Although it is possible to have an implied or verbal agreement for a contract of employment to exist, a comprehensive and clearly worded employment contract is mutually beneficial to the employer and employee because it sets the parameters of the working relationship.
Employment law governs employer and employee relationships through Alberta’s principal statute, the Employment Standards Code (“the Code”), which sets the minimum standards for employees.
A written contract can provide additional advantages for business owner because it can restrict the employee’s rights and limit your obligations to them. However, there are implied terms to employment contracts, one of which is that they do not breach the statutorily imposed minimum standards set out in the Code. These standards cover minimum requirements for vacation, overtime, and termination, amongst other things.
What are the types of employment contracts?
There are three main types of employment contracts in Canada:
- Indefinite term contracts
- Fixed-term contracts
- Independent contractor agreements
Indefinite terms contracts are used for permanent jobs within a company and do not have an end.
Fixed-term contracts cover a situation where the employment relationship exists for a defined period. For this reason, no notice is required upon termination, but if you terminate without cause before the end of the contract, the employee may be entitled to the remaining value.
Employers enter into independent contractor agreements with self-employed individuals or freelancers for specific projects. Self-employed contractors are not considered employees and are not covered by the Code.
Having a written contract to set expectations and protect your legal position in any of the above situations is wise. Contracts outline responsibilities, but they can also resolve disagreements ahead of time via dispute resolution procedures, thereby avoiding costly litigation.
What does a typical employment contract cover?
In addition to the minimum entitlements set out by legislation, the elements of your employment contract will depend on your industry, and the type of employment offered, as discussed above.
Basic terms of employment include:
- Hours and job responsibilities
- Salary, benefits, bonus
- Conditions of the offer (such as background and reference checks)
- Confidentiality and privacy policies
- Layoff and Termination clauses
- Disciplinary procedures
What to consider when drafting an employment contract
Get the contract signed before the first day of work
Make sure you provide the employee with enough time to review the contract. You must also receive the signed contract in advance to avoid discrepancies over the agreement. Because contracts require consideration, having the employee sign after the start date may render the contract unenforceable.
Ensure that all relevant documents, such as policies or regulations, are appended to the employment contract.
Update the contract as necessary
Employers should update their contracts as necessary. As an employer, you cannot unilaterally change certain elements in the contract (salary, location, work hours, for example) without the employee’s consent. Doing say may result in additional consideration being required, or it may constitute constructive dismissal.
These types of updates and variations even include providing a new raise or a signing bonus.
Duress
Undue duress or influence placed on an employee will render a contract unenforceable. The most common type of duress is economic duress. Duress might involve pressuring an employee into accepting a change to an agreement within the context of economic forces, such that they feel they have no choice due to the unequal bargaining power between the parties.
Termination Provisions
It’s essential to make termination provisions unambiguous because if they aren’t, the courts may say they are unenforceable. Common law principles will apply if they are deemed unenforceable, and the notice terms are often longer than the provisions proscribed in the Code.
It’s also important to set out the temporary layoff provisions in writing to avoid any potential claim for constructive dismissal.
Probation
You must state the existence and length of probation in the employment contract itself, as courts have said that if the probation is not agreed to before the first day of employment, it is unenforceable.
Confidentiality and Restrictive Covenants (Non-Competition Clauses)
It’s important to state clearly any provisions relating to discussion or disclosure by the employee of the employer’s confidential information.
Restrictive covenants cover the potential for competition by the employee setting up business in competition with the former employer or joining a competing company, whether during or after their employment ends.
Non-competition and non-solicitation clauses (aka restrictive covenants) are not enforceable unless the employer shows that the clause is required to protect proprietary interests and that the covenants are clear and reasonable. Courts have considered their geographical scope and length in determining what a reasonable limitation on the former employee is.
Call us with your employment law questions
Whether you would like to create or update your employment contracts, fixed-term contracts, or independent contractor agreements, Stringam can help.
We provide professional legal advice on all aspects of employment and labour law, including termination and employment litigation, workers’ compensation disputes, workplace harassment investigations and severance package reviews.
