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Employment Contract – What to Include and Why

Whitten and Lublin | Jun 20, 2017

A written employment contract is essential for employers and employees to minimize future disputes and the risk of costly litigation.  If properly drafted, an employment contract will clearly out the respective rights, obligations and expectations of the employer and employee. In preparing an employment contract, here are some of the most salient features to consider:

  1. Overall Clarity: an employment contract should be written in clear and precise language. In circumstances where its terms are vague or ambiguous, the courts will apply an interpretation that is least favourable to the party responsible for its drafting.
  2. Independent Legal Advice/Review: the employer should provide the employee with a reasonable opportunity to review and obtain independent legal advice before signing an employment contract, to preclude claims by the employee that it was signed under duress and therefore unenforceable.
  3. Signing and Acceptance: an employment contract should be signed before employment is commenced in order to avoid issues concerning its enforceability. If a contract is signed after employment was commenced, the employer should ensure that it provide additional consideration to the employee (g., a raise or bonus).
  4. Scope of Employment: the employment contract should clearly set out the employee’s title, duties and responsibilities. An employee’s duties and responsibilities cannot be unilaterally altered by the employer during the course of their employment. Therefore, in order to prevent claims of constructive dismissal, the employment contract should clearly state that the employee understands and accepts specific changes to conditions of employment, such as changes to salary, work location or responsibilities.
  5. Probation Period: the employment contract should clearly state whether there is to be a probationary period during which the employee could be dismissed for any reason, without pay or notice. If so, it should stipulate the length of such probationary period.
  6. Termination Clause: the employment contract should clearly state the means by which either party can terminate the employment relationship. In the case of termination for “just cause,” the employment contract stipulate what grounds will constitute “just cause.” For terminations “without cause,” it should provide for at least the minimum requirements for “notice” or “pay in lieu” of notice under the Employment Standards Act (“ESA”).  The employment contract should also make clear that in the event of termination of their employment, an employee will receive statutory severance pay (if applicable), and benefits continuation for, at the very least, the length of the ESA notice period.
  7. Restrictive Covenants: restrictions on post-employment activities are viewed by the courts as restraints of trade, and therefore are generally difficult to enforce. This is especially true in the case of a non-compete clause.  If some form of restrictive covenant is necessary, an employer should consider a non-solicitation clause that is narrowly aimed at prohibiting an employee from soliciting its customers, clients, suppliers or employees.
  8. Compensation: the employment contract should clearly set out all terms of compensation, including salary, health and medical benefits, life or disability insurance, stock options, bonuses or car allowance.
  9. Compliance with Statutory Minimums: an employment contract must comply with all basic statutory minimums under the ESA, including but not limited to, minimum wage; notice of termination (pay in lieu thereof); and vacation with pay.

Additionally, employers and employees should particularly note and account for the proposed amendments to the ESA, such as the increases to minimum wage and vacation allowance; personal emergency leave; and the risk of misclassifying employees as “independent contractors.”

If you require an experienced lawyer to prepare or review the terms of an employment contract, please contact one of our lawyers at Whitten Lublin.

 

Author: Sezar Bune, Whitten & Lublin