New Employment Contracts

New employees usually sign an employment contract before starting work. These contracts usually define the employee’s status (i.e. regular employee / independent contractor / dependent contractor), job description, duration of employment, earnings, the employer’s policies, intellectual property rights, restrictive covenants such as non-competition or non-solicitation clauses and what happens in the event of termination.

If employees do not sign an employment contract, they are still under an employment agreement, but that they and the employer are bound to the “common law” rather than employer defined terms and policies. These are judge made rules that are implied into the agreement, and they are more friendly to the employee than the employer.

Usually, the most important thing to place in the employment contract is a termination clause that limits the employee to notice of termination according to the Employment Standards Act minimums (i.e. 1 week per year), rather than the common law, which is much more lucrative. In fact, the gap between the Employment Standards Act’s minimum notice and common law notice can be 96 weeks.

Employers should not draft their own employment contracts or copy and paste employment contracts from the internet or anywhere else. Employment law is constantly changing. Contract clauses that were enforceable last month may not be enforceable anymore.

In the event an employment contract clause is void, the whole contract, or the important sections related to the unenforceable clause may be void in entirety. It is therefore very important that employers seek out a lawyer to draft an employment contract to use for its employees, and to consult with the lawyer at least annually about updating the contract for future employees.

One example to caution employers: watch out for drafting contract clauses which can come back to hurt you. Many employers mistakingly make their contracts last for one or two years, rather than indefinitely, thinking it will allow them to terminate an employee with no notice after such time, in case things don’t work out. This can be a major mistake that could cost 2 years of wages in exchange for no work. If the contract stipulates a set duration (i.e. 2 years), and the employer terminates the employee before the set end date, lets say in the first 3 months, the employer could be surprised to hear it may have to pay the employee pay in lieu of notice of 21 months.

This is just one of the issues that make it worth while to seek out an employment lawyer in Toronto to assist your company in drafting new employment contracts.

Dutton Employment Law, lawyers for employers, regularly drafts employments contracts for employers.

If you would like to learn more, please contact us.