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Why Write Employment Contracts
Employment relationships are inherently contractual. Even if there is no written employment contract, every employment relationship is governed by an implied (or oral) contract.
When there is no written employment contract, the implied (or oral) contract is governed by the Minimum Employment Standards of the province, like minimum wage and vacation, and by the employee-friendly Common Law of employment.
Hence, it is both wise and prudent for employers to write employment contracts so they can put into writing precisely the terms and conditions of employment and contract out of the common law. By putting into writing all the terms and conditions of employment, both the employer and employee can avoid uncertainty and conflict, especially regarding post-termination issues.
Some of the key benefits of a written employment contract include:
- Clarifying termination entitlements
- Confirming remuneration
- Instituting restrictive covenants
Given the mounting litigation against employers in Canada, employers should always have their employees sign written employment contracts. And thus, this guide will help explain how to write an employment contract.
If you do not want to take the time to write an employment contract yourself or cannot carefully craft language that is enforceable, unambiguous and to the point, use a goHeather Canadian template. Our software will create an employment contract from a local lawyer-made template in five minutes.
Guide to Drafting an Employment Contract
An employment contract should be a long-form agreement separated into sections and subsections.
The key to employment contracts is ensuring that they are enforceable. Many things can make an employment contract void. So, watch out. Craft each clause carefully and always stay within minimum employment standards. Do not allow any clause to go below minimum employment standards, even hypothetically. And avoid ambiguity and uncertainty.
A short one- or two-page employment contract is appropriate for junior, entry-level positions. Lengthy employment contracts should be reserved for more senior, sophisticated positions.
Employment contracts should accompany an offer letter, which should be on company letterhead.
To draft your contract, use a word processor like Microsoft Word or Google Docs.
Make the title of the document “Employment Contract" or "Employment Agreement”
Have a first line that says, “This Agreement between EMPLOYER NAME and EMPLOYEE NAME is effective as of START DATE.
From beginning to the end, here is generally (non-exhaustive) what should be included as sections, with subsections below those sections:
1. Position
a. The employee’s title.
b. Specify if the relationship is indefinite, and, if not, specify the end date.
c. Define a probationary period.
d. Determine whether the relationship is on-site, remote or hybrid.
e. A clause permitting a change of the terms and conditions of employment, detailing the ability to do so.
f. A clause permitting temporary lay-off.
2. Compensation
a. Paragraphs reflecting the employee's compensation, including broken down into salary, benefits, commissions, bonuses, and any other fringe remuneration.
b. Allowances, if any.
c. Expense reimbursement is applicable.
3. Termination
a. A termination section that deals with termination without cause, termination for cause and resignation subsections, ensuring all language in all termination sections both comply with statutory minimum standards and oust the common law with a defined formula.
4. Restrictive Covenants
a. A section detailing the employee's restrictive covenants, including non-solicitation clauses, IP protection clauses, confidentiality clauses and the like.
5. General
a. A sentence stating that the employee has had the opportunity to review the contract with legal counsel.
b. Background check consent.
c. That this agreement forms the entire employment contract. There are no other promises or obligations.
d. Employers who have written policies should also refer to their policies in the employment contract and consider appending such policies as appendixes to the employment contract.
Keep in mind, the above list of sections for an employment contract is not exhaustive. Your specific needs make require more less. For additional clauses to put in an employment contract, read our guide here.
At the last line of the employment contract, there should be a space for the employee to sign the agreement.
How to Negotiate an Employment Contract
Employment contracts should be written to protect the employer, not the employee. However, employees are aware of their best interests and may not agree to an overly aggressive employment contract. Therefore, make your employment contracts reasonable and concede reasonable demands in the bargaining process.
After you have bargained your employment contract, ensure it is signed before the employee starts work. Employment contracts are not generally enforceable if there is no consideration, which might expire if they start working.
Safely store a copy of your employment contract (in a backed-up cloud storage drive, for example). When your employee inevitably leaves, you may have to review this document or even rely on it in court.
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