Labour & Employment Law Blog

What You Need to Know about Employment Contracts

Employment contracts or agreements can be a source of confusion for a lot of people. There are differing power dynamics involved between employers and employees. Employment agreements can be complicated and are often signed or agreed to by an employee without the employee fully understanding what they have agreed to. This blog seeks to try to help people understand what an employment agreement is and why they are so important.

An employment contract is simply a legally binding agreement that sets out the terms, conditions, rights, obligations, etc. of an employee’s job with their employer. This contract or agreement will include information about an employee’s role and responsibilities related to their job (such as job title or duties), their pay or income, vacation time, various benefits and other workplace or employment policies.

The terms and obligations of any employment agreement in Ontario is subject to a key piece of legislation called the Employment Standards Act or “ESA.” The ESA sets out certain requirements that employers are bound by and cannot use an employment agreement to contract out of those requirements. The employer may go above and beyond these requirements, but they cannot provide less than what is set out in the ESA. For instance, the ESA sets out how much vacation pay or holiday pay an employee should be provided with by the employer. Another example is minimum wage. Minimum wage is set by the ESA and an employer cannot pay less than minimum wage to their employees. The employer may certainly provide more holiday pay to the employee, but they cannot provide less than what is set out in the ESA. Any part of an employment agreement that provides less than what is set out in the ESA to an employee is void and invalid. This means that the employer cannot rely on it and cannot enforce it.

It is also important to note that an employment agreement or employment contract can take a variety of different forms. For instance, the agreement can be written down in a formal document, the agreement may be verbal and not written down, the agreement may have a fixed-term (meaning an agreement to work until a set date), etc. The agreement can in take place in the form of an email exchange. The most common type of agreement that we see in our offices at Zeilikman Law is what is called the “indefinite-term” employment agreement which is usually a written agreement. These contracts are employment agreements that do not end at any particular time or date and include a variety of clauses.

There can be many different types of clauses in an employment agreement. For instance, there can be clauses relating to layoff rights, probationary periods, vacation pay, benefits, etc. One of the most important clauses contained in an employment agreement would be the “termination clause.” This clause sets out how the employee will be terminated and what notice they are entitled to. Most employers try to limit an employee’s entitlements to the ESA’s minimums. This means that the employer will try to reduce the notice period owed to the employee to only what is set out in the ESA and eliminate what could be owed to the employee under the common law. This is because, as many employees are surprised to find out, that non-unionized employees in Ontario are entitled to common law notice of termination unless they have contracted out of that entitlement in the employment agreement with the termination clause. Termination clauses are notoriously a source of contention because if the courts find that the termination clause is even minorly contrary to the ESA, that termination clause will be held to be unenforceable. The ESA only provides a “floor of rights.” Employees are entitled to notice period of greater length under the common law than would be typically owed to them in addition to what is owed to them under the ESA.

What should you do when you are about to sign an employment agreement?

Do not rush to sign any employment agreement! Employers will often give a timeline or a deadline that the employment agreement must be signed by. Please ask for more time to review the agreement if you need to and do not be afraid. The best course of action would be to get advice from an employment lawyer. The employment lawyer can help you by understanding exactly what is contained in the employment agreement and how this can impact your rights.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.