Employment Contracts Tune Up

January 2, 2019 | Articles

The new year is a great time to review your current employment contracts.

Doing this every few years is good practice to ensure that they are up-to-date and reflect any changes due to recent case law. Although the contents of employment contracts can vary greatly, here are some key things to consider when doing your review.

Does it adequately discuss variable compensation?
Being clear on items such as bonus or commissions, particularly upon termination, is essential.

Does it have appropriate “restrictive clauses”?
These are clauses that “restrict” (or clarify) what an employee can and cannot do. They include things like confidentiality, conflict of interest, non-solicitation and intellectual property.

Does it have a non-compete clause?
These clauses can be challenged in court for being too restrictive or not valid. The courts are fans of these so they need to be worded appropriately or incorporated into another clause like “non-solicitation.”

Does it address lay-offs?
In industries such as construction, a lay-off is common practice, but not so in more office-type environments. A lay-off in these terms is a temporary shortage of work and it may happen when there is a downturn in business, regardless of the industry. You need to let employees know in their employment contracts that this is a possibility. This will ensure there are no conflicts from a legislative standpoint should you ever need to do this.

Does it use the term “at will”?
This is a term common in contracts in the United States, but does not apply in Canada and should not be used.

Does it have a valid termination clause?
Meeting the employment standards minimum is a must. Some contracts may say that the company will provide you with a month of notice, but if the employee is there for five or more years, that clause is no longer valid and common law notice will apply.

Do you reference your benefits continuation in the termination clause?
This should state what the company will continue as far as benefits upon termination.

Does your probationary period align with employment standards?
Some organizations extend the probationary period (which is fine), but it still needs to align with what is required for payment on termination. If the provincial requirement is no notice (or pay in lieu) for the first three months, that non-payment won’t apply if you choose, for example, to have a six-month probationary period.

Is it overly legalistic?
Some contracts are difficult to read and understand because of the legalistic language in which they are written. It doesn’t have to be to have the same validity. If it’s not reflective of your culture, then consider changing it.

Contact us for more information on ensuring your employment contracts are up to date.

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