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Key Considerations for Reviewing Your Employment Contract

When you receive a job offer from a new employer, it can be tempting to sign anything  they place in front of you – especially if you’re excited about the position or you applied to a number of positions before receiving an offer. But it is particularly important to take time to read and carefully consider your employment contract and its implications both short and long term.

Similarly, as an employer, you do not want to take short cuts with your employment contracts, as they provide you and your staff with the certainty needed to have productive and secure working relationships.

An employment contact evidences an understanding between the employee and the employer of their respective rights and obligations. It provides the framework for the relationship in the future and for this reason, it is crucial to take a forward-looking approach. Below are some key considerations for both employees and employers when drafting and reviewing employment contracts.

Job Description

While an employment contract should include the employee’s title, work hours and work location, it should also include a description of the employee’s duties. This description is important because it establishes the employee’s responsibilities and provides the benchmark for the employer’s expectations.

There should be enough flexibility in the language to allow for minor modifications to duties, keeping in mind that substantial changes may be grounds for a claim for constructive dismissal

Statutory Minimums

Employers and employees alike should be aware of the statutes which regulate employment relationships. Of particular importance in Ontario are:

Clauses of an employment contract are automatically void if they provide an employee with less than their statutory entitlements. Where a clause is void, the common law will determine the employee’s entitlements. A well-drafted contract, which contemplates the relevant statutes, provides both employer and employees with certainty.

Compensation and Benefits

In addition to the employee’s remuneration (either hourly or gross salary), the contract should outline all benefits the employee will be entitled to, including health benefits. The contract should specify any relevant waiting periods or obligations on the part of the employee to pay premiums.

Term

Employment is presumed to be indefinite unless the contract states otherwise. Therefore, if an employer intends to hire someone for a specific period, the contract must state so. It is also important for employers and employees alike to be aware that a series of fixed term contracts can be treated as indeterminate employment (thereby requiring reasonable notice).

Termination

Arguably the most important clause is the termination clause. As mentioned above, a termination clause is voice if it provides an employee with less notice than they would be entitled to under the Employment Standards Act. Further, the contract should clearly provide for the extension of benefits during the notice period.

Bargaining Power

Above all else, employers would be well-served to remember that the employment relationship is inherently imbalanced. The employer holds the power and often employees are unaware of their rights.  Courts are aware of this when enforcing the terms of an employment contract so employers need to be particularly diligent to act fairly.

If you have any questions regarding employment contracts, please contact employment lawyers Eytan Rip or Chloe Waind.

Further resources:

Understanding Termination of Employment in Ontario

Validity of Termination Clauses in Employment Contracts

Why you Should Hire an Employment Lawyer to Review, Write and Negotiate an Employment Contract


Employment Contracts – Employment lawyer, Eytan Rip, explains the importance of reviewing employment contracts, and why it is a good idea to have a lawyer review them before you commence your employment.