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Unfairly treated or fired at work?
An employment contract is more than just a piece of paper; it’s the foundation of the relationship between an employer and an employee. This document outlines the rights, responsibilities, and expectations of both parties, offering clarity and legal protection.
We’ve seen firsthand how well-drafted contracts can prevent disputes and foster productive working relationships. Whether you’re an employer drafting a contract or an employee reviewing one, understanding its key components is essential.
In Canada, employment contracts are influenced by federal and provincial laws, such as employment standards legislation, human rights laws, and occupational health and safety regulations. These laws set minimum requirements that contracts must meet, but a well-crafted agreement goes beyond compliance—it ensures that both parties are on the same page from day one.
One of the most fundamental clauses in any employment contract is the job title and description. This section clearly defines the employee’s role, duties, and reporting structure.
For example, in a case we handled a dispute arose because an employee’s responsibilities were vaguely outlined in their contract. The lack of clarity led to confusion about performance expectations. By revising the contract to include specific duties and performance standards, we helped both parties avoid future misunderstandings.
A good contract should also address flexibility in tasks. For instance, if an employee might occasionally take on additional responsibilities outside their primary role, this should be explicitly stated to manage expectations.
Compensation is often the first thing employees look for in a contract. This section should outline the salary, payment frequency, and any commission structures. It should also specify additional benefits such as health insurance, retirement plans, bonuses, or stock options.
We’ve advised clients on disputes over bonus entitlements. In one case, an employee believed their bonus was guaranteed when the contract clearly stated it was discretionary. This misunderstanding could have been avoided with clearer language about performance-based incentives and criteria for pay raises.
Defining standard work hours is crucial to avoid conflicts later on. The contract should also specify whether overtime will be compensated and at what rate. With the rise of remote work arrangements, many employers now include clauses addressing flexible hours or work-from-home policies.
In one matter we assisted with, an employer faced a claim for unpaid overtime because the contract didn’t explicitly state that overtime required prior approval. Adding this detail to future contracts helped prevent similar issues.
A probationary period allows employers to assess new hires before committing to long-term employment. This section should specify the duration of the probation and the criteria for evaluation. It should also clarify whether termination during this period requires notice or severance pay.
For instance, we helped a client navigate a termination during probation where the employee argued they were entitled to notice under common law. A well-drafted probationary clause resolved the issue by aligning with statutory requirements.
Termination clauses are among the most scrutinized parts of an employment contract. They should define notice periods for both parties and distinguish between termination with cause (e.g., misconduct) and without cause (e.g., restructuring). Severance pay entitlements must comply with Canadian employment laws.
In one case at Thrive Law, an ambiguous termination clause led to litigation over severance pay. Revising this clause to align with statutory minimums while limiting common law entitlements helped our client avoid future disputes.
Restrictive covenants like non-compete and non-solicitation clauses protect employers’ interests after an employee leaves. These clauses should specify time frames, geographic scope, and restrictions on soliciting former clients or colleagues.
We recently advised a business owner whose non-compete clause was deemed unenforceable because it was too broad. By narrowing its scope to specific competitors within a reasonable geographic area, we ensured better enforceability while respecting the employee’s right to work.
Protecting sensitive information is critical for employers. Confidentiality clauses ensure that employees cannot disclose trade secrets or proprietary information during or after their employment. Intellectual property clauses clarify ownership of work created during employment.
For example, we assisted a tech startup in drafting a clause that assigned ownership of all software developed by employees to the company while allowing employees to retain rights to personal projects unrelated to their job.
This section outlines how workplace disputes will be handled—whether through mediation, arbitration, or legal action—and specifies which province’s laws govern the contract. Clear dispute resolution mechanisms can save time and money if disagreements arise.
Employees value clarity around time off. Contracts should specify annual vacation entitlements, sick leave policies, and parental leave options. It’s also important to address how unused vacation days will be handled upon resignation or termination.
In one case we handled, an unclear vacation policy led to a dispute over unused days at termination. Revising future contracts to align with provincial standards resolved this recurring issue for our client.
Finally, linking the contract to workplace policies ensures employees are aware of expectations around ethics, harassment prevention, and disciplinary actions. This section reinforces compliance with anti-discrimination laws and workplace safety standards.
A well-structured employment contract benefits both employers and employees by setting clear expectations and minimizing risks. We’ve seen how proactive legal advice can prevent costly disputes down the road.
Whether you’re drafting a new contract or reviewing an existing one, take the time to ensure it’s comprehensive and compliant with Canadian laws.
I’m Saad Mirza, the founder of Thrive Law, a employment law firm dedicated to helping employees across Ontario navigate challenging job terminations and workplace issues.
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