In follow up to our webinar, Legal Peace of Mind: How Employment Contracts Protect Your Bottom Line, featuring LawVo™, we've answered the most frequently asked questions about employment contracts.
A letter of offer and an employment contract are related but distinct documents in the hiring process.
A letter of offer is typically the initial document provided to a candidate who has been selected for a position. It outlines the basic terms and conditions of the job offer. An employment contract is a more detailed document that formalizes the employment relationship between the employer and the employee.
The letter usually includes key details such as the job title, start date, salary, work location, and any conditions of employment (e.g., background checks, reference checks). The contract includes comprehensive terms and conditions of employment, such as job duties, compensation, benefits, termination provisions, confidentiality agreements, non-compete clauses, and other legal obligations.
The letter sets out the offer's terms; it is generally less comprehensive than an employment contract and may not cover all aspects of the employment relationship. The contract, however, is a legally binding agreement that both parties sign, outlining their rights and responsibilities.
The candidate's acceptance of the letter of offer can indicate their intention to enter into an employment relationship, but it may not constitute a binding contract on its own. An employment contract is intended to be enforceable in court, providing clarity and protection for both parties.
While a letter of offer can serve as a precursor to an employment contract, it is advisable to follow up with a formal employment contract to ensure all terms are clearly defined and legally enforceable.
In employment law, "consideration" is about ensuring there's a fair exchange between you, as the employer, and your employee when forming or modifying a contract. It's what each party gives to the other to make the agreement legally binding.
When you hire someone, you offer them a salary or wages in exchange for their work and services. This exchange—your payment for their work—is the consideration that makes the employment contract valid.
If you want to change the terms of an existing contract, you need to provide something additional to the employee, such as a raise or a bonus. This is because you're asking them to agree to new terms, and there needs to be a fair exchange to make the new agreement enforceable.
Here are some examples of reasonable consideration that an employer might offer to an employee when forming or modifying an employment contract:
When an employee receives a promotion or salary increase, it can be an ideal time to review and update their terms of employment. This ensures that the job description accurately reflects any new duties and responsibilities associated with the promotion, clarifying expectations for both parties. Additionally, documenting the new compensation terms, including any changes to bonuses, commissions, or other financial incentives, is important.
Whether consideration is required when changing company policies outlined in an employee handbook depends on how those policies are integrated into the employment relationship and whether they affect the terms and conditions of employment.
For significant changes that impact fundamental aspects of the employment relationship, it is advisable to provide consideration to ensure the changes are enforceable. This could include changes to policies that affect pay, benefits, or job security.
Regardless of whether consideration is legally required, it is best practice to communicate any changes to policies clearly and seek employee acknowledgment or agreement. This helps maintain transparency and trust within the workplace.
If you're planning to make changes to your employee handbook or policies, it may be beneficial to consult with a legal professional to ensure compliance with employment laws and to determine whether consideration is necessary.
When a long-term employee refuses to sign an updated employment contract, it can present a challenge for employers. Here are some options for addressing this situation:
Changing the terms of an employment contract, such as the number of hours worked, requires careful thought and adherence to legal principles.
Any changes to the terms of an employment contract, including hours of work, should ideally be made with the mutual agreement of both the employer and the employee. This involves discussing the proposed changes with the employee and obtaining their consent.
If the change significantly alters the terms of employment, such as reducing hours and thereby affecting pay, new consideration may be required. This could involve offering something of value to the employee in exchange for agreeing to the change, such as a one-time bonus or other benefits.
Constructive Dismissal: Unilaterally changing fundamental terms of employment without the employee’s consent can lead to a claim of constructive dismissal. This occurs when the changes are so significant that they effectively amount to a termination of the original employment contract, allowing the employee to resign and potentially seek damages.
Before implementing changes, it’s advisable to consult with an employment lawyer to ensure compliance with employment laws and to mitigate any legal risks.
Even if there is no written employment contract, the terms and conditions of employment are still governed by the Employment Standards Act in your jurisdiction, common law principles, and any verbal agreements or established practices between the employer and employee.
