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No Requirement in Canada to use Written Employment Contracts
It's not illegal to hire an employee without a written contract in Canada. Still, it's generally advisable to have a written employment contract in place to clarify terms and conditions of employment to protect your business from unneeded liability.
Even without a written contract, certain terms and conditions are automatically implied into the employment relationship by the common law and statute legislation. Hence, even if you don't have a written employment contract, if you hired an employee, you and them are bound to a contract of employment that is implied. For example, minimum standards for wages, hours of work, vacations, and other conditions are set out in provincial employment standards legislation and implied into your employment relationship. Also, as another example, the common law in Canada implies "reasonable notice of termination", which is the often lengthy amount of termination pay that must be paid to an employee when you fire them but could have been trimmed down with a written employment contract ousting the common law right to reasonable notice.
Not illegal and even if it was, you are fine because you actually do have a contract
Getting back to the issue of whether it is illegal to hire someone without an employment contract, the answer, again, is no. There is no legislation or common law requiring employers to have employees enter into written employment agreements. Moreover, when you deal with the government with regard to taxes and such, you won't need to provide them with an employment contract as a legal form of proof or something like that. There is simply no requirement in any instance that requires a business to use a written employment contract. And remember, as discussed above, even if you have no written contract, if you have an employee, you and them have an (implied) employment contract, which is exactly the same as a written contract, just not as good for you (if you are an employer).
Still, as discussed in this blog before many, many times, you should use a written employment contract to protect your business.
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