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Employment contracts in Canada are generally written in favour of employers to displace a worker’s common law entitlements. An employment contract provides an employer many benefits and very few cons.
New employees often sign an employment contract before starting work. These agreements usually define the employee’s earnings, the employer’s policies, restrictive covenants such as non-competition or non-solicitation clauses and, most importantly, what happens in the event of termination.
If employees do not sign an employment contract, they should know that they still have an implicit employment contract with their employer, but that they and the employer are bound to the “common law” rather than defined terms and policies. This is always better for employees, and worse for employers, because the common law gives employees rights that employment contracts usually take away.
The most important thing to look out for in an employment contract is a termination clause that limits the employee to notice of termination according to the Employment Standards Act’s minimums (i.e. one weeks’ notice per year of service) or something slightly greater than that.
Employers are keen to insert a termination clause because then it prevents the employee from being entitled to notice upon termination according to the common law, which is much more lucrative than the Employment Standards Act’s minimums (i.e. one weeks’ notice per year of service). In fact, the gap between the Employment Standards Act’s minimum notice and common law notice can be 96 weeks of termination pay.
Finally, employees should note that they must be given an employment contract to sign at the start of a new job, and not be handed one later down the road. Contracts that are given to employees after they have started working are unenforceable unless they are given side by side with a promotion or some other monetary reward.
Key Employment Contract Clauses to Review
Someone offered a new employment contract should consider hiring an employment lawyer to review the employment contract especially if the proposed employment contract contains any of these complicated and potentially lucrative / expensive sections:
- Change of Control clause;
- Good Reason clause;
- Disability clause;
- Significant bonus clause;
- Equity incentive clause;
- Fiduciary obligation clause;
- Loan clause;
- Without cause termination clause;
- Non-competition clause;
- Non-solicitation clause;
- Intellectual property clause;
- Liability and indemnification clause;
- Arbitration clause;
- Various schedules defining key issues; and
- Any section that appears to be worth significant monies or significant drawback.
Dutton Employment Law is an employment contract law firm.
If your employer has offered you a new employment contract to sign, and you would like advice, please book a consultation with us. We will review your employment contract. Often times, employers are willing to negotiate the removal of certain anti-employee clauses if the employee just asks. After all, you were hired because they wanted you above all other applicants. You do have bargaining power, and a lawyer can help coach you how to negotiate or negotiate on your behalf.
The cost of an employment contract review by a lawyer is not prohibitive. In most cases, all it takes is one hour of a lawyer’s billable time. Moreover, in our experience, and especially for more senior employees and executives, the employer will pay the employee back for the cost of the employment contract review.
Note: Click here if you have been asked to sign a new employment contract after you have worked for the employer for some time already.