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
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
Q. What form should the written contract
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
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;
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.
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