If I hire someone seasonally, do I need to get the employees to sign a new contract every year?
Whether you need to have seasonal employees sign a new contract each year depends on the terms of the original contract and the nature of the employment relationship.
Even if the terms remain the same, it can be beneficial to have employees reaffirm their understanding and acceptance of the terms each season. This can be done through a simple letter of re-engagement or a short form agreement that references the original contract.
This is called a severability clause. A severability clause is a provision commonly included in contracts, including employment contracts, that ensures the remainder of the contract remains valid and enforceable even if one or more of its specific provisions are found to be invalid, illegal, or unenforceable by a court.
The primary purpose of a severability clause is to protect the integrity of the contract. If a court finds a specific provision of the contract to be unenforceable, the severability clause allows that provision to be "severed" or removed from the contract without affecting the validity of the remaining provisions.
While a severability clause is helpful, it does not automatically save a contract if the unenforceable clause is fundamental to the agreement. In such cases, the overall intent and balance of the contract may be affected, and the parties might need to renegotiate the terms.
It is important to draft severability clauses carefully and ensure they are tailored to the specific contract. Consulting with a legal professional can help ensure that the clause is appropriately worded and effective.
You can include a term in an employment contract that specifies a fixed term or a minimum period of employment. However, drafting such terms requires careful consideration to ensure they are enforceable and do not infringe on the employee's rights. While you can require an employee to commit to working for a minimum period, enforcing this can be challenging if the employee decides to leave before the period ends. Courts may be hesitant to uphold terms that restrict an employee's freedom to leave a job. If you decide to include penalties or consequences for early departure, such as repayment of training costs, these must be reasonable and not punitive, as unreasonable penalties may be deemed unenforceable. Given the complexities and potential legal challenges, consulting with an employment lawyer is advisable when drafting these terms.
Unionized employees typically do not sign individual employment contracts in the same way non-unionized employees do. Instead, their terms and conditions of employment are governed by a collective agreement negotiated between the employer and the union representing the employees.
When taking over an existing business with employees, you are not necessarily required to terminate and then rehire employees on new contracts. When a business is sold and the new owner continues to employ the existing employees, Employment Standards considers the employment continuous. This means that length of service is preserved, and the original hire date will be used for calculating entitlements like notice of termination and severance pay.
E-signatures are legally valid. For an e-signature to be valid, both parties must consent to use electronic signatures and must intend to sign the document electronically. This intention is often demonstrated through the process of applying the e-signature.
You can present an employment offer by email, and it can be legally binding if it meets certain criteria.
Sending an employment offer via email is a common and accepted practice. It allows for quick communication and provides a written record of the offer details.
For an emailed offer to be legally binding, it must include all the essential terms of the employment agreement, such as job title, salary, start date, and any conditions of employment. The offer must be clear and unambiguous, and the employee must accept it, either by replying to the email with their acceptance or by signing and returning an attached document. Both parties must intend to create a legal relationship. This intention is usually inferred from the context and the language used in the email.
The employee’s acceptance of the offer, whether by email or by signing a document, is crucial for forming a binding contract. Acceptance should be communicated clearly and unequivocally.
As with any contract, there must be consideration—something of value exchanged between the parties. In employment, this is typically the employee’s work in exchange for the employer’s payment.
While an emailed offer can be binding, it is advisable to follow up with a formal, comprehensive employment contract. This contract should cover all terms and conditions in detail and be signed by both parties to avoid any misunderstandings or disputes.
When an employer provides termination pay in lieu of notice, they are generally required to continue providing benefits during the statutory notice period, even if the employee receives a lump sum payment. This means that even if you choose to provide a lump sum payment instead of having the employee work through the notice period, you must continue to provide benefits such as health insurance, dental coverage, and other employee benefits for the duration of the statutory notice period.
If the termination involves common law notice (which may be longer than the statutory notice period), the continuation of benefits during this period can depend on the terms of the employment contract and any negotiations between the parties. It's often advisable to seek legal advice to determine obligations during the common law notice period.
