By Rachel Ravary of McCarthy Tetrault
and Brian P. Smeenk, formerly with McCarthy Tetrault
So you’ve hired a new employee. Should you put it in writing? If so, what should it look like? What do you include? What is better left out? If you decide against an employment contract, what will the terms and conditions of employment be?
Those are some of the many questions that arise when you make an offer of employment. This week’s tips will give you practical advice on these and other questions about employment contracts for your Canadian operations.
Number 1 — Don’t assume that because you don’t have a formal agreement in writing, you don’t have an employment contract.
Every employer in Canada has an employment contract, whether written or unwritten, with each of its nonunion employees. An employment contract exists as soon as an individual agrees to provide services to an employer in exchange for remuneration of any kind. Sometimes, none or only some of the contract terms are in writing, but it’s still an agreement that can be enforced in the courts. Courts can fill any gaps in the express agreement by implying reasonable terms.
For employees represented by a union, the contract terms are contained in the collective agreement.
Number 2 — If you want to play it safe, get it in writing.
It’s up to you how much or how little of your agreement you put in writing. 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 arguments about what promises were made. You may also be at the mercy of the courts that will imply what they believe the reasonable terms of employment should be. The safer course is to set out at least the key terms and conditions in writing.
Number 3 — Long or short? Simple or comprehensive? The choice is yours.
The form of your written agreement is really up to you. You can use a formal contract, or you can simply use an offer letter containing the key terms, which the employee signs and accepts in writing. Also, employment policies that are given to employees, especially those given at the time of hiring, will usually become implied terms of the employment contract.
Number 4 — An employment contract is not “until death do you part.”
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 provides for a specific notice period. Contractual notice provisions will generally be enforced by the courts so long as they meet statutory requirements (or the Civil Code in Québec) and aren’t otherwise unconscionable.
Number 5 — Tailor the contract to your needs.
In addition to termination provisions, your contract should include any other 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, nonsolicitation, etc.).
Number 6 — Timing is everything.
The timing of the employee’s signature on the offer of employment or employment contract is 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 starts work. Even if you have to delay the employee’s start date, make sure to have him or her sign the document first.
McCarthy Tétrault has a great deal of experience in all matters relating to employment contracts in a wide variety of fields and workplaces. We can help draft an employment contract to address any situation.