Employment contracts — should you have them? If so, what form should they take? If not, what will become the terms and conditions of employment? What are implied terms? What types of provisions should be included? These are some of the many questions that arise when you make an offer of employment. The following answers these and other questions about employment contracts.

Q. When does an employer have an employment contract with its employees?

A. Every employer in Canada has an employment contract, whether written or unwritten, with each of its non-union employees. Sometimes, none or only some of the contract terms are in writing. Where necessary, courts will imply reasonable terms in the absence of any express agreement on the issue. For employees represented by a union, the contract terms are set forth in the union's collective agreement.

Q. What is necessary to create an employment contract for non-union employees?

A. An employment contract exists when an individual agrees to provide services to an employer in exchange for remuneration of any kind. This agreement forms the basis of a contract that can be enforced in the courts.

Q. How much of the employment contract should be in writing and how much can be implied?

A. This is up to you. You can have a comprehensive, written employment contract. Or you can put nothing in writing. Of course, if you take the more informal approach, you are open to disputes as to what promises were made. You will also be at risk for having the courts imply what they believe the reasonable terms of employment should be. The safer course is to reduce the key terms and conditions to writing.

Q. What form should the written contract take?

A. Again, this is up to you. You can use a formal contract, or you can simply use an offer letter containing the key terms, which the employee accepts in writing. Also, employment policies that are given to employees, especially if given when hired, will usually become implied terms of the employment contract.

Q. Does an employment contract mean I cannot terminate the employee?

A. No. You can still terminate employees even if they have a contract of employment. You must, however, give proper notice or pay in lieu of notice of termination. The courts will determine how much notice is reasonable, unless your contract expressly provides for notice. Contractual notice provisions will generally be enforced by the courts so long as they meet statutory requirements (or the Civil Code in Québec) and are not otherwise unconscionable.

Q. Apart from termination provisions, what are some of the other key items that should be included in an employment contract?

A. Include those matters that are most important to you and that will not likely be covered by the general policies you give to all employees. So, you may want to include clauses dealing with:

  • probationary period after hiring;
  • salary and future salary increases;
  • job title and scope of duties;
  • possible changes in job or location;
  • protection of the employer's intellectual property; and
  • post-employment obligations (confidentiality, non-solicitation, etc.).

Q. If you have an employment contract, does it matter when the employee signs it?

A. The timing of the employee's signature on the offer of employment or employment contract is very important. In order for the terms in the offer letter or employment contract to be enforceable, the employee must sign the document before he or she commences work. Even if you have to delay the employee's start date, it is important to have him or her sign the document prior to commencing work.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.