6 Key Things That Should Be In Your Employment Contract

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I had coffee with an old friend (let’s call her “Meggan”) the other day, and she excitedly told me about how she had interviewed for a position, was offered the job, and now just had to sign a contract.

I asked Meggan if she had already signed the contract, and she said that she planned to that evening, commenting: “I made sure that they spelled my name right, and that I was offered the wage they promised…I’m set!”

While Meggan’s enthusiasm to quickly sign back the contract was understandable, it may not have been in her best interest, especially long term. I explained to Meggan that this contract is like any other relationship she forms, and she needs to take time to make sure it is providing her with what she needs, and even with what she wants.

The advantage with an employment relationship, as opposed to other relationships (family, friends, significant other) is that it often begins with a clear expression of what the relationship will involve: the employment contract.

I told Meggan to look for the following key elements in the employment contract:

1. Who are you in the relationship with?

The parties to an employment relationship will usually be set out at the beginning of the employment contract. The employer will be the person (natural person or company) you are responsible to; and the person that is responsible to you, particularly if the relationship sours.

2. What do you provide for the employer, and what do you get in return?

Your position may be clearly set out in the employment contract, or in an appendix to the employment contract. It is important to review these responsibilities to ensure it is truly the position you sought out.

Similarly, the contract should set out what you are receiving in return for your work. This may be an hourly wage, an annual salary, or a commission. These payments may also be supplemented with a bonus; health benefits; and perks such as a vehicle or expense reimbursement. If the employer is offering a bonus, make sure you know what the bonus plan terms are, and what you must do to be eligible for a bonus.

3. How often do you provide these services, and are you in an exclusive relationship?

The employment contract should set out whether you are a part-time or full-time employee. It should also set out whether you are allowed to provide services to any other employers, or otherwise engage in other forms employment (i.e. self-employment). What the employment relationship should not do is prevent you from pursuing your interests on your free time, so long as they do not conflict with the employer’s business.

4. How can the relationship come to an end?

The employment relationship generally comes to an end in one of three ways, all of which may be outlined in the “termination” section of your employment contact.

The first way is called “just cause”, and entails the employer ending the relationship for a particular reason. It essentially means that you have breached one of the deal-breakers and the relationship cannot continue. These deal-breakers can be set out in the contract itself or they can be implied. Deal-breakers can include any of the following: theft, illegal activity, excessive lying, or violent, harassing, or otherwise inappropriate behaviour (can include offsite and online misconduct).

The second way is called “without cause”, which, as the name suggests, means the relationship ends but not necessarily as a result of your actions. This is often the case where the employer is downsizing or where the relationship just isn’t a good fit.

The third way is called “resignation”, whereby you end the relationship with the employer.

5. What are you entitled to when the relationship ends?

When the relationship ends for just cause, the employer need not provide you with any money for severing the relationship (severance pay) or any form of notice. Just cause terminations can take immediate effect.

When you choose to resign from a position, you are forfeiting any claim you may have to severance pay, because you are the party ending the relationship. However, keep in mind that resignations cannot take immediate effect (unless the employer agrees otherwise), and you will likely need to provide some length of notice to your employer, so that they can make a transition plan.

When the relationship ends without “just cause”, you have minimum entitlements under the Ontario Employment Standards Act, 2000. There is an entitlement to notice (or pay in lieu), which is based on your length of service (one week per year of service), and is currently capped at eight weeks’ compensation. In some circumstances, you may also have a right to statutory severance pay once you’ve worked for more than five years. Your contract should provide that you receive at least these minimum entitlements.

If your employment contract provides only these minimum notice requirements, you may wish to negotiate for a more generous severance, keeping in mind that you would be entitled to more than just these minimum notice/payments if a contract did not exist. Remember that this is all that you will likely receive when you lose your job, so you’re looking to try and negotiate the kind of protection you will need in the event that the relationship comes to an end.

6. Do you have any duties to your employer after the end of the relationship?

Your employment relationship may be at an end, but you may still be bound by the contract, particularly if it contains non-compete and non-solicitation clauses.

Non-compete clauses restrict you from taking another job in the same industry for a period of time after leaving your employer. Non-solicitation clauses prevent you from approaching your employer’s customers/clients and employees for a period of time after leaving the employer.

While non-compete clauses have become extremely difficult to legally enforce, non-solicitation clauses remain enforceable, unless they are overly broad and restrictive. Therefore, you ought to ensure that you are not in breach of the employment contract, even if the relationship has come to an end.

While it’s not easy to contemplate the end of a relationship at its beginning, understanding the employment contract by asking for clarification on vague terms, can lead to a clearer and healthier employment relationship.

Photo credit: Frank McMains

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About the author

Parisa Nikfarjam is an employment lawyer with Rubin Thomlinson LLP. She supports both employee and employer clients with legal counsel in all areas of employment law and workplace human rights. Parisa is a recent graduate of Osgoode Hall Law School, where she earned her Juris Doctor degree. Parisa writes numerous articles on employment law topics for a variety of publications including HR Connected and Lexology, and enjoys speaking to human resources professionals, educators, business owners, and recent graduates about workplace law issues.