Employment Contract Analysis (Updated October 28 2021)

Contracts govern many aspects of our lives. They’re an important part of establishing security, whether you’re beginning a new job or taking out an insurance policy.

All parties to a contract have a vested interest in ensuring that the contract being signed is fair, reasonable and protects their respective interests.

In the case of Martin v. ConCreate USL Limited Partnership, 2013 ONCA 72 which made it to the Ontario Court of Appeal, it was held that restrictive clauses (non-compete and non-solicitation) not allowing for a “clear outside limit”-that is to say, a limit for the clause’s reach- are unenforceable.

So what makes a “good” contract?

1) Enforceability: Enforceability is perhaps the most important feature of a contract. In order to ensure a contract is enforceable, items which should be included in the contract include:
a. Severability (Invalidity, Unenforceability)
b. Applicable Laws ( the laws governing the contract, i.e Provincial and Municipal)

You may also wish to consult a lawyer before a contract is drafted or signed, to ensure that it meets all legal requirements. A contract is not enforceable if its terms are not compliant with the applicable legislation. For instance, a clause in an employment contract that extends the probationary period to 6 months is illegal, as the maximum probationary period under the Employment Standards Act, 2000 is 3 months.

2) Protection: All parties to a contract want to ensure the contract respects and preserves their rights. In an employment contract, this factor would typically be represented in several sections, including:
a. Compensation and Benefits (what is guaranteed, in terms of remuneration)
b. Probation
c. Termination (what would be grounds for termination of the relationship)

3) Clear Terms and Explanations: As a new employee, you wouldn’t want your employment contract to include a non-exhaustive list of duties you may perform. A good contract makes the terms of the relationship clear, and without question. Using the “Position” section of an Employment contract as an example:

1. Unclear Explanation:
“As an Administrative Assistant, the Employee will be required to perform numerous duties, including assisting executives, printing and sending documents, and other tasks which will be regularly assigned.”

2. Clear and Concise Explanation:
“As an Administrative Assistant, the Employee is required to perform the following duties and responsibilities:

1) Assist and report to Elena Morrison, VP of Marketing, on a daily basis;

2) Draft, print and distribute itineraries for all interns in the Marketing Department, also on a daily basis;

3) Print and distribute materials for Marketing Campaigns at the request of Elena Morrison;

4) Keep a record of all calls and correspondence to Elena Morrison on a daily basis; and

5) Be responsible for ensuring that all Marketing interns perform their allotted tasks and report their progress accordingly.

4) Industry-Specific Clauses: Most companies would consider a “Confidentiality” clause of great importance, given the sensitive information processed by employees. In the legal and business fields, “Non-Compete” clauses are often used as they prevent employees from taking advantage of trade secrets and clientele information. These clauses are typically more elaborate and require separate schedules.

On October 25, 2021, the Ontario government introduced Bill 27, Working for Workers Act, 2021. The proposed legislation aims to better protect, support, and attract workers to Ontario. The bill passed the first reading in the Legislative Assembly of Ontario on October 25, 2021. If passed, the new legislation will amend the Employment Standard Acts to prohibit employers from using non-compete agreements. However, the new legislation will continue to allow purchaser and seller to enter into an agreement that prohibits the seller from engaging in any business, work, occupation, profession, project or other activity that is in competition with the purchaser’s business after the sale. 

5) Legal Advice: A contract should always include the opportunity for the parties involved to contact a legal professional prior to signing. Employees should strongly consider taking this advice to heart and contact a lawyer prior to signing on the dotted line.

6) Dispute Resolution: The contract should include a section for what is available to the parties in terms of relief, should there be a dispute over a section of the contract. The contract may set out a specific route to be taken (i.e the parties must mediate before going to trial), but will typically set out a specific resolution method (with exceptions).

Contracts are detail-orientated, and it’s important to make sure you have the right details included. The best way to ensure that your contract is not only fair and reasonable but also legal is to consult a lawyer. A lawyer can go over the aspects of your contract and give you advice as to what should be included. A lawyer can also personally draft or amend your contract to meet your specifications and to ensure that it meets the requirements of the law.

Contact Monkhouse Law today to discuss your options in terms of contract analysis, drafting, and amending.

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