Human capital can be one of the most valuable assets of a business. However, your employees can quickly become an expensive liability without properly drafted Ontario employment agreements. This blog post will cover some of the essential terms to include in your Ontario employment contract template to help minimize your liability when an employment relationship comes to an end.

  • Clear Start Date and Letter of Offer 

One often overlooked component of entering into an employment agreement is the employee’s start date. This is because when a dispute arises (usually in regard to notice or severance pay when an employee feels they’ve been wrongfully dismissed) the first place your employee’s lawyer will look is to when the contract was entered and when the employee’s actual start date was. If your employee started work before the start date indicated in your employment contract, there is an argument to be made that the employment agreement already began prior to the signing of the contract and therefore, without fresh consideration (no new benefits being offered to the employee for actually signing the agreement) the signed contract is actually a secondary agreement and not enforceable. This is why an offer of employment should be made via an independent letter of offer and the employee’s acceptance of the offer contingent on signing the attached employment agreement (and any other policies you may want your employee to agree to, but more on that below). The employee should also be provided with the offer prior to starting work so they have time to review the agreement and seek out independent legal advice.

  • Additional Policies/Employee Handbook

Many employment contracts specify that, on signing the employment contract, the employee agrees to be bound by additional terms set out in the employer’s workplace policies. These workplace policies could include a human rights policy, privacy policy, or even the terms of any temporary layoffs the employer may need to implement in the event business slows down. While these additional protections are good in theory and even legally required (in the case of human rights policies and privacy policies) if the employee has not had an opportunity to review and agree to these policies, there is little hope that they will be legally binding on them. This can have the effect of resulting in a constructive dismissal (in essence an implied termination of the employee due to the employer’s breach of the employment contract) in the case of a layoff where the right to temporally layoff the employee is not expressly set out in the contract. The solution to this problem is to attach the policies the employee will be bound by as schedules to the contract and have the employee initial the pages to provide evidence the employee had had an opportunity to review and agree to the terms.

  • Role and Responsibilities 

Clarifying expectations for the employee is a good way to prevent disputes from the start. While you might have a good idea in your head of the various responsibilities an employee should have in their role as say an Assistant, Sales Representative, or Office Manager, taking the time to clearly outline the duties of each employee will help prevent disputes between you and your staff members (or amongst them) that can lead to resignations or dismissals.

Another important reason to clarify the employee’s roles is that if the employee’s responsibilities change substantially from the time of hiring, there is an argument that the initial contract is no longer binding so that there is really no contract between you and your employee (potentially entitling them to long notice periods). This is why when an employee is given a promotion it’s a good time to have your employment agreements reviewed by an Ontario employment contract lawyer before offering the employee a new contract to sign outlining their new responsibilities should they accept the promotion. In this case, the new contract will be binding because you are offering the employee fresh consideration for the changes to their employment agreement (the promotion).

  • Probationary Periods

Many employers will want their employees to be subject to a probationary period at the start of the employment relationship. The probationary period is designed to allow the employer a reasonable amount of time to assess the employee’s skills and suitability for a role and to allow them to terminate the employee without notice in the event the employee simply isn’t a good fit. In Ontario, if you are limiting your employee’s entitlements on termination to the minimum standards provided by the Employment Standards Act (“ESA”), it is not strictly necessary to include a probationary period because under the ESA employees with less than three months of service are not entitled to notice pay. If you are going to include a probationary period, you must ensure that it does not violate the employee’s entitlements under the ESA (more on termination provisions below).

  • Termination Provisions 

Employees are provided with minimum statutory protections under the ESA that employers must follow.  One of the biggest sources of employment-related disputes is the employee’s entitlement to notice or pay in lieu of notice when their employment is coming to an end. Under the ESA, employees are generally entitled to one week of advance notice that their employment is coming to an end (or pay instead of actual notice) per year of service (up to 8 weeks) and an additional payment called “severance” in the case of larger employers. During the notice period (or what would be the notice period if the employer chooses to pay the employee instead) employers are also required to maintain the employee’s benefits. Employers cannot contract out of the minimum statutory protections under the ESA and those that do will be punished by having to pay their departing employee damages in the form of “reasonable notice” at common law. Common law reasonable notice (as opposed to the minimums under the ESA) is based on the employee’s characteristics (age, role, length of service, availability of similar employment, amongst other factors) and will be calculated in months instead of weeks of pay.  As employers usually find out that they have violated the ESA on receiving a demand letter from the departing employee’s lawyer, they will usually find themselves paying the employee’s legal fees as well.

Conclusion 

Employees can be your most valuable assets, but without properly drafted employment contracts they can quickly create financial risks.  Protect your business with Supply Law’s flat fee employment contracts drafted by an Ontario contract lawyer.