Under the Civil Code of Québec, notice of termination should be given in reasonable time, taking into account the nature of the employment, the specific circumstances in which it is carried on, the employee’s responsibilities, and the duration of the period of work. A longer notice period may be justified for a critical or senior position, so the employer can find a suitable replacement and ensure a smooth transition.
Though the law doesn’t define a specific notice period, employers usually require 2 weeks to 1 month of notice for mid-level positions. For management or critical positions, the required notice could reasonably be 2 or 3 months, or even longer depending on the circumstances.
It’s important to note that any specific provisions regarding notice must be clearly stated in the initial employment contract to avoid ambiguity and ensure expectations are understood by both parties.
In New Brunswick, resignation notice periods aren’t generally specified in the law, while layoff notice periods often are. However, it is common practice to require notice be given in reasonable time, taking into account both the employee’s responsibilities and the employer’s needs in looking for a replacement.
For a critical position with important responsibilities, a longer notice period may be reasonable. For many positions, 2 to 4 weeks’ notice is typical. However, for strategically important roles such as management and critical project management positions, a notice of 4 to 8 weeks, or even longer, may be considered reasonable. This gives the employer time to ensure a smooth transition and minimize operational disruptions.
In any case, the notice period should ideally be clearly defined in the employment contract to avoid any ambiguity.
Absolutely. An employment contract can be formalized at any time during the employment period. Though a letter of offer may contain certain essential terms of employment, it doesn’t replace a comprehensive employment contract.
Transitioning to a formal employment contract is often recommended to clarify the responsibilities, expectations, rights, and obligations of both parties. Here are a few points to consider when drawing up a new contract:
A carefully crafted and mutually agreed upon formal employment contract can strengthen the employment relationship and offer more structure and security to both parties.
In both Quebec and New Brunswick, renewing an employment contract and signing a new contract are distinct concepts. Though they can be easily confused, there are many differences between the two:
Renewing a contract:
Signing a new contract:
In short, whether you should renew a contract or sign a new one often depends on how extensively you or your employee want to alter the terms. Renewing the contract usually makes sense when both parties want to ensure continuity. To incorporate substantial changes, the employee must agree to a new contract and the previous contract must be terminated with notice. It is advisable to have new contracts reviewed by a lawyer to ensure compliance with applicable legal standards.
Quebec’s labour standards differentiate between dismissals and layoffs, which can have different legal implications.
Dismissal: A dismissal generally refers to termination of employment for reasons related to an employee’s conduct or performance. An employee can be dismissed for serious misconduct if the employer has a valid reason (such as theft or gross insubordination). If an employee is dismissed for a reason other than serious misconduct, the employer must respect the employee’s rights, including any notice periods and severance required by law or the employment contract. In Quebec, if the duration of employment exceeds 2 years, the employer must show proper cause for dismissal.
Layoff: A layoff often refers to a permanent termination of employment for financial or structural reasons, such as a business downsizing or closing. Layoffs are unrelated to employee conduct, and the employer must generally provide notice or severance pay as required by law. In both Quebec and New Brunswick, no notice is required for a temporary layoff of less than 6 months. However, if the layoff exceeds 6 months, the employer must pay the severance owed to the employee.
In New Brunswick, “dismissal” and “layoff” are sometimes used interchangeably but may also refer to distinct concepts with different legal implications.
Dismissal
Layoff
Yes, if a business is bought out, non-compete clauses may be stricter in terms of territory, duration, or other conditions. This is often because protecting the business’s intangible assets—including customers, expertise, and other sensitive information—takes on greater importance. Here are a few points to consider:
NOTE:
Non-compete clauses help employers protect themselves. However, to enforce such a clause, an employer must take the employee to court and will likely have to demonstrate the harm suffered. According to article 2089 of the Civil Code of Québec:
The parties may stipulate in writing and in express terms that, even after the termination of the contract, the employee may neither compete with his employer nor participate in any capacity whatsoever in an enterprise which would compete with him. However, the stipulation shall be limited as to time, place and type of employment, to what is necessary for the protection of the legitimate interests of the employer.
