Does Your Employment Contract Comply with the Ontario Employment Standards Act?Team
Most employees in Ontario are entitled to certain workplace rights and protections under the Ontario Employment Standards Act, 2000 (ESA). The ESA guarantees statutory minimum standards that most employers in Ontario must comply with.
The ESA provides minimum standards for workplace matters including but not limited to:
- Working hours, meal breaks, and overtime;
- Minimum wage;
- Vacation and holiday pay;
- Bereavement leave, sick leave and other forms of leave; and
- Termination of employment.
When does an employer have to comply with the ESA? What if an employment agreement has terms different from the ESA’s requirements? Most importantly, what legal risks if an employment agreement breaches the ESA? If you’re an employer and this describes your situation, you’re certainly not alone.
Luckily, you will find the answers to these important questions below. You will also discover how an experienced employment lawyer can help you comply with the ESA and avoid unnecessary legal risks.
When does the ESA Apply to Employment Agreements?
The ESA does not apply to independent contractors, volunteers or other individuals otherwise not considered employees by legislation or previous legal rulings.
If your employee works for you under a verbal or written contract in Ontario, there is an employment agreement. The ESA applies to that employment agreement if the employee works for you in Ontario and is not otherwise exempt from the ESA.
What if your employee freely and willingly consented to an employment term that’s different from the ESA? That means it is binding and legal, based on the basics of contract law, right? The answer may surprise you.
Can an Employment Agreement Have Terms Different from the ESA?
The ESA sets the minimum standards for an employment agreement, not the maximum. The ESA expressly prohibits anyone from contracting out or waiving the protections of the ESA. An employee agreeing to a term and the employer’s intention to comply with the ESA does not make an otherwise illegal term enforceable.
This means employers are not allowed to have any terms in their employment agreement that deny an employee a minimal right, benefit or other protection guaranteed to them by the ESA. Terms that provide for more than the ESA’s minimum standards are not in breach of the ESA.
For example, if the employment agreement sets out an employee is to receive a wage less than the ESA’s established minimum wage, that provision is unenforceable and a breach of the ESA. If a provision provides for more wages than the established minimum wage, that is not in breach of the ESA.
The ESA provides employees options to seek remedies against their employers for not complying with the ESA. Those processes can be costly and open an employer to significant legal risks.
What If an Employment Agreement Does Not Comply with the ESA?
Employers who breach the ESA in general risk the employee making a complaint with the Ontario Ministry of Labour. If the Ministry concludes the employer breached the ESA, the employer may be subject to paying for unpaid wages, fines, and penalties.
Failing to comply with the ESA in an employment agreement can result in legal liability for damages far exceeding unpaid wages and fines. The specific term that attempts to contract out of the ESA would not be legally enforceable. But the employer could not then rely on that term to protect its interests.
A common example is termination clauses in employment agreements that can be interpreted as contracting out of the ESA. Without an enforceable termination clause in an employment agreement, an employee is entitled to common law reasonable notice if you terminate them without cause.
This includes and often exceeds an employee’s minimum ESA entitlements, up to a maximum of around 26 months of notice or pay in lieu of notice. The longer an employee works for an employer. Certainly, the more notice or pay in lieu of notice a court usually awards them, in consideration of other factors.
If your termination clause is unenforceable, you only pay the employee their ESA termination entitlements, that employee might then sue you for wrongful dismissal. You would then have to pay a lawyer to defend against the wrongful dismissal claim. If the employee succeeds in their wrongful dismissal claim, you may also owe some or most of their legal costs on top of any notice period damages you owe them.
Based on the above issue alone, failing to comply with the ESA in an employment agreement can have costly consequences for an employer. Luckily, you can avoid those problems, even if you already have employment agreements in place.
How to Ensure an Employment Agreement Complies with the ESA
Trying to draft an employment agreement yourself without legal advice is like driving without insurance. You can ensure your employment agreements comply with the ESA by consulting and retaining an experienced employment lawyer. That is the most cost-effective way to protect your business, minimize your risks, and avoid costly mistakes in drafting your employment agreement.
Even if you have other employment agreements already in place with your employees. However, an employment lawyer can still help you draft and get ESA compliant employment agreements signed. Attempting to correct employment agreements yourself may trigger employee termination through constructive dismissal, so a lawyer’s guidance is vital.
The ESA sets out the minimum standards and protections for Ontario employment agreements. Terms in an employment agreement that undermine or waive the ESA’s minimum standards and protections are illegal and unenforceable. Failure to comply with the ESA in an employment agreement can open employers to unnecessary legal costs and risks. Likewise, including wrongful dismissal lawsuits for massive severance packages.
The best way to ensure compliance with the ESA and prevent other issues when drafting your employment agreement is to consult with an employment lawyer. Our experienced employment lawyers at Achkar Law regularly review and draft employment agreements. Similarly, you can contact us with the information below to find out how we can help.
Whether you’re an employer who needs assistance with drafting an employment agreement. Consequently an employee who wants their employment agreement reviewed. Therefore, our team of experience employment and human rights lawyers at Achkar Law can help. Contact us by phone toll-free at +1 (800) 771-7882 or email us at [email protected] and we will be happy to assist.
If you are a small or medium-size company looking for full-service support with same day response, visit our CLO Program page for our strategic solutions.
Disclaimer: This blog is not intended to serve as or should be construed as legal advice and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call (800) 771-7882 or email [email protected]