1. EFFECTIVE EMPLOYMENT CONTRACTS
Presented by:
Landon Young & Jeff Murray
Stringer LLP

2. What is an Employment Contract?
All employees have an “employment contract”
Sets terms and conditions of employment
May be written or verbal or a combination
Can be express or implied
Terms can change over time of relationship
Policies and practices can define terms of the contract

3. Common Misconceptions About “Contract Employees”
They are not legally entitled to benefits, but full-time employees are.
In law it does not matter if an employee is considered a “contract employee” to receive benefits
Full-time employees do not have a legal entitlement to benefits
They have a different legal status than full-time employees.
They have the same legal status

4. Creation of Employment Contracts
An employment contract is created when the employee accepts offer of employment
Legal requirement:
Exchange of promises, or
“Consideration” given in exchange for a promise
Employment contracts can be changed during the relationship BUT the employer may need to give the employee fresh consideration

5. Basic Terms of all Employment Contracts
Employee agrees to work and employer agrees to pay for the work
Amount of pay
Duties to be performed
Where the employee will work
Vacation entitlement
Termination entitlement or, if not defined, “reasonable notice”
Employer may terminate employment for “just cause”

6. Other Possible Terms of Employment Contracts
Benefits and pension
Non-competition and non-solicitation covenants
Confidentiality agreements
Restrictions on outside activities
Incentive pay or bonus eligibility
When “just cause” may exist for termination

7. Limits on Employment Contracts
Employees cannot agree to receive less than minimum employment standards (i.e. hours of work, minimum wage, vacation pay, etc.)
Cannot violate human rights legislation
Cannot violate health and safety legislation

8. Implied Duties in Employment Contracts
Employee has a duty of loyalty to the employer
Top management owes a fiduciary duty
Employer will act in good faith in the manner of dismissal
Employers may also have a duty to act in good faith generally

9. Types of Breach of an Employment Contract
Employee stops reporting to work
Employer stops paying
Employer makes a significant change to the terms and conditions of employment (“constructive dismissal”)
Employee commits serious misconduct that is prejudicial to the employer’s operations (“just cause”)

10. What Kind of Contract? Questions to Consider:
Will the relationship be short-term or long-term?
Could this employee do significant harm to your organization?
Will the employee’s duties change?
How will the employee be paid?
Will the employee’s pay change?
What kind of hours will the employee work?
Will the employee have access to sensitive information?

11. Independent Contractors
Not considered employees under the law
May have a written or unwritten contract to provide services
Reasonable notice of termination obligations may apply unless defined in the contract
Employment standards do not apply
Employer does not have to make deductions for tax, E.I. or payroll remittances
Same duty to provide a safe workplace applies as with employees

12. Differences Between Employees and Independent Contractors
Control over work performed
Risk of profit or loss
Ownership of tools
Supervision
Discretion in performance of duties

13. Tips for Independent Contractors
Only hire people as independent contractors if they meet the legal test
Use written contracts
Require the independent contractor to use a corporation and pay the corporation
Do not enroll the independent contractor in your benefits plan

14. Fixed Term/Temporary Employment
The employer does not owe termination or severance pay at the end of the contract’s term
Duration may be specifically spelled out (such as 3 months) or more general (for the summer)
Can be for a specific project

15. Common Misconceptions About Fixed Term or Temporary Employees
This is the type of contract employers need to have to avoid paying benefits
Employees can be terminated at any time without notice or termination pay
Employment standards legislation does not apply to them

16. Potential Pitfalls of Fixed Term Contracts
Employee’s services may be required longer than fixed term
Employee’s services may not be required for the entire term
Lack of stability in your workforce - employee may be inclined to leave for permanent employment else

17. Potential Pitfalls of Fixed Term Contracts
Employer is required to pay the employee for the rest of the term if the employer wishes to terminate early (unless there is an early termination clause)
Successive renewals of the contract can mean the employee is entitled to reasonable notice of termination
If the employee continues to work after the end of the contract the employee is considered indefinite

18. Tips for Fixed Term Contracts
Include a termination clause
Don’t forget the termination date – make sure the employee does not keep working after the termination date without a new contract
Avoid multiple, successive renewals

19. Tips for Using Contracts Generally
Tailor them to the individual employee – avoid using same contract for everyone
Make sure employees sign them before starting work
Keep the language simple and clear
Make sure minimum legal requirements are met
Consider having a lawyer review it
Keep a copy in a secure place!!