You may not realize it, but all of your employees have contracts as every employment relationship in Canada is governed by a contract. In many cases, however, they are 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, 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 already seeking to reduce labour 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.
A well-drafted and properly implemented contract is the most effective way to improve your legal position as an employer. For years, Stuart has been encouraging his clients to use employment contracts for all employees (not just for executives, as is still common). And while it is more common than before, most organizations do not do this consistently.
For an example of how a contract can help, consider dismissal clauses: such a clause can mean the difference between owing someone 24 months of severance or as little as 8 weeks. Not surprisingly, these provisions are often successfully challenged. That is why it is critical to ensure that they are drafted and implemented properly; otherwise, the contract will not be worth the paper it is printed on.
Organizations should:
- have every employee sign an employment agreement,
- make it clear that the individual has not been hired until they sign the agreement and any conditions have been satisfied;
- include clauses to address issues including:
- duties and responsibilities,
- hours of work,
- vacation,
- salary, bonuses, and other forms of compensation (retaining as much discretion as possible),
- benefits,
- confidential information,
- privacy issues,
- ownership of inventions and information,
- restrictive covenants,
- dismissal (this clause can easily save you tens of thousands of dollars),
- The right to impose temporary layoffs,
- discipline,
- conditions of offer (reference check, background check, etc.), and
- anything else of importance to the organization.
The most common mistake is to have the employee sign the contract at the time they commence their employment, or even later on. Once an employee has started working, 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.
How we can Help
We work with organizations in all industries 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 are often asked what to do about existing employees that do not have a contract. We work with clients to effectively address this complex situation. The most important thing to remember is that it is not what the employee signs, it is whether the contract will be enforceable if challenged.
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. We will help to ensure that your contracts are customized to your needs, and that you can rely on them as you move forward.
We want to be your Trusted Advisor, your Chief HR Law Officer, your business partner. Let us be part of your team, so that we can look after your employment law issues, and you can focus on your business.
