Reducing the terms of an employment agreement to writing at the start of a working relationship, when the atmosphere is generally positive and memories have not faded, is a good idea as it provides the employer and the employee with clarity as to what obligations each of them is expected to fulfill.
Although each employment agreement must be tailored to suit an individual employment relationship, most employment agreements usually address basic terms such as job title, salary, probationary period, hours of work, vacation, leave policies and benefits. Employers also use employment agreements as tools to minimize risk and to set out what will happen in the event the employment relationship ends. As such, it is not uncommon for employers to include non-competition and non-solicitation clauses in their employment agreements as well as termination clauses that limit employee notice entitlements upon termination to the minimum standards set out in Ontario’s Employment Standards Act (“ESA”).
Problems arise for employers when mistakes are made in the drafting of employment agreements. Ambiguous, misleading or outdated clauses often leave employers paying more notice to terminated employees. For example, while a properly drafted termination provision could limit an employee’s notice of termination to the minimum requirements of the ESA, a poorly drafted termination provision could result in an employee being awarded common law reasonable notice of termination (which is more generous than the minimum amounts required by the ESA).
Since courts generally dislike enforcing termination clauses against employees, employers must be vigilant not only in drafting such clauses but also periodically reviewing and revising such clauses to ensure that they are in line with current developments in this area of the law and that they adequately reflect the changes in their workplace.
In Ontario, courts will not enforce a termination provision in an employment agreement that provides for less than the minimum notice period required under the ESA. Ontario courts will also void a termination clause that excludes benefit continuation from the employee’s termination entitlements. In both circumstances, courts will award employees common law reasonable notice in place of the ESA minimum requirements.