An employment contract is arguably the most important document an employee will sign throughout their working life. But it’s often the most overlooked aspect of an employment relationship.
When starting a new job, individuals often flip through a contract to the section where their salary, job title and vacation days are confirmed. Their next and final step is likely to jump to the last page, where they sign their name — and sign away their full employment rights, in some cases.
What employees do not realize is that an employment contract almost always benefits the employer. The less written in a contract, the more legal protections an employee has.
A contract often takes away protections that would otherwise be available to the employee. Failing to understand what your employment contract truly contains could cost you tens of thousands of dollars if you are let go from your job.
What is an employment contract?
An employment contract, also known as an employment agreement, is a legal document that sets the terms and conditions of the relationship between an employer and an employee.
A typical contract covers an employee’s responsibilities, compensation and hours of work, as well as workplace policies.
A contract often contains other very important terms. For example, it may significantly limit an employee’s termination entitlements.
A contract may also give an employer the right to change an employee’s pay, job duties and work hours. It can even prevent an employee from working in the same industry after employment comes to an end.
The good news is that these restrictive terms can often be negotiated and revised. The key is to identify them and not simply sign a contract without understanding what you are signing.
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My employment contract has a termination clause. Will that impact my severance package?
Companies use termination clauses in an attempt to reduce or eliminate their employees’ severance packages.
These clauses are often unenforceable, for various reasons. An employer may write the clause in a way that fails to completely and comprehensively limit the employee’s rights to severance. Some businesses, either accidentally or purposefully, include a clause that is outright illegal, because it seeks to remove severance rights that are guaranteed by regional employment laws.
Many of the termination clauses reviewed by my team in Ontario and B.C. are not valid, and we are able to quickly negotiate much larger severance packages than what is initially offered. That is why we always stress the fact that you should call an employment lawyer immediately after you are terminated from your job.
A recent court decision confirmed that even the most supposedly ironclad termination clauses may not rob you of your ability to collect full severance pay.
In that case, Swegon North America, the employer, attempted to use a termination clause to restrict an employee’s severance to a mere two weeks’ pay after eight months of.
In a decision handed down in June 2020, the Ontario Court of Appeal found that the specific language used in the termination clause was illegal. The employer’s attempt to limit the individual to a bare minimum of severance pay was blocked. The employee may now get a severance package worth six figures instead of four.
What’s more, the termination clause used by Swegon North America is a standard one that has also been used by many companies across Ontario over the past several years. The court decision has just rendered that clause.
If you were let go or fired, with or without cause, from a job in Ontario within the past two years, and had an employment contract with a termination clause that severely limited your severance pay amount, you should contact the employment lawyers at Samfiru Tumarkin LLP immediately to find out if you are now entitled to additional severance pay.
My employer wants me to sign a new employment contract. Do I have to?
No. Your employer can’t legally force you to sign a new employment contract at any point, especially if the agreement further restricts certain parts of your job. This also applies to employees who are being called back to work from a temporary layoff during the COVID-19 pandemic.
Given the recent Ontario Court of Appeal ruling, however, many companies may encourage their staff to sign new agreements with updated termination.
If you are asked to accept a new employment contract at any point in your career, do not sign until you have it reviewed by an employment lawyer to ensure that you aren’t giving up your rights. The company may attempt to limit your severance package to a few weeks’ pay, or add a clause that gives them the ability to cut your pay or put you on a layoff without penalty in the future.
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What does my employer have to provide in a new employment contract?
In order for a new contract or agreement to be legally binding, the employer must provide something to the employee. This could be a bonus, or an increase in pay or vacation time.
I never signed an employment contract when I started working. Should I ask to sign one now?
No. You should not actively seek an employment contract if you don’t already have one.
If you want proof of certain aspects of your work, such as pay, hours, vacation time or duties, confirm those details in an email exchange with your employer, and store it in your personal files in case you need to refer to it.
Have you been let go or laid off from your job? Are you being asked to sign an employment contract?
Contact the firm or call 1-855-821-5900 to secure assistance from an employment lawyer in Ontario or British Columbia. Get the advice you need — and the compensation you deserve — during this crisis.
Lior Samfiru is an employment lawyer and partner at Samfiru Tumarkin LLP, one of Canada’s leading law firms specializing in employment law and disability claims.