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The Importance of Employment Contracts for Small Businesses

The Importance of Employment Contracts for Small Businesses

An employment contract is a legally binding contract between an employer and an employee that is meant to safeguard the employer along with a businesses’ intellectual property. Across Canada, it is standard for employers to use a written employment contract when hiring new employees.
 
Some things that should be included in an employment contract include, but not limited to:
  • The names of the parties (i.e. employee and employer)
  • The date when the contract begins along with the duration of the contract
  • A description of the employee’s duties
  • Remuneration, job title and geographic work location(s)
  • Competition and non-solicitation clauses
  • Entitlements, obligations and restrictions of both parties
  • Reasonable notice in the event the employer terminates the employee
  • Clauses that prohibit/restrict an employee from engaging in certain behaviour after the employee has left the business.1 These could include:
    • Poaching of, or dealing with clients or suppliers of the former employer
    • Working in similar employment for a competitor
    • Poaching former employees
 
In most cases – for an employment contract to be valid, it must meet very basic conditions of contract law. At the most basic level:
  • There must be a written offer and acceptance of the contract;
  • The terms of the contract must be legal (i.e. not unconscionable or illegal); and
  • There must be “consideration” (benefit for each of the parties) for entering the contract.
 
Employment contracts govern the relationships between employees and their employer. While most Canadian companies have mandatory employment contracts in place – there are still oral or implied agreements between employees and employers in some companies which is strongly advised against by employment lawyers. Without a well written employment contract – both employers and employees can be left with the daunting and challenging task of identifying what the true terms of the contract are – especially when the relationship is about to terminate. This can subsequently lead to unexpected litigation.
 
Legal proceedings in a situation like this can be quite extensive and costly. For this reason, we recommend having clearly defined employment contracts that have been reviewed and approved by a seasoned employment lawyer. Having pre-defined expectations in writing in an employment contract is the easiest way to avoid litigious employment issues and can help avoid legal costs.
 
[1] 2018. Legal Line. Employment Contracts. Retrieved from: https://www.legalline.ca/legal-answers/employment-contracts/

 
Posted: 12/6/2018 1:43:33 PM by Alexandrea Sharpe


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