05 Feb Written Employment Contracts

Do I need a written employment contract?

A significant number of employees in Ontario do not have written employment contracts. Although it is not mandatory to have a written employment contract, or to put it another way employees do not have the right to have a written employment contract, it still is a good idea to have a written employment contract, for the employer and the employee.

Should I use a written employment contract?

Employers who do not use written contracts of employment often tell me that it keeps things simple.

Employees who do not have a written contract of employment often tell me that they were never given one and never asked about it.   

Normally, whether talking to an employer or an employee, at this point in the conversation I ask what the terms of the contract of employment are. This understandably generates some confusion.

In situations where an employee has been working without a written contract of employment defining the terms of the employer-employee relationship, they have been working under an unwritten contract of employment. The terms of this contract between the employee and the employer are defined by what actually goes on, the patterns, history, facts of the day-to-day employment relationship. Obviously, this can be hard to define.

To make matters worse, the employer and the employee will almost always have different versions of what actually goes on, at least in part, and will therefore have different ideas about the terms of the unwritten employment contract.

This ambiguity isn’t good for the employer or the employee. Both can benefit from a written employment contract.

Employees signing a written employment contract

For employers, the best time to have an employee sign an employment contract is before they start. Implementing a written employment contract after an employee starts working is delicate.

Requiring employees who have been working under an unwritten contract to sign a written contract involves a significant risk of triggering a constructive dismissal if not done carefully.

In some circumstances, employees may ask for a written contract of employment. While this involves less risk of triggering a constructive dismissal than the employer initiating this or imposing a written contract of employment on an employee, this remains a situation that needs to be handled carefully to avoid triggering a constructive dismissal.

Addressing the key terms in a written contract of employment

While every contract of employment will be different, there are few areas that are normally more contested, by employers and employees. These include terms defining bonus structure, termination provisions and work done outside of normal business hours.

Aside from the legal benefits of a written employment contract, I often emphasize to both employers and employees that the exercise of negotiating the contract is in and of itself beneficial to the relationship because it forces the employer and the employee to think about the details of how this relationship will work.

For example, what happens if work is required after 5:00 p.m.? Does the employee receive an overtime wage, do they receive time-in-lieu, does their salary factor in that some work will be required after 5:00 p.m. or are they to stop working at 5:00 p.m. and simply leave the task for the next day? An employer and an employee may have drastically different assumptions on this point. These differing assumptions could easily result in litigation and ruin an otherwise fruitful employer-employee relationship.

Discussing issues like this often leads to an agreement on what will happen, which is then formalized in the written employment contract. This reduces the risk of litigation and increase the likelihood of a long and mutually beneficial employer-employee relationship.

Occasionally, the discussion may result in the decision that the employer and employee cannot agree on an issue and that they should not enter into a contract. Although this is not ideal, it is far better to have these early discussions and make this determination before a written employment contract is signed.

Entering into a written employment contract where the parties have not addressed important issues, and have not agreed on important issues, will almost certainly result in litigation. I often tell clients (employer or employee) that entering into a written employment agreement without having both sides give some genuine thought to the day-to-day relationship is like driving a boat blindfolded and wondering how long it will be until you hit the rocks.

Help with employment contracts – for employers

For employers, an employment lawyer can draft a proper employment contract, work with you to make sure if captures what you envision the employment relationship to be and negotiate with the employee (or their lawyer) to fine tune the agreement making sure that it protects your rights and adequately defines the relationship.

Help with employment contracts – for employees

For employees, getting legal advice on an employment contract before signing it is essential.

An employment lawyer can help you to understand your rights, to make sure that the contract captures what you envision the employment relationship to be and to provide you with the peace of mind that comes with knowing that this has been taken care of properly. In most cases, this doesn’t require many billable hours and might even be something that can be completed with one meeting. As an employee, you might work under this employment contract for many years. It’s important to get legal advice before signing it.

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