Every employment relationship in Canada is governed by a contract. You may not realize it, but all of your employees have contracts. In many cases, they will will be verbal, comprised of the terms that you explicitly discussed, such as position and compensation, along with a host of other terms that will be implied by law. Not surprisingly, those terms are designed to protect the employee, and not the employer. Among others, these include the requirement to provide reasonable notice in the event of dismissal, which can be a tremendous cost to an employer that is already seeking to reduce labor costs.
In addition to reducing costs, employment contracts also provide certainty. Instead of debating an employee’s duties, or estimating their entitlement to severance, the contract sets these and more terms out in black and white. Along with a well-drafted set of policies, an employment contract sets out the terms of the relationship and the rules of the workplace.
Stuart has encouraged his clients to use employment contracts for years, and for all employees (not just for executives, as is still common). We work with organizations in all industries, including not-for-profit, to customize contracts that reflect their goals and values while helping them to minimize liability and maximize flexibility when it comes to their most valuable resource: their employees.
We also work with our clients in order to ensure that any contract they implement will be enforceable. In recent years, there have been many court challenges to contracts of employment, and in many cases, the contracts have been found to be null and void. The most common mistake is to have the employee sign the contract at the time they commence their employment, or even later on. At that time, there is already a verbal agreement in place and it is tricky to replace it with a new one that is drafted for the benefit of the employer.
- have every employee sign an employment agreement,
- make the agreement the offer of employment, rather than introducing it after the individual has verbally accepted the job,
- include clauses to address issues including:
- duties and responsibilities,
- hours of work,
- salary, bonuses, and other forms of compensation (retaining as much discretion as possible to avoid claims for automatic increases, guaranteed bonuses, and the like),
- confidential information,
- privacy issues,
- ownership of information,
- restrictive covenants,
- dismissal (this clause can easily save you tens of thousands of dollars),
- policies and procedures,
- conditions of offer (reference check, background check, etc.), and
- anything else of importance to the organization.
What about existing employees?
We are often asked what to do about existing employees that do not have a contract. We work with our clients in order to address the situation effectively; it is important to remember that the test is not whether or not the employee signs, it is whether the contract will be enforceable if and when it is challenged.