Labour & Employment Law Blog

Why Employers Should Have Their Employment Contracts Prepared by an Employment Lawyer and Reviewed on an Annual Basis

Why Employers Should Have Their Employment Contracts Prepared by an Employment Lawyer and Reviewed on an Annual Basis

We see a lot of employers come into our office with employment contracts or employment agreements that are often “standard” agreements which they have downloaded off the internet and sort of retrofitted to suit the employer. They are also used for all staff regardless of the employee position. They are also often old with the employer using the same employment agreement for a number of years without change.

There are several problems with using these sorts of agreements by an employer. However, the most serious issue with the use of these types of agreements is that they almost always do not reflect the law in Ontario and therefore are almost certainly not enforceable thereby leaving the employer open to being sued by any employee they dismiss for wrongful dismissal.

So what should the employer do?

We cannot emphasize this strongly enough – any employer (from a large corporation to a single individual who employs only a few) should use an employment lawyer to prepare an employment agreement or employment contract for their staff.

Secondly, the employment agreement or contract must be reviewed by an employment lawyer on an annual basis.

There are some good of reasons that the above rules-of-thumb should be utilized by employers. The most important reason is that by using an employment lawyer and by ensuring a proper review of the employment contract on an annual basis, the employer will be able to address recent developments in employment law so that their employment agreement will offer the best protections against being sued.

Now, let us be clear that nothing is certain in life, and this is also true with respect to employment law. An annual review of an employer’s employment contracts will still serve as the best way an employer can seek to protect itself from outdated termination clauses that offer no safeguards to the employer. This is because, as a lot of employers are surprised to learn, non-unionized employees in Ontario are entitled to common law reasonable notice of termination unless they have contracted out of that entitlement in an employment agreement with an enforceable termination clause. Ontario’s Employment Standards Act (“ESA”) only provides a “floor of rights.” And under the common law, an employee can be entitled to a much more lengthier notice period that would be owed to them in addition to amounts owing under the ESA.

Let us give you an example of a change in the law that can take place overnight. Back in 2020, the Ontario Court of Appeal case of Waksdale v. Swegon North America, 2020 ONCA 391, majorly shifted the employment law landscape. Please read more about that case in our blog found here. Before Waksdale, the employer only had to be concerned whether the “without cause” termination provision would violate the ESA in their employment agreements. They thought that with a severability clause they would be able to contain any liability for common law notice to the termination provision that dealt with a “without cause” termination. Now the employer must be concerned that contractual wording in both “without cause” and “with cause” terminations do not violate the ESA in order to prevent liability for common law notice even if the termination was “without cause.”

When the employer knows about these changes, usually via an employment lawyer, they can take the necessary steps to try to update their employment agreements in order to try to comply with the prevailing case law or jurisprudence.

Finally, we would emphasize that what to do with respect to implementing enforceable employment law contracts may not be intuitive to a lot of employers. Typically, an employer cannot give a long-term employee a new employment agreement on Friday and expect to have it signed by Monday – this will likely make the agreement unenforceable in its entirety. The best practice in these situations would be to use an employment lawyer to navigate through these issues. There are certain steps that must be taken with the implementation of a new employment contract or a new term in an employment agreement is involved.

The bottom line is that employers can significantly mitigate against the need to deal with wrongful dismissal claims from employees as well as the costs of settlements and legal fees by ensuring that they have enforceable employment terms prepared by an employment lawyer and reviewed on an annual basis.

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.