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Chapter 4: The Employment Contract

Overview

The employment contract serves as the foundational agreement between employer and employee, setting forth the rights and responsibilities of both parties. Understanding its elements is crucial for compliance with employment law and ensuring fair treatment in the workplace.

Key Elements of Employment Contracts

1. Consideration: The core of an employment contract is the exchange of labor by the employee for wages provided by the employer.

2. Oral Agreements: Employment contracts can be oral; however, there are exceptions requiring written agreements:

   • Exception #1: Fixed-term employment contracts longer than one year must be in writing due to the statute of frauds.

   • Exception #2: Employment conditional upon signing a formal written contract must be documented in writing.

Implications of Oral Contracts

1. Implied Notice Terms: Without a written contract, employers cannot restrict non-unionized employees’ rights to reasonable notice of termination, which generally defaults to common law notice.

2. Company Policy References: Mentioning company policy in the offer can sometimes restrict termination notice rights to those specified under the Employment Standards Act (ESA).

Implied Terms in Employment Contracts

1. Resignation Notice: Employees owe reasonable notice to their employers upon resignation; failure to do so may result in damages for breach of contract.

2. Limited Enforcement: Employers typically do not pursue damages for non-compliance unless in cases of significant financial loss.

3. Additional Implied Responsibilities:

   • Duty of Confidentiality: Employees cannot disclose proprietary information such as customer lists.

   • Duty of Loyalty: Employees must act in the best interests of their employer (e.g., RBC Dominion Case).

   • Non-Competition: This duty primarily applies to executive employees to prevent conflicts of interest.

Fiduciary Employees and Non-Compete Obligations

1. Definition: Fiduciary employees hold key positions that involve trust and can impact the organization's interests post-employment.

2. Post-Employment Obligations: These employees have stricter non-compete requirements to protect their employer's interests. Notable cases include Can Aero v O’Malley and KJA Consultants Inc. v Soberman.

Important Employment Contract Terms

1. Job Description: A detailed job description defines essential duties and protects against unilateral changes without consent.

2. Compensation and Benefits: Terms must meet or exceed ESA minimums; otherwise, they are unenforceable.

3. Employment Term: Employment can be either indefinite or definite. Non-unionized contracts are generally assumed to be indefinite unless stated otherwise. Indefinite contracts afford employees the right to reasonable notice upon termination, while fixed-term contracts do not.

Case Study: Ceccol v Ontario Gymnastic Federation, 2001

1. Context: The plaintiff worked under a series of fixed-term contracts for 16 years, with annual renewals based on performance.

2. Termination Incident: Following the end of the last contract, employment was terminated without renewal, prompting a wrongful dismissal suit.

3. Employer Defense: The employer claimed entitlement to severance pay based on the latest contract's terms, but the employee asserted rights based on a continuous 16-year relationship.

4. Court Findings: The Court affirmed that their relationship was effectively indefinite, awarding the employee 12 months’ pay in lieu of reasonable notice, minus any failure to mitigate damages.

Legal Framework for Fixed-Term Employment Contracts

1. Duration Limits: Fixed-term contracts can be up to nine years; longer terms must be in writing to be enforceable.

2. Renewal Conditions: Non-renewal transforms a fixed-term contract into an indefinite employment relationship.

3. Termination Clauses: Early termination provisions must be specific and clear to be enforceable; ambiguous terms may favor the employee.

4. Employer Right to Modify: Modifications to job responsibilities must be explicitly agreed upon; significant alterations may lead to claims of constructive dismissal.

Duty to Mitigate and Common Law Notice

1. Mitigation Duty: Applies primarily to common law notice pay, not ESA amounts.

2. Example Scenario: For a hypothetical employee dismissed after two years, ESA pay might be three weeks while common law notice entitlement could be two months, subject to mitigation.

Projection of Termination Clauses

1. Clear Terms: Termination clauses should clearly define entitlements at the outset to avert reliance on common law notice.

2. Compliance with ESA: Employers must ensure that termination provisions meet or exceed ESA standards to avoid legal pitfalls.

General Provisions in Employment Contracts

Probationary Clauses: If there's a probation period (a trial period for new hires), the contract must clearly explain it, including what kind of notice the employer needs to give after probation ends.

• Advanced Notice of Resignation: For some specialized jobs, employees might be required to give more notice than usual before quitting.

• Inducement and Relocation Provisions: If the job requires you to move or if the company is offering something special to convince you to take the job, these details should be spelled out in the contract.

• Restrictive Covenants: These are rules you agree to follow even after you leave the company, like not sharing secrets (non-disclosure), not poaching clients or employees (non-solicitation), and not working for competitors (non-competition). However, these restrictions have to be fair and reasonable to be legally enforceable.Conclusion

Understanding the nuances of employment contracts is essential for both employers and employees to navigate their legal rights and obligations effectively. Proper drafting and awareness of relevant statutes ensure compliance and the protection of interests in an employment relationship.