Legally sound employment contracts spell out your company’s obligations to workers and their responsibilities to the business. Canadian employment contracts must comply with the terms set by the Employment Standards Act, or ESA. The Act describes legal minimums that employers must meet when offering a job to a prospective employee.

If you are concerned about the employment contracts at your company, you may wish to speak with an attorney to make sure your documents are in order and compliant with federal law. This page will discuss some best practices when drawing up new contracts.

The Basics: Employee Duties, Hours, Compensation and Type of Employment

These basic components are all related but distinct aspects of an employment contract that lays out when an employee will report to work, what they will do, and how you will pay them. Your employment contracts may also outline any probationary periods you establish for staff at your company.

Types of Employment

You may hire an employee under the following types of contract:

• Permanent full-time (at least 30 hours per week)
• Permanent part-time (less than 30 hours per week)
• Fixed period
• Project-based
• Flexible

Permanent positions have no set end date of employment, whereas a fixed-period contract lays out a specific time within which you may dismiss the employee. An employee may sign on to additional fixed-term contracts when the first expires. This renewal may allow the worker to build seniority, thus entitling them to benefits such as severance pay commensurate with the total time they have worked rather than the most recent contract.

An employer may pursue a project-based contract. These types of contracts provide some latitude to allow employees to work as needed to accomplish a particular task. This form of employment differs from hiring an independent contractor.

A flexible contract allows an employer to adjust the number of hours per day or the number of days per week that an employee works in order to suit the ebb and flow of business.

Compensation

An employee may earn:

• An hourly wage
• A weekly or annual salary
• A percent commission of sales or profits
• A combination of an established salary plus an additional commission

An employment contract should also address the company’s payment schedule, whether every week, twice a month, every other Friday, or some other arrangement. The contract should also discuss the company’s overtime pay and policy, such as whether employees may take off time as compensation for working overtime.

Employee Duties

The contract should lay out the employee’s obligations to the employer. Furthermore, if a position includes a probationary period, the contract should clearly explain the conditions in case you decide to terminate a new worker.

Keep in mind that an employer may try to renegotiate an employment contract down the road. However, if you were to make fundamental changes to an employee’s job function or pay, they could interpret it as “constructed” — or effective — termination. In such a case, your employee might have legal protection, so it is important to layout duties clearly from the start.

Employee Confidentiality and Competition Agreements

A confidentiality clause requires employees to keep information about your business private, which protects your property and rights from public disclosure. Additionally, a non-compete agreement restricts employees from working for another rival company or establishing their own competing business as long as they work for you and perhaps for a set period of time after they leave.

A non-compete clause can also legally protect your business from an employee who tries to hire away your staff or contractors for a rival business.

Employer Notices Regarding Termination and Changes to Employment

Your contract should provide information in line with the ESA to address termination and significant changes to employment, which could include demotion, cutting hours, or making substantial changes to an employee’s duties, which may amount to “constructive dismissal.” 

Your employment contract should address issues such as the period of time between notice of termination and the conclusion of employment.

Review the ESA for your province or territory to ensure you are in compliance with Canadian federal law:

• Alberta
• British Columbia
• Manitoba
• New Brunswick
• Newfoundland
• Northwest Territory
• Nova Scotia
• Nunavut Territory
• Ontario
• Prince Edward Island
• Québec
• Saskatchewan
• Yukon Territory

Consider seeking legal counsel if you are concerned about how your company handles this aspect of employment contracts.

Some Final Advice

If you are looking to hire new employees, you may be able to attract more qualified applicants by offering a competitive benefits package. Group Enroll is a brokerage firm that has helped many Canadian companies secure group health insurance and other benefits packages that appeal to prospective employees who are trying to decide where they want to work.

Contact Group Enroll today to begin receiving quotes from top health insurance providers so you can compare policies and choose the best one to fit your employees’ needs and your budget.