Key Provisions to Include in Every Employment Contract
Hiring a new employee is an investment, and it is important to start the relationship on the right foot. Both parties need to have a clear understanding from the outset of their role, rights, and responsibilities. Where there is confusion in this regard, disagreement and disputes may follow.
To minimize the chance of future conflict, employers should look to set out the terms of the parties’ working relationship in a written employment agreement. While this step alone is far from a silver bullet, it is an important part of providing both parties with clarity and certainty around their respective roles.
Written employment agreements must be fit for purpose. They will necessarily differ based on the industry within which the employer operates, and the nature of the role being filled. For example, in some roles, the protection of confidential information and intellectual property may be of paramount concern, while in others, the focus may instead be on ensuring an ability to have the individual work excess hours pursuant to an averaging agreement.
That being said, here are a few common contractual provisions that employers may wish to consider building into their written employment agreements to better protect their business and ensure certainty:
Ability to Work
When hiring a new employee, it is important to consider where they are coming from, and what, if any obligations the worker may have to their prior employer (or any other third party for that matter). Employers may require incoming employees to confirm that by accepting the proposed job, and performing their assigned duties, they will not be in breach of any post-employment obligation (restrictive covenant or otherwise) to a former employer. This type of provision serves two purposes: it provides a basis to terminate employment where it transpires an employee has made a false representation; and it allows an employer to rely on this requirement in responding to litigation brought by a past employer for an alleged breach of a restrictive covenant.
Probation Period
A probation period provides an employer with a time-limited duration within which they may assess the worker’s suitability for their role. Also, based on current Ontario law, it may help to rebut any presumption that the employee was induced to leave their former role and accept employment with the employer.
Resignation from Employment
The sudden loss of a key employee can cause significant disruption and harm an employer’s operations. To protect against this risk, employers can build into their contracts a requirement that employees provide advance written notice of their intention to resign from employment.
Termination of Employment
The importance of clear, lawfully enforceable, termination provisions within an employment agreement cannot be overstated. There is more litigation each year around the enforceability of this type of provision than any other aspect of employment agreements. As such, it is critical to include within every employment agreement clear language setting out the employee’s entitlements in the event of a subsequent dismissal from employment.
Restrictive Covenants
Employers may restrict the actions that an employee can take both during, and after, their tenure with the business. These restrictions may limit the employee’s ability to disclose and use confidential information, solicit employees, solicit customers/clients and, in the right circumstances, to engage in a competitive business within a defined area for a limited period of time.
These types of contractual provisions allow employers to better protect their legitimate business interests, including existing contractual relationships and proprietary information. They are worth including within an employment agreement where the role in question, if exploited, would leave the business vulnerable.
COVID-Era Clauses
The pandemic has highlighted the importance of several contractual clauses which previously received limited attention, such as:
Unpaid Temporary Lay-off: unless an employer has a written contractual right to place a worker on a temporary unpaid lay-off from work in accordance with applicable provincial law, it cannot do so (subject to limited exceptions) without triggering a constructive dismissal and becoming exposed to unintended liability.
Employee Vaccination Requirements: employee vaccination requirements have become a hot topic in the past several weeks. An increasing number of employers have announced their intention to require that, as a condition of returning to the workplace, staff must either be fully vaccinated against COVID-19 or, in some cases, show proof of a negative COVID-19 test result. This issue has thus far proved contentious. Employers that wish to require that new workers be vaccinated should state this requirement clearly in their employment agreement (while being careful to balance both human rights accommodation and employee privacy obligations).
Entire Agreement
An “entire agreement” provision confirms that the terms of the parties’ agreement are limited to those set out within the written employment agreement (and any associated appendices). By including this type of provision, employers can avoid any argument after-the-fact that they agreed (either verbally or elsewhere in writing) to provide any additional entitlements to a worker. They may also help protect against a potential action for negligent misrepresentation.
Putting Words into Action
Carefully drafted employment agreements are important. In order to be effective, however, they must be properly implemented. As such, Ontario employers should be sure to:
Provide the prospective employee with the written employment offer in advance of the intended start date;
Encourage the prospective employee to review the employment offer and seek whatever advice they may deem appropriate prior to agreeing to its terms (providing a reasonable period of time to do this); and
Require the individual to sign and return a copy of the employment agreement before starting work.
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.
