When it comes to legally binding contracts, HR needs to upskill
When it comes to drafting employment contracts, HR needs to seriously upskill their talents. In the ever-changing employment law landscape, employers are being penalized more than ever before for faulty, illegal, and unscrupulous contracts – leading to fines, damages, and lawsuits. So, what exactly makes a ‘good’ employment contract? Well, according to Andrew Caldwell, HR advisory manager at Peninsula, he believes it comes down to understanding the uniqueness of your province.
“Employers, especially those operating a nation-wide business, should remember that employment law varies across provinces,” he told HRD. “The terms and provisions that apply to an Ontario employment contract will slightly differ from that of a BC employment contract or one for Alberta.
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“To be considered valid, your job contract must follow the minimum terms and entitlements, such as wages, work hours, and vacation entitlement, set by the employment standards legislation in your province. While employers are free to offer more benefits to employees, they cannot provide less than the minimum entitlements outlined in their province’s employment standards act. Your employment contract and company policies must also comply with the provincial occupational health and safety law and human rights legislation.”
Employment contracts detail employee wages, duties, hours of work, holidays and much more – especially since the pandemic.
“Ensuring the role of the employee is clearly outlined in a contract, prior to them starting their job, helps avoid future confusion or disagreements over the scope of their role,” added Caldwell. “It will also paint a clear picture of what is expected which helps the employee feel more prepared.”
Beware of litigation
A well-drafted and valid job contract reduces the risk of legal claims for the employer. It protects the rights of the employees as well, ensuring they receive their entitlements set down in the provincial employment standards.
Amend future conflicts
An employment contract that clearly defines the terms of employment and rules of the workplace can serve as a reference guide in case of a disagreement.
“Employment contracts often include dispute resolution procedures that help avert long legal battles, and the time and costs associated with them,” explained Caldwell. “Besides the minimum entitlements and conditions required by your provincial employment standards legislation, the clauses and polices you may want to include in your employment contract will depend on your industry and the type of employment being offered.”
Caldwell added that some basic terms of employment to address in your job contracts are;
- Hours of work
- Job responsibilities
- Salary, bonus, benefits
- Conditions of offer (reference check, background check, and so on)
- Privacy and confidentiality policies
- Layoff clause (giving the employer the contractual right to alter major terms of employment when needed)
- Termination provisions
Costly mistakes in working contracts
It may seem like a straight forward concept, drafting a legal employment contract, but the ramifications of making even one small mistake can be huge. A case in Ontario in 2016 detailed a candidate who entered into a series of discussions with a chief operating officer in regards to a new job. Eventually, the candidate was emailed an offer letter which detailed salary, probationary period and title.
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However, the employee was dismissed after 10 months for ‘cost-cutting’ purposes. The employee demanded severance pay above the one week stipulated in his employment agreement – but was denied and it went to court. Perhaps somewhat surprisingly, the court sided with the employee in saying that his employment contract was invalid because terms of his employment has already been agreed upon prior to his signing the contract. He was awarded four months’ pay in lieu of reasonable notice.
Speaking to HRD, employment lawyer Dan Pugen added: “This case is a good reminder to employers that they need to be careful during the hiring process. Employers should be transparent with applicants during the hiring process. While terms such as salary, benefits and vacation will naturally be the main focus, employers should be very clear, including in any e-mail communications or offer letters, that employment is conditional on signing an employment agreement prior to starting work.”
Puden explained that all hiring documents should be presented at the same time and always in advance of beginning the new role.
“In this case, the court found that an oral agreement was reached between the parties which was confirmed by the e-mail and offer letter.”