Receiving a new job offer is an exciting time, often coming with a new role, a fresh start and – most importantly – higher pay and more employee perks and benefits. But with that new gig, a new employer may request that an employee sign a new “Employment Contract” before starting their first day on the job.
Some employees may wonder why they even need to sign a new employment contract. In fact, traditionally, most employees simply provided their new company basic payroll information and commenced their new job. However, as employment law became much more complex, there was a greater need to properly define the terms and conditions of the working relationship in a written employment contract. This trend toward requiring employees to sign new employment contracts will likely increase following the mass terminations and temporary layoffs caused by the COVID-19 pandemic.
On the one hand, some employees may be fearful of losing their new job opportunity by hesitating to sign a new employment contract, or asking to negotiate terms that may not be beneficial to their interests (especially a termination clause). This may explain why some employees rarely think twice before signing a new employment contract, even if they have yet to get all the details of their new job and understanding rights and obligations with their new employer.
As discussed below, before signing away on the dotted line in a new employment contract, it is important for employees fully understand their contractual rights and responsibilities – even if they intend on accepting the job anyway. It may be helpful to understand some of the most common terms found in an employment contract, so below is a general informational overview of some of the most important contractual clauses that employees should review with an employment lawyer.
Probation Period
If an employment contract contains a “probation period” section, it means the employer intends to impose a “trial period” on the employee, during which employer can freely terminate (end) the employee’s new job, without providing them with any prior notice or severance pay. In Ontario, employers usually require their employees to accept a minimum probation period of 3 months, which this is the maximum probation period allowed under the Employment Standards Act, 2000 (“ESA“) where employees are not entitled to any prior notice of termination or termination pay. However, while employers can impose a probation clause that lasts longer than 3 months, or ask an employee to sign an employment contract that allows the employer to extend the probation period beyond 3 months, the employee must generally be provided the minimum notice of termination or termination pay required under the ESA.
Employee Compensation: Salary, Bonus, Benefits and More
This section of an employment contract explains what pay and benefits the employee will be paid in their new job, in exchange for providing their knowledge, skills and services to the new employer. For example, it will detail whether the employee will only be provided with a base salary, or a combination of a base salary and bonus? It will also explain if there are conditions for receiving any incentive or bonus pay, especially upon termination of employment. Similarly, it will also detail whether the employee will receive a health benefits plan, such as dental and medical insurance. And for employees, an employment contract will also explain if they will also receive the benefit of participating in the company’s pension plan – which could be either a defined contribution pension plan, or a defined benefits pension plan. These are all some of the important issues that an employee should review and discuss with an employment lawyer when considering a new employment contract.
Termination of Employment
When reviewing an employment contract, the “termination clause” is arguably the most important (and contentious) section to review with an employment lawyer. The general purpose of a termination clause is to limit the amount of notice of termination, benefits and severance pay the employer is required to provide when the employee’s job is terminated. As such, it is prudent for employees to carefully review what the employment contract says about termination of employment “for cause” and “without cause.” Has the employer included a termination clause and, if so, what is the impact on the employee’s legal rights should they resign or their employment be terminated by the employer? Does the employment contract say the employee’s entitlements upon termination are limited to only receiving the minimum notice of termination pay, severance pay and benefits required under the Employment Standards Act, 2000, and nothing more? Similarly, does the employee understand the amount of resignation he or she is required to provide before leaving their job in the future (and the impact of a resignation on their entitlement to receive a severance package). For these reasons, it is important for employees to understand from outset their rights and obligations to better ensure they are receiving their full severance pay entitlements upon termination, including maximizing their severance package, by speaking with an employment lawyer.
Temporary Layoffs
Depending on the nature of the employer’s business, an employment contract may provide an employer permission to impose a “temporary layoff” when the need arises. For instance, employers in seasonal industries or who expect occasional business slowdowns, will often need flexibility to temporarily reduce their workforce without permanently losing their employees. As the illustrated by the significant economic disruptions caused by the COVID-19 pandemic, employers will sometimes need to resort to temporarily lay off some employees in order to reduce costs and ensure they are able to continue operating in the long-term. Accordingly, we expect to see more employers ask employees to sign an employment contract that provides the employer with the ability to place employees on a temporary layoff when necessary (otherwise, an employee placed on a temporary layoff could have a claim for a Constructive Dismissal against the employer).
Workplace Policies
This section of an employment contract typically discusses the employee’s obligation to abide by the employer’s various rules, policies and procedures. Such company policies will include, for example, workplace harassment policies, bonus policy, human rights and accommodations, vacation policies and sick leave policies. It is prudent for employees (especially upon joining a company for the first time) to request a copy of these workplace policies to review and understand them before signing a new employment contract. Among other things, doing so can help minimize the risk of being disciplined (or terminated) for not following the company’s requirements and policies.
Non-Competition and Non-Solicitation
In particular industries, employers often ask employees to sign a non-competition or a non-solicitation clause. These are called “restrictive covenants” in an employment contract, which seek to restrict an employee’s ability to compete with the employer after their employment ends, or to solicit the customers and/or employees of the employer (non-solicitation). As such, they are particularly important since they may limit the employee’s ability to find new employment after termination. Whether or not a non-compete agreement or non-solicitation agreement is legally enforceable and binding on the employee will depend on the specific wording of these agreements. In order to be understand an employee’s legal obligations in an employment contract regarding such restrictive covenants, and get a better sense of their potential impact on their activities post-termination, it is important to speak with an employment lawyer before signing a new employment contract.
Contact Bune Law, Employment Lawyer in Toronto
Not all employment contracts are alike or created equally, and it is often the case that an employment contract is one of the most important documents employees will be asked to sign by a new employer. This is why it is very important for employees to have an experienced employment lawyer review their employment contract with them to allow them to fully understand their rights and obligations in their new job – especially toward the termination of their employment.
At Bune Law, our employment lawyer can help you understand your particular contractual rights and obligations. Let us review your employment contract, negotiate with your employer and, if necessary, guide you in any discussions with your employer. Contact us online or at 647-822-5492 for a consultation.
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