Northern Exposure

Must-Know Facts about Employment Contracts in Canada

McCarthy Tetrault

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 nonunion employees. Sometimes, only some of the terms are in writing. When necessary, courts will imply reasonable terms in the absence of any express agreement on the issue.

Q. Does the concept of “at-will employment” apply in Canada?
A. No. Canadian law does not recognize this concept.

Q. What is necessary to create an employment contract?
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, which can be enforced in the courts.

Q. How much of the employment contract should be in writing and how much implied?
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’re open to disputes about what promises were made. You’ll also be open to having a court imply what it believes 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?
Again, this is up to you. You can use a formal contract or you can simply use an offer letter containing the key terms that the employee accepts in writing. Also, employment policies that are given to employees – especially if given when hired – will usually become implied terms of an employment contract.

Q. Does an employment contract mean I can’t terminate the employee?
A. No. Canadian employers can still terminate employees even if they have a contract of employment. You must give proper notice or pay in lieu of notice of termination, however. The courts will determine how much notice is reasonable unless your contract expressly provides for notice.