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Why You Need An Employment Contract in Ontario

Every employment relationship is governed by an employment contract in some form, whether intentional or not. Unionized workplaces are governed by a collective agreement that applies to all employees who are members of the union. For non-unionized employees, an employment contract can either be written or verbal, with an implied verbal agreement existing in the absence of a written agreement. Given the importance of the employment contract to the employment relationships between non-unionized employers and employees, employers and employees should know the benefits and the risks involved. This article outlines what you need to know when it comes to employment contracts in Ontario.

 The Importance of the Employment Contract in Ontario

An employment contract specifies the terms of employment between the employer and the employee. It can set out the employer’s expectations, the employee’s entitlements, and any continuing obligations. The employment contract also sets out the manner in which the employment relationship can come to an end. It is additionally more difficult to dispute the terms of a written employment contract than would be the case if there was a verbal agreement.

What if you Don’t Have a Written Employment Contract?

If an employee commenced employment without signing a written employment contract, the employment relationship will be governed by an implied verbal employment agreement. The employee will remain entitled to the minimum entitlements set out in the Employment Standards Act, and any other representations made by the employer regarding the employment. Given the terms are not in writing, such an employment contract leaves open the possibility for either side to dispute what the terms are to begin with should a disagreement arise. If an employment-related matter goes to court, the terms of the agreement may have to be determined by a Judge based on the credibility of the parties, which means neither side’s interpretation is guaranteed to be taken as correct.

The greatest risk involved with a verbal employment agreement comes with the dismissal of an employee’s employment. A verbal employment agreement will automatically entitle an employee to common law reasonable notice in the event of a without cause dismissal. Common law reasonable notice can be significantly higher than the notice entitlements found in the Employment Standards Act, and as such can end up very costly for an employer.

Possible Risks Involved with a Written Employment Contract

Employers should be aware that certain errors when drafting written employment contracts can also create risks. Employers must ensure the termination clause in a written employment contract is enforceable, else the employee may become entitled to common law reasonable notice in the event of a without cause dismissal. Even small errors in the termination clause can cause it to be deemed unenforceable under the Employment Standards Act.

Employers should consult with an employment lawyer while drafting an employment contract, or prior to amending an existing employment contract.

Contact Us

If you are an employer who needs the drafting of an employment contract, or an employee who believes you’ve been wrongfully dismissed, our team of experienced workplace lawyers at Achkar Law can help. Contact us by phone toll-free at 1 (800)771-7882 or email us at [email protected] and we would be happy to assist.

If you are a small or medium-sized company looking for full-service support, visit our CLO program page for our strategic solutions.

Disclaimer: This blog is not intended to serve as or should be construed as legal advice and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call (800) 771-7882 or email [email protected]