Cunning Law assists employers and employees with reviewing and drafting comprehensive employment contracts.
Once an employment offer is made and the employee accepts, the next step is usually the presentation of the Employment Contract. Once the parties sign an Employment Contract, they become legally bound to its terms. This legal document sets out the terms of employment, like a roadmap for both employers and employees. It ensures that everyone knows what’s expected.
Under the law, it is actually not required for employees to have a written Employment Contract. However, even though a verbal agreement is legally binding, having a written contract in place is the best way to protect the interests of both parties. This is because it creates a record of the agreed-upon employment terms that can easily be referred to.
Issues can arise when there is a dispute or lawsuit and no written Employment Contract is in place. The parties will be prone to recalling the details of their arrangement or agreement differently. This makes it very challenging to resolve the conflict. In other words, both parties would benefit from having a written Employment Contract which can be used as legal protection in case of a dispute or lawsuit.
In Canada, employment is governed by both federal and provincial laws.
At the federal level, the Canada Labour Code applies to employers and employees involved in federally regulated industries, such as banking, air transport, and telecommunications.
At the provincial level, each province and territory has its own employment standards legislation. This sets out employee entitlements such as minimum wage, working conditions, hours of work, severance pay, etc. For example, in BC, the Employment Standards Act requires the employer to pay all wages owing to an employee within 48 hours after the employer terminates the employment.
Job title
Employer and employee information
Start date
End date, if applicable
Work location
Working hours
Employee duties
Pay type (salary, hourly wage, and/or commission)
Pay rate and frequency
Probationary period length, if applicable
Benefits
Vacation time; and
Notice periods
A comprehensive Employment Agreement contains the below key elements in addition to more protective clauses. It is also drafted in a clear and detailed manner. Any wording in an Employment Contract that is vague or leaves room for ambiguity may expose an employer to potential legal claims. This is why it is important to have comprehensive and custom Employment Agreements drafted. This will ensure that no stones are left unturned, leaving less room for confusion or disagreement later on. When it comes to Employment Agreements, comprehensive is key for peace of mind and smooth sailing ahead.
Non-solicitation clause This clause restricts an employee from recruiting or hiring employees or contractors away from the employer during or after their employment. The purpose is to prevent an employee from interfering in the employer’s relationship with other employees.
Confidentiality clause This clause restricts an employee from sharing any of their employer's confidential information during and after employment. A confidentiality clause protects a company’s information from being shared externally. These are particularly important when an employee has access to sensitive or proprietary information that is the exclusive property of the employer. It’s important that this clause states the confidentiality period and defines what constitutes confidential information.
Non-compete clause (or non-competition clause) This clause restricts an employee from competing for business with their employer. For example, it may restrict an employee from working for a competing business or individual. Non-compete clauses may be in effect during the employment period and/or for a certain period of time after leaving. This clause is not permitted in all provinces.
It is worth noting that just because an Employment Contract has a particular clause doesn’t mean that it can be enforced. It may be deemed unenforceable. Specifically, it may be considered invalid at common law or illegal under statute.
The purpose of a termination clause is to allow the parties to agree to terms regarding notice periods and severance pay that are different than what is set out at common law. At common law, employees are entitled to “reasonable notice of dismissal.” What constitutes reasonable notice at common law generally must be proven on a case-by-case basis and can be much longer (and more expensive) than what is required by employment laws.
This is why termination clauses are becoming more and more common. These clauses ensure clarity and fairness for both the employer and employee. They do so by providing certainty regarding an employee’s entitlements upon dismissal. For example, they provide the employee with either a fixed notice period or a formula for calculating the notice period based on the employee’s years of service. They also specify what benefits and other compensation (in addition to base salary) will be continued during the notice period.
A termination clause will not be enforced by a court if it is below the minimum standards required by employment laws.
Fixed-term employment is a type of employment where employees are hired for a set term or duration. The end date is clearly mentioned rather than being indefinite.
Contract employees (sometimes called seasonal workers), unlike permanent staff, know when they have to leave their jobs. Therefore, the main benefit for employers using fixed-term contracts is not having to provide employees with notice of termination unless they seek to end the term early.
However, note that if the employer continues the employment well after the termination date, then the fixed-term contract becomes an indefinite-term contract. This means that the employee would be entitled to notice of termination or pay in lieu thereof.
A termination clause will not be enforced by a court unless it provides the employee with at least the minimum statutory entitlements
A probationary period is period of time in which an employer has the right to terminate an employee (and an employee has the right to quit) without notice. It is up to the employer to decide how long the probation period is, subject to employment law. An employer may also choose to not have one at all.
It is a good idea to have a probationary period in the contract as this will be a period in which both parties can set their expectations.
Always keep in mind that any terms in an Employment Contract that does not comply with minimum standards set out in employment legislation will not be enforceable.
It is a good idea to have a lawyer review your Employment Contract to determine if it meets such minimum standards.
Employees who want to end an Employment Contract must provide their employer with a Resignation Letter. On the other hand, employers who want to terminate an Employment Contract must provide the employee with an Employment Termination Letter.
However, sometimes both the employer and the employee mutually agree to end their employer-employee relationship. In that case, they may use a Termination Agreement to cancel the Employment Contract. This will ensure the release of all obligations and legal requirements outlined in the Employment Contract and records the employee’s last official day.
When an employee breaches their Employment Contract, an employer may issue them a Warning Letter for minor infractions, such as:
If an employee continues to breach their Employment Contract after receiving a warning, then an employer may let them go by sending an Employment Termination Letter.
In addition, some infractions can be grounds for immediate termination, such as:
If an employer wants an employee to sign a new contract that significantly changes the existing terms, then something valuable must be exchanged in return. This is known as “consideration.” Some examples include pay increases, a bonus, added benefits, a promotion, or other advantages.
An employer cannot unilaterally make changes to the contract that negatively impact an employee without their agreement.
An employer must give an employee adequate time to review and understand the new contract and its implications.
Forcing a new contract onto an employee in the absence of mutual agreement or contractual rights may be considered constructive dismissal (i.e., breach of contract).
Employers cannot force employees to sign new contracts without the employee’s consent. The employee would need to agree to the terms willingly. Keep the above principles in mind if you wish to propose a new Employment Contract.
Employers should update their Employment Contracts to ensure compliance with changing legislation and legal requirements. Changes and updates may also be required as a result of internal changes, such as business restructurings. Remember, if it’s not compliant with employment law then it is not enforceable.
Moreover, employers should have their standard form Employment Contracts legally reviewed to ensure that they are not poorly written. This could lead to unwanted blindsides if a dispute occurs.
Give the employee several days to review the contract. This will ensure that they understand the contract and allow them time to seek independent legal advice if they wish to do so.
The contract should be signed before work begins. This prevents discrepancies.
If the contract refers to other documents (for example, Policies and Procedures or Code of Conduct), these documents should be attached to the employment contract.
An employment contract lawyer can advise on whether restrictive covenants and other clauses are enforceable or should be negotiated down. A lawyer can also advise on the implications of such clauses and how to on improve them.
Moreover, experienced employment lawyers can explain the “legalese” of the contract, discussing the meaning of each clause in the entire contract and how it impacts the employee’s legal rights during employment and upon termination.
Importantly, a lawyer can also ensure that everything that was previously mentioned or promised orally is actually included in the contract. If it’s not included, it’s not obligated. This concept is known as “entire agreement.”
Lawyers have seen hundreds, if not tens of thousands contracts. They know all the important clauses an employee or employer should include in their agreement to best protect their rights. Therefore, it is worth having your Employment Contract reviewed.
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