An Enforceable Employee Contract Explained
In today’s business landscape, the significance of having a solid and legally enforceable employee contract has become increasingly apparent. Many businesses that initially onboarded employees without such employment contracts are now recognizing the far-reaching implications of this oversight. Often, employers are unaware that their employment agreements might lack enforceability until they encounter unexpected challenges or disputes.
This article delves into the crucial importance of establishing an enforceable employee contract and highlights the array of advantages that accompany it. It serves as a valuable resource for employers seeking to proactively safeguard their interests and maintain harmonious employment relationships.
Layoffs in Ontario
In Ontario, the rules regarding layoffs are governed by the Employment Standards Act, 2000 (ESA). Here are the basic rules and regulations related to layoffs in Ontario:
Temporary Layoffs: In Ontario, employers have the right to temporarily lay off employees without triggering termination or severance pay requirements under certain conditions. Generally, a temporary layoff is considered to be when the employer reduces an employee’s hours of work or discontinues their employment with the expectation that they will be recalled.
Length of Temporary Layoff: The ESA specifies that a temporary layoff can last up to 13 weeks in any period of 20 consecutive weeks, or up to 35 weeks in any period of 52 consecutive weeks if certain conditions are met, such as continuing benefits coverage and the issuance of a written statement outlining the date of recall or the end of employment.
Termination Pay: If a temporary layoff exceeds the allowed duration, it is considered a termination, and the employer may be required to provide termination pay or notice of termination as outlined in the ESA. The length of service of the employee and other factors will determine the amount of termination pay required.
Constructive Dismissal: In some cases, if an employer imposes a temporary layoff that is not permitted by the ESA or if the layoff extends beyond the allowable duration, it may be considered a constructive dismissal. This means that the employee may have the right to treat the layoff as a termination and seek severance pay or damages.
Recall Rights: When an employer temporarily lays off an employee with the intention of recalling them, they should provide a written statement outlining the date of recall or the end of employment. The employee retains their rights to benefits during the layoff period, and if recalled, they have the right to return to their former position or a comparable one.
Unionized Employees: If employees are covered by a collective agreement (union contract), the terms of the agreement may govern layoffs and recall rights. These agreements may have specific provisions related to layoffs that differ from the ESA.
COVID-19 Exception: During the COVID-19 pandemic, the Ontario government introduced temporary measures to provide flexibility to employers regarding layoffs. These measures may have evolved over time, so it’s important to check for the latest updates.
It’s crucial for both employers and employees to be aware of the specific circumstances and regulations surrounding layoffs in Ontario. If you have questions or concerns about a layoff, seeking legal advice or contacting the Ontario Ministry of Labour, Training and Skills Development can provide clarity and guidance based on the current laws and regulations.
Why Do I Need a Written Employee Contract in Ontario?
An employment agreement is governed by the basic principles of common law, but also set against the backdrop of the special relationship between an employer and employee. General principles of contract law apply, but courts also recognize the inherent power imbalance in the employment relationship. As such, there are certain rights and obligations that courts “read in” to an employment relationship.
Written employment contracts can increase flexibility for employers while clarifying the rights and obligations of both parties. Notably, an employment contract can save employers significant costs in the long-term.
For example, where an employer terminates an employee without cause, the employer must provide the employee with reasonable notice of their termination or pay in lieu of notice. The length of notice that an employee is entitled to depends on what his or her employment contract says (or does not say).
An employment contract that contains valid provisions on terminating an employee may limit an employee’s entitlement to the minimums set out in employment standards legislation. This minimum is approximately one week of notice per year of service, up to a maximum of eight weeks.
In contrast, where an employer does not have a valid provision limiting the employee’s entitlements to the legislated minimums, the employee may be entitled to several months of notice (or pay in lieu of notice).
Courts look at several factors to determine the appropriate notice period for the employee, which commonly ranges from 3 to 24 months (with higher awards being granted in exceptional cases).
How to Implement or Update an Employee Contract in Ontario
Generally, an employer should ensure the employee executes their employment agreement prior to their start date. However this may not be possible where the employment contract is being introduced for an existing employee.
An employer must be careful when making changes to an existing employee’s terms of employment. A fundamental change may include an alteration to an employee’s duties, reporting structure, or compensation. An employer could seek an employee’s consent to impose such a change or impose it unilaterally.
Where seeking an employee’s consent, the employer should introduce a new or revised employment agreement. For this contract to be enforceable, an employee must be provided with something in exchange for agreeing to the new terms of employment. In contract law, this is referred to as “consideration”, and it may include a raise, signing bonus, or other perks.
Where an employee does not consent to an employer’s proposed changes, there is a way to impose unilateral changes to employment. These are complex situations that an experienced lawyer should help to navigate to ensure the new employment contract is enforceable. Otherwise, an employer may be making themselves a target for a claim of constructive dismissal if employment terms are improperly altered.
Contact Achkar Law
If you an employer and are looking to introduce or revise your employment contracts, or an employee and need an employment agreement reviewed, our team of experienced workplace lawyers at Achkar Law can help.