Saturday, 4 January 2014

Three Reasons to Have an Employment Lawyer Review an Employment Contract Before You Sign It

There are a number of reasons you may wish to have an employment contract reviewed by an Ontario employment lawyer before you sign on the dotted line. This post will look at the three most important reasons prospective employees should have employment contracts professionally reviewed.

Probation Periods

The first reason you should have your employment contract professionally reviewed by an Ontario employment lawyer is for the potential implications of a probation period.

A lot of employment contracts will provide for a “probation period.” The reason for such a probationary period can vary. Sometimes the probationary period must be worked before an employee will be eligible for enrolment in the company’s health and benefits plan. Other times, however, the probationary period will be inserted to allow the employer to fire the employee without the provision of either notice or severance.

If the purpose of the probationary period provision in the employment contract is to allow the employer to fire you without notice or severance, you are going to want to know if that provision is legal; not all contractual provisions are legally enforceable.

As I explain in my posts Probationary Periods and Notice and Right to Fair Opportunity on Probation, Ontario courts will not always enforce a probationary period against an employee. However, because the courts can enforce such provisions it pays to know whether your contract is legal, whether it can be upheld against you, and what your rights are with respect to such provisions.

Non-Competition and Non-Solicitation Agreements

The second reason you may wish to have your employment contract professionally reviewed by an employment lawyer before you sign it is the potential for the contract to limit your employment opportunities in the future.

In a number of industries, the two most common of which being sales and research & development, it is usual for an employer to attempt to include non-competition and/or non-solicitation provisions. These provisions will usually say something like this: "For the term of this agreement and for a period of XX month following the termination of this agreement, however arising, the employee agrees not to work for any competing business."

Like the probation period provision considered above, some non-competition and non-solicitation provisions are going to be upheld by the courts, but others are not. It is important to know in advance which side of the line your agreement is going to fall on.

Many doing research on the internet may be led to the believe that non-competition agreements are generally not enforceable in Canada. While that is the legal presumption, the same is not necessarily always the case. This blog has several posts looking at Non-Competition Agreements, but for an example of where such an agreement was enforced consider the post Caveat Venditor - Non-Competition Agreements in Asset Sales, which looks at the Supreme Court of Canada’s decision in Payette v. Guay, 2013 SCC 45 (CanLII).

If you are reading this post because you have such a provision in your agreement and want to know if it can be legally enforced, the employment lawyers at Ottawa’s Kelly Santini LLP can of assistance with respect to that issue as well. We may also be able to provide you with strategies to negotiate such provisions.

Termination and Severance

Finally, the number one reason you are going to want to have an employment contract professionally reviewed by an Ontario employment lawyer is to understand the agreement’s termination provisions and the implications of them.

Much like marriages, few people consider the potential for a relationship to breakdown at the time they enter into them. And, much like marriages, not all employer-employee relationships will last forever. It is therefore critical that you know what your employer intends to provide you with on termination in the event that it is the company that elects to end the relationship.

At Ontario law if the employer elects to terminate an employer-employee relationship (and if you’re not sure if you’re in one of those relationships, then it may also make sense to speak to an employment lawyer) and the employer does not have “just cause” for the termination, the employer must (subject to the comments above about probationary periods) provide the employee with notice of the termination or a payment in lieu thereof. Period.

Most people confuse “notice” with “severance” and that’s fair. However, at law there is a difference between the two. All employees are entitled to notice; not all employees are entitled to severance. For a discussion of the semantics see my post What is Wrongful Dismissal? To confuse matters even more, for the rest of this post I will call the payment “severance pay.”

Returning to the point, employers typically want to provide employees with as little severance pay as possible. In order to do that, they typically include a provision in the employee’s contract that says that in the event the employer terminates the employee’s employment without just cause they will pay the employee in accordance with the provisions of the applicable employment standards legislation.

The wording of that provision is critical. Some wording will be upheld by the courts and other wording will be struck down. As mentioned before, not all contractual provisions are legally enforceable. Simply because a contract is signed does not mean it is legally enforceable.

As this blog has explained before in a number of posts, see No Termination Agreement without Benefits and Poorly Drafted Employment Agreement Proves Costly, unless the contractual termination provision meets the court’s expectations, it will be struck down in favour of the legal presumption that employment can only be terminated on the provision of “reasonable notice.” Reasonable notice will often generate a much more substantial severance package than the minimum amount required by the Ontario Employment Standards Act, 2000. (For a review of this point have a look at my post The High Price of Free Employment Law Advice.)

However, in the never-ending cat and mouse game between employment-contract drafters and the courts, some termination clauses do survive and the employee receives no more than the amount set out in the agreement. Sometimes that amount can be much, much less than the employee might otherwise be entitled to. It is therefore very important for you to know whether your employment contract is providing you with what you are legally entitled to, and whether you are agreeing to accept far less than you might otherwise receive.

How To Have Your Employment Contract Reviewed by an Ontario Employment Lawyer

This post has given just a few reasons you may wish to have your employment contract professionally reviewed by an Ontario employment lawyer; there are other reasons.

If you are in Ontario and have been offered an employment contract to consider, you should invest the money to have that contract reviewed before signing it. Typically a review of an employment contract will cost in the range of $500 - $1,000, depending on the length of the agreement and the number of issues you have with it. To negotiate an agreement on your behalf may cost slightly more, but typically far less than the cost of not negotiating the agreement before starting employment.

If you are an Ontario employer and wish assistance drafting such an employment contract, the professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email or call 613.238.6321 x233.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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