Employment Agreement to increase your Workforce

Contact Neufeld Legal PC for your incorporation legal work at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

Hiring employees to increase your workforce to advance your corporate enterprise should not be undertaken with a legally-binding employment contract. A written employment agreement enables the employer to set out the terms and conditions of the working relationship with the employee, laying out the rights, responsibilities, and expectations of both parties from the outset of the employment.

A well-written and comprehensive employment agreement enables an employer to mitigate its risk and establish clarity in the employment relationship, which includes:

A. Mitigating Legal and Financial Risk (Severance Liability)

This is arguably the most important benefit. Without a clear, enforceable termination clause, Canadian common law often implies a much longer "reasonable notice" period than the minimum required by provincial or federal employment standards legislation (like the Employment Standards legislation in a province).

• Limiting Severance Liability: A well-drafted termination clause can limit an employee's severance entitlement upon without-cause dismissal to the statutory minimums (e.g., notice or pay in lieu of notice, and severance pay where applicable). This can save an employer tens of thousands of dollars and prevent costly wrongful dismissal claims, as common law entitlements are often much higher.

• Controlling the Terms of Termination: The agreement allows the employer to explicitly define the grounds for dismissal with cause, the notice period, and the severance package, replacing the more expensive and unpredictable common law entitlements.

• Defining Layoff Provisions: The contract can clearly stipulate the employer's right to temporarily lay off an employee, which can otherwise be interpreted by a court as a fundamental change to the employment terms, potentially leading to a claim of constructive dismissal.

B. Protecting Business Interests and Assets

Employment contracts can safeguard the employer's competitive advantage and proprietary information through specific clauses:

• Confidentiality and Non-Disclosure (NDA): These clauses protect sensitive business information, trade secrets, and client lists from being disclosed during or after employment.

• Intellectual Property (IP) Assignment: They clearly state that any work, inventions, or creations developed by the employee during the course of their employment are the sole property of the employer.

• Restrictive Covenants: These include:

  • Non-Solicitation: Prevents a departing employee from poaching the employer's clients, customers, or other employees.

  • Non-Competition: Restricts a former employee from working for a competing business for a defined period within a specific geographic area. (Note: Courts are often reluctant to enforce non-competition clauses unless they are narrowly defined and necessary to protect a legitimate business interest).

C. Creating Clarity, Consistency, and Managing Expectations

A written agreement formalizes the entire relationship, reducing ambiguity and preventing disputes during the relationship.

• Defining Roles and Responsibilities: It provides a detailed job description, duties, reporting structure, and performance expectations, ensuring both parties have a shared understanding of the job.

• Setting Compensation and Benefits: It clearly outlines salary, bonus eligibility, overtime policies, vacation entitlements, and benefits, preventing misunderstandings about pay.

• Establishing a Probationary Period: To have an enforceable probationary period where an employee can be dismissed without notice in the first three months, it must be explicitly stated in the written contract.

• Governing Changes: It sets the foundation for managing changes to the job, such as a change in duties or location, and can specify what changes an employer can make without risking a constructive dismissal claim.

D. Ensuring Legal Compliance

The contract serves as a foundational document for compliance with statutory minimums.

• Compliance with Employment Standards: A good contract explicitly states that its provisions meet or exceed the minimum standards set by the applicable provincial or federal employment legislation (e.g., minimum wage, vacation pay, statutory public holidays). This helps the employer demonstrate that they are meeting their legal obligations.

• Incorporating Other Policies: The contract can incorporate or reference critical policies (e.g., remote work, health and safety, drug and alcohol testing, IT use), making them a binding part of the employment terms.

So if you are looking to incorporate a new corporation or deal with the corporate legalities impacting your company, there tends to be considerable legal work to undertake. For an experienced corporate business lawyer to work with you in completing that legal work, contact our law firm at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or via email at Chris@NeufeldLegal.com.