What You Need to Know About Employment Contracts


When an offer of employment is accepted, it’s understood that there is a contract between the two parties – the employee and the employer. This contract can be oral or written, and essentially states the terms and conditions of the relationship.

According to Alison McEwen, an Ontario employment lawyer, the requirement to sign a written contract is increasing and affecting all levels of employees. Generally, in the past, written employment agreements were reserved for those in sales, management, or supervisory positions. Contracts are not required for unionized employees, as their collective agreements usually serve the same purpose.

Contracts or agreements can be either fixed-term, with a date when both parties agree that the contract has ended, or indefinite with no specified date to end the agreement. An agreement spells out the employer’s and employee’s obligations, rights, and responsibilities.

Employment contracts or written agreements should address the following terms or conditions:

  • Nature of work
  • Job title
  • Start date for employment
  • Expected duration, if not indefinite
  • Hours of work
  • Vacation and benefits
  • Compensation Terms of probation period, if any
  • Bonus clauses, if applicable (should spell out how computed – e.g. percentage of salary)
  • Terms of dispute resolution, if applicable
  • Confidentiality clauses
  • Non-compete clauses, if applicable
  • Termination clauses, including length of notice employee obligated to give and entitled to receive Sick benefits

Employment lawyer, David Whitten, advises that you have a lawyer look over a contract prior to signing and accepting a position. He is strongly adverse to non-compete clauses, as they restrict your ability to take another job in the same industry and advises that you request the removal of the clause.

If you are considering an employment offer, the severance or termination clause in the contract deserves the most attention. Whitten suggests that you negotiate severance clauses, particularly if they only meet the minimum requirements of the Employment Standards Act – roughly one week of pay for each year of service up to a maximum of eight years. Adding at least one week per year of service would be more in keeping with the trend in employment law today.

If your contract doesn’t meet the ESA standards, it is not a legal agreement. The preference is for a written contract over an oral contract, although both are valid agreements between employee and employer. Without a written employment contract, both parties are relying on memory from conversations at the hiring interview. So the old adage “get it in writing” definitely applies! And don’t hesitate to ask for clarification regarding anything obscure or vague so that you are not befuddled if an issue arises in the future regarding your terms of employment.

An employment contract can take many forms – a formal agreement full of legal terms, a handwritten sheet of paper signed by both employer and employee, or a verbal agreement sealed with a handshake. Regardless of the form, the intent is the same – to add clarity and reduce ambiguity in the employer/employee relationship.

Susan Pratt has a certificate in journalism and has been published in The Globe and Mail, The Mississauga News, and online on the Alphabird site, plus she has over 15 years of experience in Human Resources.

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