If you are an employer and you are looking to hire one or more new employees for your company, let me explain to you why you should hire me first to prepare your company’s employment contracts: it will (almost assuredly) save you money.
I know it sounds contradictory that you can likely save money by hiring a lawyer to prepare your employment contract, for which there will be a very reasonable cost, but believe me it is true. Please allow me to explain – there is no charge for reading and if you are not convinced by the end of this post, you can move on to something else and it will not have cost you a dime.
Relationships Often End Poorly
Here is the thing about the start of all new relationships: most people do not expect them to end poorly. However, as the family lawyers at Ottawa’s Kelly Santini LLP will undoubtedly confirm to you, a lot of personal relationships do end poorly – and when they do, it can be very costly, both in terms of real dollars and opportunity cost. In her blog post, Protecting your share of shares: The importance of cohabitation agreements/marriage contracts, Kelly Santini LLP family law lawyer Meghan E.W. O’Halloran explains how a cohabitation agreement/marriage contract allows parties to contract out of the property division rules established by the Family Law Act. Such agreements provide a level of certainty and peace of mind in knowing how property is to be dealt with if the relationship ends or a spouse dies. They can protect family heirlooms by keeping them out of “family property”. They often are used to help protect a family business.
An employment relationship can have a lot in common with a personal relationship. In the beginning both sides will often be keen on the other. There is potential in the air and everyone is excited to see what may happen. Excitement, while an excellent motivator, can also often overshadow the potential for harm. Also, just as a personal relationship can start out excellent and end in a bitter, protracted, expensive legal battle so too can an employment relationship, but neither has to.
Why Ending an Employment Relationship Can Be Costly
It is settled law that provincially regulated employers can terminate an employment relationship for almost any reason at any time subject only to the obligation to provide “reasonable notice” of the termination or provide a payment in lieu. In some, but not all cases, employers must also provide the employee with severance. (For more on this issue see: Not All Employees are Entitled to Severance.)
“Reasonable notice” does not mean the amounts prescribed by the Ontario Employment Standards Act, 2000; it just doesn’t. For example, in a case where I acted for the employee, the worker was employed for only 51 weeks when his employer terminated his employment without cause. Had he only been entitled to the amount of notice prescribed by the Employment Standards Act, 2000 he would have only been entitled to one week of notice or pay in lieu. However, because he was entitled to “reasonable notice”, the court awarded him four months of reasonable notice. On an annual salary of $95,000, the difference to the employer was nearly $30,000.00 in salary, plus legal costs. (For a summary of that case and the court’s reasons for decision see: ONSC Awards Four Months Notice to Employee With Less Than One Year of Service.)
But Why It Doesn’t Have to Be Expensive
If we use the Wellman case as an example, had the employer used a professionally drafted employment agreement, like the one I am suggesting you hire me to write for your company, the company could have limited its obligation to the employee to no more than the statutory minimum. Put another way, by using a professionally drafted contract the employer could have save itself over $30,000 – with respect to that one employee alone!
Employers absolutely can and do use agreements to limit their exposure on termination, in exactly the same way some couples use prenuptial agreements or marriage contracts. However, as case after case after case demonstrates, see e.g. Poorly Drafted Employment Agreement Proves Costly, not just any employment contract will do. The wording of the contract has to be absolutely perfect or the court will not enforce it. (There are other tricky legal obligations as well of which you need to be aware – and of which I am aware and can assist you.) Do not try this at home, kids; you will get hurt.
The unabashed purpose of this post was to ‘scare and motivate.’ It was designed to ‘scare’ you into appreciating that by not using a professionally drafted employment agreement you may end up spending a lot more money than you may have anticipated to end an employment relationship. It was designed to motivate you to contact me by explaining that, while it will cost you money to have such an agreement prepared, the cost will likely be substantially less than the cost of a poorly drafted agreement or no agreement at all.
If you would like some assistance with your employment contracts, or if you would like a second set of eyes on your existing employment contracts (yes, there are ways to move existing employees on to new contracts), give me a call or send me an email. I would be happy to be of service.
To reach the author of this blog, Sean Bawden, email email@example.com or call 613.238.6321 x260.
Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.--
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.