When should I create a new employee agreementTeam
While employers are not required to have a written contract under the Ontario Employment Standards Act, 2000 (“ESA”) or other similar statutes in other provinces, it is always advisable to have an employment agreement in writing, if only because with verbal employment contracts, many issues are not addressed and the parties often have different interpretations of their rights and duties. An employment contract embodies a concrete and certified (by each party) representation of all the terms and conditions governing the employment relationship. When a conflict arises, this document provides evidence of the terms and conditions agreed upon by both parties. An employee agreement holds all contracting parties accountable to the agreed-upon terms and conditions.
However, like an employment relationship, an employment agreement does not exist in a vacuum. Changes or amendments to an employment agreement may be necessary for a workplace to keep up with any developments in employment standards, legislation, and the job market. Therefore, a new employment agreement is sometimes worth considering preparing and offering to employees. If any of the following situations apply to your workplace, you may need to prepare a new employment agreement.
No formal employment contract
Although signing a hiring package or employment contract is a typical formality before working, it is not legally required. Employers may find that a written agreement is inappropriate or unjustified in situations such as:
- A personal relationship precedes the employment relationship (e.g. friends, family, neighbors, etc.)
- The employee relationship is contract based
- The employment relationship is short term
Employers should note that the absence of a written employment agreement does not necessarily mean one does not exist. Courts and tribunals will acknowledge the existence of a verbal contract based upon the actions and conduct of the involved parties. In addition, having a written agreement can mitigate against unfavorable interpretations of the employment relationship.
When a personal relationship develops into employment, an employer may find a written agreement inappropriate or unnecessary. However, a reasonable employer does not expect a workplace conflict with an employee when they hire them. As there is always a possibility that such conflicts may arise unexpectedly, preparing a written agreement is always appropriate and necessary.
Changes in legislation or employment standards
A benefit to preparing a written employment agreement is that employers can reuse a standard form and make minimal changes depending on the specific position of an employee. However, an employer may be required to change a standard employment contract in certain situations.
When employment legislation is passed, employers may be given a grace period to modify their workplaces before a new employment standard becomes effective law.
A recent example is the passing of the Working for Workers Act (“the Act”) and its inclusion in the ESA. Once the Act was passed, employers in Ontario were given notice that a Right to Disconnect policy would be a formal requirement under the ESA starting on June 2, 2022. As the Right to Disconnect is a policy requirement specific to each workplace, it may be necessary for employers with 25 or more employees to create a new employment agreement.
Another development in the aftermath of the COVID-19 pandemic is the shift in many workplaces towards remote or hybrid models. While the initial change came as a precautionary measure mandated by the Ontario government, employers may choose to maintain or restrict this workplace practice. Drafting a new employment agreement, one that stipulates a work-from-home policy, may prevent workplace conflicts and in doing so limit an employer’s legal risk.
Fundamental changes to an existing employment agreement
An employer may find it necessary to make changes to existing employment agreements because of economic conditions or legislative developments. However, employers should always exercise caution when changing an employment agreement as a unilateral change to a fundamental term may trigger a constructive dismissal claim.
Suppose a term or clause is considered fundamental to the employment relationship. In that case, any changes form a new employment contract. When an employee rejects the new agreement, an employer may react in the following ways:
- Acknowledge the rejection and enforce the existing agreement
- Enforce the new agreement despite the employee’s rejection
- Terminate the employee without cause and offer employment under the new agreement
An employer may be liable for constructive dismissal when attempting to enforce the new agreement on an employee that has expressed rejection. An employer may choose instead to terminate any employee without cause. However, employers should note that an employee dismissed in this manner is entitled to a statutory or common law notice period or pay in lieu of this notice.
If you have any questions regarding employment agreements, our team of experienced 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.