Canada does not have at-will employment. In Canada, employment relationships are governed by employment contracts, either written or implied, and various employment laws and regulations. Employers are generally required to provide reasonable notice or pay in lieu of notice when terminating an employee without cause.
At-will employment is a term used in the United States to describe the employment relationship between an employer and an employee, where either party can terminate the employment at any time, with or without cause, and with or without notice. This means that an employer can fire an employee for any reason or no reason at all, as long as it is not for an illegal reason, such as discrimination. Similarly, an employee can quit their job at any time without providing a reason or notice.
What Is Included in an Employment Contract in Canada?
An employment contract in Canada typically includes the following elements:
- Job title and description. This outlines the employee’s position, duties and responsibilities within the company.
- Duration of employment. This can be for a fixed term or indefinite term, depending on the nature of the job.
- Location of work. This is an increasingly critical term to include in the post-pandemic remote/hybrid work era.
- Hours of work. This section details the employee’s expected work hours, including any overtime requirements.
- Compensation. This includes the employee’s salary or wage, as well as any bonuses, commissions or other forms of compensation.
- Benefits. This section outlines any benefits provided by the employer, such as health insurance, vacation time or retirement plans.
- Probationary period. If applicable, this clause specifies the length of the probationary period during which the employer can terminate the employee without cause.
- Termination provisions. This section outlines the conditions under which the employment relationship can be terminated, including notice requirements and any severance pay entitlements.
- Confidentiality and noncompete clauses. These clauses protect the employer’s confidential information and prevent the employee from working for a competitor for a specified period after leaving the company.
- Intellectual property. This section addresses the ownership of any intellectual property created by the employee during their employment.
- Dispute resolution. This clause outlines the process for resolving any disputes that may arise between the employer and employee.
Reasons to Use an Employment Contract in Canada
An employment contract is an essential tool for both employers and employees in Canada. It helps to outline the terms and conditions of employment, as well as protect the rights of both parties.
Employment contracts are one of the best investments an employer can make to contain overall costs at termination. Most importantly, if an employer does not set out the termination terms, the courts will—and in Canada’s employee-friendly system, the courts will almost always award more than what the parties would otherwise negotiate.
Here are some reasons why using an employment contract in Canada is important:
- Clarification of employment terms and conditions.
- Protection of confidential information and intellectual property.
- Establishing performance expectations and job duties.
- Defining compensation and benefits.
- Setting grounds for termination and notice periods.
- Managing dispute resolution and compliance.
By having a well-drafted employment contract, both employers and employees can avoid misunderstandings, disputes and potential legal issues in the future.
Lisa Stam is an attorney with SpringLaw in Toronto. © 2023 SpringLaw. All rights reserved. Reposted with permission of Lexology.