The burden of proof that the stipulation is valid is on the employer.
It is advisable to consult a specialized lawyer to ensure the provisions of your buyout agreement or non-compete clause are valid, proportionate, and of reasonable duration.
For a business like a taxi company, a non-compete clause could potentially apply to every region where it operates. However, its validity and enforceability depend on several important factors, including the reasonableness of the clause. Here are a few points to consider:
NOTE:
Non-compete clauses help employers protect themselves. However, to enforce such a clause, an employer must take the employee to court and will likely have to demonstrate the harm suffered.
For taxi companies in particular, the territorial scope of a non-compete clause may depend on the company’s structure and the nature of its operations in each region. It is advisable to consult a labour and business lawyer when drafting non-compete clauses.
Yes, a non-compete clause can be a separate document from the main employment contract in both Quebec and New Brunswick. When treated as separate documents, specific non-compete provisions can be negotiated more flexibly without affecting the terms of the employment contract.
If a court deems a non-compete clause unlawful or unenforceable, the main employment contract will not necessarily be invalidated provided the 2 documents are effectively separate and the terms of the employment contract are independently valid. However, each document must be assessed for validity separately.
It's important to note that for a non-compete clause to be valid and enforceable, it must usually meet certain criteria, including reasonableness in duration, geographic scope, and professional scope. Otherwise, the clause may be found to excessively restrict freedom of employment.
An employee’s duty of loyalty in Quebec
In Quebec, the law requires all employees to act with honesty and loyalty in the interest of their employer, even if an employment contract has not been signed. Employees must:
The duty of loyalty is based on the principle that an employer must be able to trust their employee, both in and out of the workplace.
This duty applies to all employees, regardless of sector or position. However, more stringent standards may apply to management and high-responsibility roles.
An employee’s duty of loyalty does not end when their employment does. A former employee still has certain duties toward their former employer, such as keeping information obtained during employment confidential. However, the law is less stringent on the duty of loyalty than what may be provided in a non-compete agreement.
In Quebec, it is strongly recommended to draw up written employment contracts even for self-employed and on-call workers. Though not formally required by law, a written contract can offer clarity and legal certainty to both parties. It sets out clear expectations, responsibilities, working conditions, and terms of payment, which can prevent future misunderstandings and disputes.
Contracts for self-employed and/or on-call workers may specify the following:
A detailed contract can also clarify the employee’s status within the business: whether they are considered self-employed or a full employee, which has implications for taxes and benefits.
Self-employed worker status according to the CNESST
In Quebec, the CNESST defines a self-employed person who is considered a worker as someone who meets the following conditions:
A self-employed person is not considered a worker by the CNESST if any of the following applies:
A self-employed worker who hires employees takes on the status of employer and is subject to the associated obligations.
Even someone recognized as a self-employed person by a government department or other public body (such as the Canada Revenue Agency) may still be considered a worker by the CNESST under the Act respecting industrial accidents and occupational diseases. See the CNESST website for details and case law.
Given these definitions, it is essential to validate the worker’s conditions of employment before concluding that they are self-employed. If the CNESST determines that your workers are in fact employees, you may be required to retroactively pay all unpaid source deductions and other amounts.
The only way to change an employee’s status is to adjust their working conditions and characteristics so they meet the criteria for a self-employed worker.
It is possible to add a clause to an existing employment contract stipulating that employees may be called upon to work in a new business location, but it requires a detailed, often individualized approach. Here are some steps to follow and key considerations to bear in mind:
When an employment contract has a specified end date, it is generally considered to be a fixed-term contract. At the end of the contract term, a new contract can be negotiated without the need for consideration, provided the employer and employee agree on the new terms. However, there are a few things to bear in mind:
NOTE: If work associated with a fixed-term contract is completed before the end of the term, the employer may have to pay the employee for the full term. It is recommended you consult a lawyer to ensure each contract is drafted properly and in compliance with local laws and regulations.