Written Employment Contracts

If you are a business owner the time will soon come to add a new employee to your empire – maybe your first employee or maybe your fiftieth, either way, you will need to decide whether or not to have them sign an employment agreement. Let us help you decide: have them sign an employment agreement. It might not seem necessary, especially if you are a small company and you prefer to do things on a handshake and a smile, but just because you and your new hire are on good terms now doesn’t mean that things will stay that way. Things happen, things you didn’t count on, and when they do, you can save yourself future problems if you prepare properly now.

A written employment contract is useful for the employer and employee alike because it sets out clearly the mutual expectations and obligations of both parties right at the beginning of the relationship so, hopefully, there will be less confusion later. Of course, as the employer, you will be the one who sets the terms of the contract, so you can ensure that you protect your business interests.

Employment contracts can be a couple of pages or they can be quite lengthy, depending on the level of employment and how much information you want included. There are, however, certain terms that you will want to ensure are included.

You will want to include information such as salary (including any bonus structures or targets, which much be properly described), hours of work, vacation, benefits, and a job description that provides enough certainty about what the job is, but not so much detail that the job description cannot be changed or expanded as time goes on. You will also want to include a termination section that describes how much notice an employee will receive if they are terminated without cause (which much be at least the minimum notice periods set out in the Employment Standards Act), and a section that describes what sort of acts or omissions will lead to termination of the employee for cause.

There are many optional clauses that you may want to include, such as sections dealing with privacy policies, use of computers/internet, harassment, drug use, non-competition, non-solicitation, or inter-office romantic relationships. Which clauses to include will depend on your particular needs as an employer in your given industry.

Each of the these various clauses are worthy of their own discussion, so for now we will just say that you may want to talk to your lawyer about what should be in your contract and to ensure that everything you are including is legal and enforceable.

Generally speaking, your written employment contract must be signed at the commencement of the employment relationship. An employment contract signed six months after the employment started is not going to be valid, unless you have “fresh consideration”. Fresh consideration means some new condition or aspect to the employment relationship, like a raise or promotion or the addition of some substantial benefit. No fresh consideration means no new employment contract, so just have it signed right at the beginning.

Also, you would be wise to have a clause in the contract that notes that the employee has been given time to review it and has had the opportunity to seek independent legal advice. If you hand an employee a contract and force them to read and sign it on the spot, there’s a pretty good chance that they could later claim that they signed it under pressure or that they did not understand the terms, so make sure they read it and understand it and that they acknowledge this in the contract. For really key/highly remunerated employees, you may want to consider paying for them to get a certificate of independent legal advice and appending it to the contract. It isn’t necessary, but it certainly bolsters the enforceability of the contract in the future.

It can seem like a lot of hassle when all you want to do is put your new recruit to work, but really, a bit of time and money at the beginning will save you so much in the future.

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