Reviewing Employment Contracts

Getting a job offer is general excellent news. Having successfully gotten through the application and interview process, few people are keen to kick-start their new career by appearing to be “difficult” about the terms of their new employment contract. It is, however, important to take the time to read and understand the agreement. If down the road, things go pear-shaped and you find yourself receiving a letter terminating your employment, the terms of that contract may take on particular significance. Here are some items to consider:

1.      Start Date

Take the time to read the employment contract before you sign and before you start working.

2.      Termination Clause

This is the part of the contract that sets out how much notice the employer will give you if the decision is made that it is time to part ways.  Often the clause will say that the employer will only pay the minimum set out in provincial employment regulations.  The provincial minimum is often less than what an employee without an employment contract would receive.

As an example, a three year employee would receive 3 weeks pay in lieu of notice under the Ontario Employment Standards Act, 2000 (“ESA”)If that same employee’s contract did not limit the amount of notice they would get under the ESA, that employee would be entitled to claim common law notice which tends to be more generous than the statutory minimums.  In deciding how much notice an employee is entitled to at common law, a Court will consider the employee’s age, availability of other comparable jobs, and any other factors they think are relevant to determining an appropriate amount of notice.  The result is often a longer notice period for the employee.

If your contract says that you will only be provided with the provincial minimum of notice, you may want to try to negotiate for a notice period that is more in line with the common law.

3.      Non-Competition Clause

These clauses are typically difficult to enforce in Canada and are generally viewed as attempts to limit an employee’s ability to earn a living.  In order to manage expectations of both the employee and the employer, it would be worth asking that the non-competition clause be removed.  It is likely the case that some language in the contract about confidentiality of employer information and a non-solicitation agreement may provide some of the protection an employer is looking for while still respecting the employee’s ability to work in the same industry.

4.      Reference to Other Documents

If your employment contract states that you have read and agree to be bound my certain corporate policies or procedures, make sure that you are provided with a copy of those policies and that you review them before you sign.

Consider consulting a lawyer before signing your employment contract. Some people are concerned that consulting a lawyer before starting work shows a lack of trust.  It is often much easier to work out potential misunderstandings and clarify terms ahead of the employment agreement than after an employee has been terminated.   A consultation for a standard employment agreement should require no more than two hours for a review of the contract and give advice.  Senior executive contracts involving shareholder agreements and stock options will require additional time.


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