The Importance of Reviewing and Understanding Employment Agreements feature image

The Importance of Reviewing and Understanding Employment Agreements

In 2018, there are many different forms of employment and what we think of as the standard, traditional form of employment is not necessarily the norm. As such, employment agreements or employment contracts, as well as other agreements governing workplace relationships (such as independent contractor agreements), are arguably more important than ever before.

With the new types of employment (i.e. not your typical 9-5 employment, including freelancing, gig work, etc.), the expectations and requirements of workers and companies need to be appropriately defined. All parties should be aware of their rights and obligations.

Employment agreements and other contracts typically set out what is expected of the parties (the employee, contractor, employer, or company) pay, length of employment, and termination among other things. They are important documents to reference when there is a dispute or other issue.

What is Typically in Employment Agreements?

Employment agreements govern what most people consider “standard” working relationships in non-unionized workplaces (unionized employees will be subject to a collective agreement instead of an individual contract). That is, they outline the terms between an employee and their employer, including things such as compensation, benefits, holidays, leaves, and what happens in the event of termination.

Fundamental terms of an employment relationship are important. An employment contract will outline important aspects of the relationship and serves to protect both parties. Employment agreements may be accompanied by company policies that are outlined in a separate handbook or attachment.

Employment agreements can help clarify:

  • What is expected of the employee;
  • What is expected of the employer;
  • How to handle sensitive material or any material;
  • Who the employee will report to;
  • Compensation (both monetary and benefits);
  • What hours the employee is expected to work;
  • Whether there is overtime pay;
  • Lunch and other breaks;
  • Sick and other leaves;
  • What happens if there is a breakdown in the working relationship;
  • Notice in the event of termination of the working relationship- both on the part of the employee (if they quit) and the employer (if the employee is terminated);
  • How to resolve complaints, including complaints about harassment or discrimination.

What Happens if there Is No Employment Contract?  

Not having an employment contract is risky for both parties and can result in significant liability and lengthy litigation, particularly around termination. While an employment contract will not eliminate this risk or liability, it can significantly mitigate it.

Termination is dictated by legislation. The Employment Standards Code of Alberta requires that both employees and employers provide a minimum amount of notice for the termination of the employment arrangement. This is known as statutory notice. The amount of notice required will depend on how long the employee has been working there but cannot fall below the statutory minimum. An employer may end the employment agreement by giving the employee notice, termination pay, or a combination of both. Importantly, the language in an employment contract can be used to limit a terminated employee to this minimum amount of notice required by the Code.

However, consider a situation where there is no written employment agreement and an employee is fired. This is where the common law (i.e. law that is developed by the courts) comes in. If there is no contract spelling out how much notice a terminated employee is entitled to, or limiting them to statutory notice, the court will imply “reasonable notice” into the employment relationship. Reasonable notice requires an employer to provide the employee with reasonable notice of termination, or payment in lieu of notice in the case where an employee is terminated without cause. If the employer fails to do so, then there is a case for wrongful dismissal.

Reasonable notice generally has a significantly greater obligation on employers than the statutory requirements under the Code Reasonable notice is determined on a case-by-case basis, and the courts use a number of factors to determine what is reasonable, including:

  • The position and responsibilities held by the employee;
  • The length of employment;
  • The compensation the employee was receiving;
  • The availability of replacement employment; and
  • The employee’s age.

The length of common law reasonable notice that an employee is entitled to increases with the age of the employee, their level of responsibility (i.e. whether they held a senior position, etc.), and how long they were employed.

If an employee decides to end the employment arrangement, then notice must be given in writing. The length of notice is dependent on how long the employee has been working with that employer. However, in certain circumstances, such as seasonal employment, being employed for less than 90 days, and if there is a different practice in the industry, then notice may not be required.

What is Typically in Independent Contractor Agreements?

Independent contractor arrangements are becoming more and more common as people take on freelance work, work as consultants, enter the gig economy, or take on other alternative forms of work. In such situations, instead of an employment agreement, there is generally a consultant agreement or an independent contractor agreement (the names for these contracts may vary).

Independent contractors and business relationships can be described as a contract for service, whereas an employee-employer relationship is a contract of service. Depending on the services provided, the agreements between a contractor and a business will differ. These agreements will, however, have some standard terms, such as:

  • How the contractor will be paid (lump sum, instalments, per invoice, etc.);
  • What the fees of the contractor are;
  • Length of the contract;
  • Termination of the contract (notice);
  • Timelines for projects; and
  • Whether the contractor will be compensated for supplies.

This list is not exhaustive, and it is important to remember that independent contractors are different from employees. Independent contractors are unlikely to get benefits, termination pay, vacation time, sick leave, and so on and are not subject to the same protections under the Code as employees 

How Can an Employment Lawyer Help?

Whether you are an employee, consultant, independent contractor, or an employer or other organization engaging contractors, it is always advisable to have an employment lawyer review an employment agreement, an independent contractor agreement, or consultant agreement before it is finalized and signed.

Employees and Contractors

Due to a power imbalance that is present in a workplace relationship, employees or independent contractors may be hesitant to ask questions or may not know what is missing from the employment or contractor agreement that could be beneficial to include. There are also situations where an agreement is drafted in such a way that it benefits the employer/company in a very subtle way, such as, in the case of employees, by mentioning what happens in a termination, but limiting an employee’s rights to statutory minimums only.

An employment lawyer will review your employment agreement and ensure that its terms are as beneficial as possible. Even if you believe the contract is straightforward and you understand the terms, it is always worth retaining an employment lawyer to carefully take the time to review it to ensure your rights are protected. A lawyer can also help you negotiate a better agreement. For example: if your compensation is acceptable, but you would like more vacation time or other perks, then a lawyer can help you to approach the discussion in a way that will put you in a better position.

Employers

As an employer or person hiring a contractor, having an employment lawyer assist you in drafting contracts or workplace policies can ensure that you have done your duty to minimize risks while complying with your legal obligations. Employment lawyers can also provide advice as to what may be missing in your policies or agreements, and what steps to take to further minimize risks in the workplace.

It is important to remember that all employment agreements will be different. The type of job or the company or business will make a difference in how these agreements are drafted. Regardless, having an agreement governing the workplace relationship is always necessary. No matter what the type of relationship it is, whether it is contract work, part-time employment, full-time employment, or casual work, you should have an agreement in place.

At HMC Lawyers LLP, our Employment Team has the experience and the knowledge to advise both employers and employees on employment agreements. Knowing your rights, regardless of your position, is important for a healthy work relationship, and we can help you ensure that those rights are protected. To book a consultation, call 1-800-480-3534 or contact us online. We represent clients in Calgary, throughout Alberta, and across Western Canada.

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Contact HMC Lawyers for Exceptional Legal Guidance

At HMC Lawyers, we offer strategic legal advice. Our breadth of practice experience allows us to promptly handle almost every litigation-related legal issue that may arise, and anticipate potential roadblocks that may delay its resolution. To make an appointment with a member of our team, contact us online or call 403-269-7220

For articling student inquiries please contact Sean Jeffers at 403.261.3329 or sjeffers@hmclawyers.com

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Calgary, AB
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