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Employment Agreements: Where to Start

By April 30, 2014October 21st, 2021Employment Law

It would be redundant for me to tell you that employment agreements are essential.  You probably already know that not having an employment agreement exposes you to unnecessary liability and it leaves you and your employee with the hard task of having to figure out who bears what responsibilities and to what extent.

So my aim in this blog is to give you a starting point for employment agreements.  A lawyer drafted employment agreement is your best bet at having a proper and enforceable document but, at the end of the day, you are the ultimate decider of which provisions make it into the employment agreement and which ones don’t.  So, when thinking about employment agreements, you should consider the following:

Duration of the Employer / Employee Relationship

The type of employment agreement will depend on whether the employee will be in a permanent role or if their role will be for a fixed term or a fixed task.  For example, if one of your assistants goes on maternity leave, you can hire another employee to take over her duties until the assistant returns.  The new employee will need to be on a fixed term agreement.

There are benefits to putting an employee on a fixed term or fixed task agreement.  For example, a fixed term agreement will enable you to exempt the employee from certain minimum statutory obligations on the expiry of the agreement, such as notice of termination or pay in lieu of notice.

But you should be cautious with fixed-term contracts, especially if your relationship with the employee looks and smells of an indefinite term contract but you are using self-renewing fixed-term contracts to limit your liability towards the employee.  For example, in Ceccol v. Ontario Gymnastic Federation, 55 O.R. (3d) 614 (ON CA) a 16-year management employee with a series of back-to-back fixed-term contracts was fired upon the expiration of her last one-year fixed-term contract.  The employee took the Gymnastic Federation to court and argued that although there were a series of fixed-term contracts, those contracts amounted to one indefinite contract, especially in light of the fact that all of her bosses treated her like an indefinite employee whose contract was indefinite.  Barring a clear termination clause that limited the employer’s liability to the minimum standards of the Employment Standards Act, 2000, SO 2000, c 41, the employer was directed to pay the employee approximately $50,000 as termination pay in lieu of notice.

Clarity and Meeting of the Minds

Your employees should be able to understand the contract they are given.  And you should too!  If your lawyer suggests giving your employee a 20-page document that contains clauses that don’t necessarily apply and is written in such a way that it might as well be Greek, then you should think twice before giving the agreement to your staff or signing it yourself.  This kind of agreement could be detrimental to you.

Agreements should be clear, concise, and contain just as many provisions as are necessary to protect your interests and the interests of the employee.   There is a legal principle called contra proferentum that says any ambiguities in an agreement will be construed against the person who drafted the agreement (in this case, the employer).

To avoid having the employment agreement construed against you, you should also think about the fact that agreements are based on a “meeting of the minds”.  So, for example, if you offer a bonus to the employee on certain terms and those terms are not clear in the agreement, it could be the case that those provisions of the agreement will be construed against you, as they were against the employer in Lipari v. Ecolosite Inc., 2005 CanLii 7120 (ON SC) who ended up having to pay their former employee a bonus which was much higher than intended.

Nature of the Employer’s Business

The nature of your business will often dictate the kind of content that should be included in the employment agreement.  For example, in a dental office, it may be a part of the employment agreement that no smoking will be allowed during business hours.  If we are talking about a hygienist’s agreement, it will likely also be necessary to include a non-solicitation clause for the protection of your patient lists and records.  Other restrictive clauses may be used, but be aware that not all restrictive clauses will be enforceable.

Strength of the Employer’s Office Policies

An office policy generally consists of things like:

  • staff orientation matters such as opening and closing procedures, lunches, office meetings, etc;
  • staff code of conduct such as dress code, punctuality, illness and absences, etc.;
  • payroll procedures such as paydays, vacation pay, bonuses and benefits, etc.;
  • dispute resolution matters such as progressive discipline, who to speak with about harassment and other matters, etc.

From our experience, dental offices vary in size and number of employees.  The smaller the office, the less likely it is to have an office policy in place for employees.

If your office does not presently have an office policy and is not likely to have one in the near future (though we recommend all dental offices have a policy in place), then you should think about including internal policies in the employment agreement (such as dress code, duties, payroll procedures, benefits and bonuses).

On the other hand, if your office has a comprehensive office policy that is updated regularly, you may not wish to include those things which are contained in the office policy in the employment agreement.  This is because you do not want inconsistencies as inconsistencies are usually interpreted against the employer (again, this is the principle of contra proferentum).

Other Agreements

If you intend on giving an already existing employee an employment agreement, then one of the things you should think about is whether there are any other “agreements” or “letters” offering employment that may conflict with the new employment agreement.

If you intend on having a lawyer draft the employment agreement, ensure you give them any previous correspondence that has to do with their employment.

There are, of course, other matters to consider on a case-by-case basis, but the above should be your starting point.  If you have existing employment contracts you would like reviewed or you are thinking about putting new or existing employees on an employment agreement, you can contact us for assistance.

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.