Employment Law
Employment Contracts
It is not a requirement that an employment contract be in written form, however, a written contract is preferable for the protection of all parties. Terms in an employment relationship can be made in one of three ways: expressly; impliedly; and, by the conduct of the parties.
An employment contract and its terms evolve over time. New or modified terms of a contract can occur where an employee has been with an employer for a long period of time and his or her employment has undergone changes, such as promotions, mergers and acquisitions, and, salary increases, which have been mutually agreed to.
Terms in an employment contract can be implied when not expressly written or stated by the parties. Terms will be implied in order to comply with the reasonable intention of the parties to reflect the relationship between the parties.
Some examples of implied terms in every contract of employment, in the absence of a written contract, are as follows:
- an employer will provide the employee with reasonable notice if it wishes to terminate the employment relationship without just cause;
- an employer may terminate the relationship without notice if there is just cause;
- an employee will perform his or her duties with reasonable skill and diligence;
- an employee will not engage in activities that are in conflict with the employer’s legitimate business interests.
To avoid implying terms into an employment contract, parties may enter into written contracts with clear, unambiguous terms, that comply with statutorily imposed minimum standards. In particular, termination provisions that attempt to curtail and override an employee's entitlement to reasonable notice must be drafted with care, be clear, and adhere to current employment standards legislation, otherwise the terms will be of no effect; in this event, the employer will be required to provide the employee with reasonable notice to adhere to the legislative minimum standards and the common law.
In practice, employment contracts are generally provided by an employer to an employee, at the time of hire; the purposes of employment contracts are generally to restrict the employee’s rights and limit the employer's obligations in the following areas:
- Conflicts of Interest: to remind the employee that he or she is prohibited from engaging in activities or conduct that are, or appear to be, a conflict of interest to the employer’s business;
- Competition against the Employer’s Business: the employer usually restricts the employee’s ability to compete with the employer’s business during employment and/or thereafter for a certain specified period of time. These clauses must be reasonable in terms of length of time (after termination), geographic location, and, scope of restricted activities, otherwise, it may be of no force or effect;
- Reasonable notice or pay in lieu thereof upon termination (see below);
- Solicitation: Limits are usually imposed by the employer upon the employee, either during employment, or thereafter, with respect to hiring of the employer's staff, or recruitment of existing or potential clients; and
- Confidential Information: Limits are imposed upon the employee’s ability to discuss or disclose the employer's confidential information, which is usually defined in the contract.