Congratulations! You have made it through the interview process and have now been given an employment contract. The contract may contain terms that significantly alter your legal rights. Don’t assume that the document is a “standard form” or that it is non-negotiable. You should consider the terms carefully. You may consider getting legal advice to have it reviewed properly. Here are some things to consider before signing:
1. Termination Clause: In Canada, this is the number one item to watch for. If there is no termination clause, you will generally be entitled to common law “reasonable notice” on dismissal. This can be in the range of one month per year of service and can often be much more than that. Under Canadian law, employers can use termination clauses to limit the amount of compensation you might get in the event of a dismissal. Employers can provide that they are paying as little as the minimum amounts under the applicable employment standards legislation. With proper wording, they can exclude common law amounts. If you sign a clause like this, it may be enforceable. This could end up costing you thousands of dollars. These clauses are often negotiable. If the employer will not negotiate, this type of clause could be a deal-breaker for some people, especially those with other options. Ideally, a Canadian employment contract should simply state that in the event of dismissal, you will be provided with notice and/or compensation in accordance with common law. Beware of any reference to the Employment Standards Act in a termination clause.
2. Post Employment Restrictions: This is the second most important reason employers use written employment contracts in Canada. If there are no post-employment restrictions, you are generally free to work wherever you like, with whomever you like after you leave a workplace. Employers often include non-solicitation clauses (of clients or employees), non-competition clauses and confidentiality clauses in their agreements. Some of these clauses may be enforceable. They may also make it very difficult for you to find alternate employment later on, even if the enforceability of the clause is uncertain. These clauses are often negotiable. Be very wary of extensive non-solicitation, non-competition or other similar clauses.
3. Probation: Contrary to what most people believe, there is no “standard” or automatic probation term. Although probation is referenced in the Ontario Employment Standards Act, for example, this type of clause is not automatic. If you are leaving other employment to accept a position – and even if you are not, you may be able to get the employer to delete the probation clause. You may also be able to get the employer to start your health and medical benefits immediately without a probationary period.
4. Compensation: It goes without saying that the various components of your income should be set out clearly- including salary, bonus, car allowance, pension or RRSP contributions, stock options or share grants and any other amounts that have been discussed. Employees can often negotiate a signing bonus, particularly if you found the position directly or if you are leaving other employment to accept this role. If the terms of a plan (for example, a bonus plan or a commission plan) are vague or not provided, you should consider requesting further information or even some guarantees for the first year or two. Vacation and sick days should also be specified. Vacation time is often negotiable.
5. Role and Responsibilities: The position should be described in sufficient detail, ideally with a job description attached as an appendix, if appropriate. Watch for language in the employment contract that would permit the employer to change your position, job location, hours of work or other key employment terms with minimal or no notice. These clauses may be enforceable and could alter your legal rights.
6. Lay-Off: Some employers include a clause that states that the employer can put its employees on a “lay-off” in the even of a work slowdown, without advance notice or compensation. These clauses may be legally enforceable and may alter your common law rights.
7. Entire Agreement Clause: Many employment contracts in Canada contain an “entire agreement” clause. This clause means that any promises that may have been made to you must be included in the employment contract or they will become worthless. If the employer has said anything about future salary increases, bonus amounts, promotions, benefits, or other terms, make sure that these promises are included in the written employment contract. Otherwise, these promises will become worthless.
8. Jurisdiction: Generally this is not an issue. If you are working in Ontario, for example, you should expect that the employment contract will reference Ontario law and will confirm that Ontario courts have jurisdiction over any issues. However, some employers do try to transfer the jurisdiction, especially if they think they will more likely to get an injunction in a non-competition case in another location (i.e. somewhere in the U.S….). While these clauses may not necessarily stand up in court, they can create complications. Employers may sometimes include mandatory arbitration clauses, which have the effect of ousting the jurisdiction of the courts. These clauses should also be considered carefully.
In Canada, employment law is reasonably favourable to employees. Many employment terms are “implied,” which means that they are deemed to be part of your employment contract even if they are not in writing. Most employees would be best off with a simple offer letter confirming the start date, the job responsibilities and the salary and compensation arrangements.
Of course, the flip side is true for employers, who are generally much better off with a more detailed employment contract. If you are provided with an extensive employment contract containing numerous terms that limit or affect your common law rights, this may be an ominous sign of things to come. See how flexible the employer is about negotiating these terms. Speak to current or past employees about how the workplace is actually run and managed. In some cases, the position may seem like such a great opportunity that you are prepared to overlook all of the problematic terms of the employment contract. Ultimately, that is a business decision that you have to make based on your personal circumstances. But you should make that decision only once you are fully informed about the impact of these different contract clauses.