Employment Contract: Key Clauses
Employers in Ontario (and all of Canada) should require employees to 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 still have an implied agreement with their employer in that they 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.
Here are some of the most important clauses to include in an employment contract:
1. Termination Clause: An enforceable termination clause can limit an employee’s entitlement to termination pay from over 24 months to just eight weeks.
2. Non-Compete Clause: A non-competition clause prohibits employees from competing with their employer for a set period of time in a specific geographic area after the employee leaves the employer for whatever reason.
3. Non-Solicitation Clause: A non-solicitation clause prohibits employees from soliciting or dealing with customers of the employer for a set period of time in a specific geographic area. In addition, a non-solicitation clause usually prohibits the employee from soliciting other employees to leave the employer.
4. Confidentiality Clause: A confidentiality clause reinforces and specifies the employee’s duty of confidentiality to their employer. A good confidentiality clause defines confidential information and trade secrets, clearing up any ambiguity as to which information must be kept secret.
5. Bonus Language: A solid bonus clause in favour of the employer will state that any bonus is purely discretionary and that no bonus will be paid beyond the statutory notice period in case an employee is terminated.
6. Privacy Clause: An employer should consider adding a clause in the employment contract that says the employee has no expectation of privacy with regard to employer-issued electronics and email.
7. Fail-Safe Clause: Recent case law suggests a fail-safe clause that states that in no circumstances will the employer provide anything less than employment standards may protect the employer against the court finding related terms in the contract are void.
8. Severability Clause: A severability clause will reinforce that if any other clause in the employment contract is found void or unenforceable, the remaining clauses, will, nonetheless, continue in force.
9. Probationary Clause: A probationary clause gives the employer the right to terminate the employee without any notice or termination pay in case the employee is let go within 90 days or less.
The above is just a brief introduction to boilerplate employment contracts. Depending on the compensation and the sophistication of the position, an employment contract should have more or less defined terms and conditions.
Dutton Employment Law drafts and reviews employment contracts for employers and senior management. Please contact our offices for more. Otherwise, refer to our guide for startups in drafting employment contracts here, refer to our guide for executive contracts here, and refer to our post discussing drafting new contracts for other employers here.
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Jeff is an employment lawyer in Toronto. He is the Principal of the Dutton Employment Law Group at Monkhouse Law. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles.