Why Employers need an Employment Agreement

By Toronto Employment Lawyer, Karen Zvulony

One of the best, and most cost-effective ways an employer can protect itself from paying costly severance and termination packages is by having a properly drafted and executed written employment agreement with its Employees that limits and outlines how much severance will be payable upon termination. As simple as it sounds, ensuring that enforceable employment agreements are in place is key to limiting an employer’s liability.

Basic Requirements For an Employment Agreement

From the employers perspective, it is crucial that any employment agreement must comply with the minimum standards set forth in the Ontario Employment Standards Act.  Moreover, like all valid contracts, an employment agreement must use clear and concise language.  The agreement should be agreed to before the employee starts working to ensure that there is valid consideration for the employee signing the agreement. A change in position or promotion may necessitate a new agreement being signed.

In addition to limiting the amount of severance payable on termination, employment agreements may also address other issues such as:

  • changes in responsibilities or reporting structure,
  • when (and if) an employer can reduce an employee’s salary
  • whether an employee can be relocated;
  • and any post-employment obligations (such as non-solicitation and non competition).

An employment agreement can also ensure that are no misunderstandings with the employee regarding the terms and conditions of the employment and that no misrepresentations were made to the employee prior to the acceptance of the employment that they employee relied on or that they can claim to have relied on later on.

On the practical side, clearly outlining the expectations of the employment relationship at the very beginning will likely save headaches down the line. No one likes to be caught by surprise.

Don’t Leave Your Business Vulnerable

In my experience of assisting employees, I have come across many poorly drafted employment agreements that have been used against the employer.  It never ceases to amaze me, how many employers neglect to properly protect themselves.