Five Provisions to Include in Your Employment Agreements

When drafted carefully, written employment contracts can be helpful tools. They provide a clear view of the intended relationship and proactively address common issues that may arise. In so doing, contracts offer transparency and reduce the risk of future disputes.

While the content of employment agreements will vary based on industry and the role in question, there are several key provisions which should be considered in setting up most (if not all) employment relationships.

The remainder of this post discusses some of these key provisions. There are other provisions that may prove necessary (or prudent) in certain circumstances. As such, it is always advisable to work with an experienced employment lawyer to craft a tailored contract that meets your business goals in an efficient and lawful manner.    

1. Ability to accept an offer of employment:

When bringing a new employee into your business, it may be helpful to require confirmation they are legally able to accept the offer of employment. This means, for example, verifying that by coming to work for your business, they will not be breaching any obligations to a former employer (such as a non-solicitation or conflict of interest provision). This type of language puts an onus on the employee to disclose any potential concerns up front. If you later learn the individual was dishonest regarding their ability to work, summary dismissal becomes an option.

2. Non-solicitation/confidentiality:

Depending on the nature of your business, and the employee’s intended role, it may be prudent to restrict their ability to solicit other staff, clients, and/or suppliers both during and after the relationship ends (for a specified duration). This type of restriction can help safeguard your business and avoid undue loss.

In addition, where staff may become privy to confidential financial, proprietary, or client information, it is advisable to require that the employee agree to protect this information and refrain from either disclosing it to a third-party or using it to damage your business.

3. Temporary lay-off:

Absent a written contractual right to temporarily lay-off staff (in accordance with statutory requirements), most employers lack a lawful basis to do so without risking potential liability. Placing an employee on lay-off may be construed as a constructive dismissal (being a fundamental and unilateral change to the terms of employment) and result in advertent liability for severance. As such, language of this nature provides greater operational flexibility with minimal risk.

4. Ending the relationship:

An employment relationship generally ends where the employee resigns or the employer terminates the contract. It is important for employers to turn their mind to these possibilities at the outset:

• Termination during probation: There is no statutory or common law right to a probationary period at the beginning of an employment relationship. As such, if you wish to institute a period during which the employee’s performance and skill can be assessed to ensure their suitability for ongoing employment, it is necessary to draft language requiring the same. This language can help clarify the parties’ intent for the first 3-6 months of the relationship and inform potential liability in the event of a dismissal during probation.

• Resignation from employment: There is no statutory requirement (in Ontario) for an employee to provide advance notice of their resignation from employment. While the common law does offer some protection in this regard (via the “wrongful resignation” action we have discussed elsewhere), its practical utility is often limited.
  
  As such, employers can use their employment agreements to require that an employee provide a minimum period of advance written notice prior to leaving their job. The quantum should be tailored to reflect the: importance of the person’s role within the organization; the potential difficulty in replacing the person; and the operational risk associated with their exit.

• Termination of employment (outside probation period): There are minimum statutory requirements that apply when dismissing an employee. Some employers make the mistake of believing this minimum obligation reflects their total severance liability. The common law, however, operates in tandem with statutory obligations to require that employers provide reasonable advance notice of dismissal (or payment in lieu thereof), which tends to exceed statutory obligations.
  
  To assess what will be reasonable notice, the courts consider several factors, including (but not limited to) the dismissed employee’s age, their tenure of service, the nature of their role, and the availability of comparable alternate roles in the local market.
  
  Where a dismissed employee has long service, a technical or senior role, or their age may prove a hurdle to re-employment (or a combination of all 3), the common law notice period can be up to 24 months (or more in exceptional circumstances). As such, to control potential termination costs, employers may wish to displace presumed common law rights through carefully drafted contractual language.

5. Entire agreement:

Parties can sometimes disagree over what terms govern their relationship. This can lead to disputes and, depending on the quality of the parties’ records, may result in liability for an employer. It is always worthwhile to include language in the employment contract to make clear that the written agreement constitutes the totality of the parties’ agreement, superseding any prior agreements, negotiations, or discussions (whether oral or in writing). This language can help provide a quick answer to claims for additional benefits or payments and protect against the risk of litigation.

This list offers a snapshot of some key contractual provisions employers should consider including in their written contracts. It is by no means exhaustive. It is always advisable to tailor your written contracts to fit both your business needs and the role which you seek to fill.

If you have any questions about implementing new employment contracts, or revising those currently in place, our employment lawyers would be happy to discuss further.

Vey Willetts LLP is an Ottawa-based employment and labour law firm that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in Ottawa and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca.