Reduce the Risk with Written Employment Agreements

Every employee has an employment agreement.  Whether it be verbal or written, implied or explicit, indefinite, or limited.  Sometimes, despite best efforts, employment agreements can even be created unintentionally, which can present unnecessary liability for the parties involved.  Should any form of dispute arise, enforceable employment agreements are much more reliable and can result in less costly remediation.

An employment agreement is a formally binding, legal document that serves as the cornerstone for the employment relationship.  Sometimes there is some hesitance to utilize employment agreements- the permissibility of wording and clauses contained in the document can be intimidating.  And while it is not a requirement that employment agreements be written, the benefits of a written employment agreement far outweigh the inferred terms of a verbal or implied employment agreement.  It provides clarity, protection, and structure with regards to the expectations and responsibilities of the employee and employer.

An enforceable employment agreement outlines the essential terms and conditions of employment, while ensuring fairness and rights of employees.  While an employment agreement specifies basic items such as title/role, duties and responsibilities, working hours, vacation, and information regarding compensation, a written employment agreement can also outline obligations that extent beyond this immediate information.  Unfortunately, there is no “one size fits all” when it comes to employment agreements.  The agreement should be written to suit the type of work being performed (i.e. permanent, project based, part-time, etc.) as well as protect unique proprietary and/or confidential business information and interests.  In addition, there will be a need for different employment agreements, should organizations employ personnel in different jurisdictions.

An employment agreement does not alter the basic rights of an employee, as governed by applicable legislation.  For non-union private sector employees, that means that an employment agreement cannot stipulate or provide less than the Employment Standards Act minimum entitlements as it relates to things like vacation, break and rest times, overtime, etc. (Note that there are industry specific exceptions as well).  In addition, for an employment agreement to be enforceable, there needs to be consideration.  Consideration is an exchange between employer and employee.  When someone is initially hired, the consideration is the position itself.  If on the other hand, you currently are not using employment agreements and would like to, employment agreements may be issued with consideration in the form of additional benefits, a pay increase, bonus, etc.  It is very important that any employment agreement be issued with adequate time for review, and signature should be obtained prior to a new hire’s first day or the effective date of any change.  Any new agreement that is issued cannot provide less to the employee than what was previously agreed to, as it may constitute constructive dismissal.

Whether you’re currently utilizing written employment agreements or would like to start, it’s important that agreements are reviewed to ensure compliance and enforceability.  It is best practice to review agreements on an annual basis and ensure that they are maintained.

To find out more about the wide variety of services RLB People can provide you with contact the team at people@rlb.ca or visit their website at people.rlb.ca.