Employment Agreements

You should have a written employment agreement with each and every one of your employees. The form can vary from a simple offer letter signed by the employer and employee to a complex contract, but there are a few requirements for every employment agreement. Employment agreements must (a) be in writing, (b) comply with the minimum entitlements under the Employment Standards Act, 2000 and (c) be signed before the employment begins. Employers should also provide employees with a reasonable opportunity to review the agreement with a lawyer.

The Ontario Employment Standards Act, 2000, sets out the minimum entitlements which employers must provide their employees. These include items such as vacation and leave entitlements, minimum wage, overtime and the minimum notice or pay in lieu of notice that must be provided to an employee on termination with cause (i.e. where they are not terminated for a serious breach of their duties).

In my view, the most important reason for an employment agreement is to confirm the length of notice that must be provided when an employer terminates an employee without cause. The ESA sets out a minimum notice period. However, under the common law, employees generally entitled to a longer notice period which depends on a variety of factors including the employee's age, position and length of service. Employment agreements will typically provide that an employee's entitlement on termination is limited to the notice or pay in lieu of notice specified in the agreement. In the absence of such a provision, an employee’s notice entitlement is not certain which creates a significant litigation risk where the employer and employee cannot agree on the notice period.

Employment agreements also confirm important terms of the employment relationship:

• job title and description
• remuneration and entitlement to any benefits
• the term of the employment, which is particularly important in the case of fixed-term employees
• the incorporation of workplace policies into the agreement

Employment agreements can also provide employer's with rights that are permitted if included in an employment agreement. These include probationary periods, the right of an employer to lay-off an employee and the provision of time off in lieu of overtime pay.

In addition, although the common law provides some protection to employers, employment agreements often set out restrictive covenants which protect the corporation’s business and information including confidentiality, non-solicitation and non-competition provisions:

• Confidentiality provisions are generally included in employment agreements and prevent employees from disclosing or using an employer's confidential information, such as customer lists, business strategies and financial information
• Non-Solicitation provisions prevent employees from soliciting employees and customers of the corporation
• Non-Competition provisions prevent employees from competing with the corporation

It should be noted that restrictive covenants, especially in employment agreements, are only enforced to the extent that the provisions are necessary to protect the employer’s business.

Employment agreements are no-brainers - you should have a written employment agreement for each of your employees. They provide both parties with protection. For employers, employment agreements limit liability associated with hiring employees (particularly from wrongful dismissal claims relating to claims under the common law that insufficient notice was provided on termination). For employees, employment agreements provide them with written confirmation of their job responsibilities and entitlements.