure Contract, we recommend that at a minimum you notify Employsure in writing that you do not want your contract to renew automatically within the notice period applicable to your contract.
There are numerous other options under contract law for potentially challenging your Employsure contract, which may apply to you and your circumstances. As a business, you may also have options under the Australian Consumer Law and more broadly the Competition and Consumer Act 2010 (Cth).
Ultimately, your rights and options are going to depend on your circumstances and the version of the terms and conditions that apply to your contract. It is critical that you seek legal advice before hand to prevent triggering any termination payments.
NB Lawyers – Lawyers for Employers are able to give legal advice on all manners of contracts including Employsure Contracts.
Jonathan leads a team of handpicked experts in the areas of employment law and commercial law who focus on educating clients to avoid headaches, deal with problems before they fester and when action needs to be taken or a mistake is made mitigate risk and liability.
Daniel Dash is part of the commercial law team and has significant exposure working with individuals and business owners on a range of matters including business sales, property disputes, estate disputes, shareholder agreements, intellectual property, litigation and taxation matters.