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Employment contracts are a fundamental aspect of the employer-employee relationship, as they set out the terms and conditions of employment, rights, and obligations of both the employer and the employee. Therefore, understanding the basis of any employment contract is essential for both parties.

This blog discusses some key points regarding employment contracts in Ontario and what to look for when signing one from an employee perspective.

Types of Employment Contracts

The basis of any contract is “consideration” exchanged between the parties. Consideration in this case simply means that both employer and employee must receive something of value in exchange for their mutual promises. In the context of employment contracts, consideration may include the promise of employment in return for the employee’s agreement to abide by the terms and conditions of the contract.

Employment contracts come in two different forms – express or implied.

  • An express contract, for example, is a written contract. An express contract explicitly outlines the terms and conditions of employment. It includes details such as salary, job responsibilities, working hours, benefits, termination procedures, and other relevant terms. Express contracts are legally binding.
  • An implied contract, on the other hand, is one that comes about due to the absence of an express contract. It is essentially a verbal agreement based on common law principles and statutory rights. This type of contract is generally less specific than an express one, but still provides certain rights and obligations to both the employer and the employee.

Enforceability of an Employment Contract

The enforceability of an employment contract will depend on various factors, including the terms of the contract, Ontario’s statutory employment laws, and common law principles.

For example, employment contracts must comply with Ontario’s employment standards legislation, which sets out minimum employment rights and entitlements. These statutory rights cannot be contracted out of, meaning that any provisions in a contract that attempt to provide less than what the law requires may be unenforceable.

As another example, termination clauses in employment contracts are a common point of contention. These clauses must comply with the minimum notice and severance requirements under the Employment Standards Act, 2000 (ESA) or provide reasonable notice of termination or pay in lieu of notice. If a termination clause is deemed to be invalid or contrary to the ESA, a court may declare it unenforceable.

Unenforceability may also occur when the employment contract is deemed to be unconscionable or significantly unfair to the employee. This includes situations where an employer takes advantage of an employee’s vulnerability or lack of bargaining power.

Further, employment contracts cannot include terms that are illegal or contrary to public policy. For example, terms that discriminate against employees based on protected grounds, such as race or gender, are unenforceable.

It is important that employees be given adequate time to review and seek legal advice before signing the contract. Employment contracts that are presented on a “take it or leave it” basis may be more susceptible to challenges.

Making changes to an Employment Contract

Once an employment contract is in place, and it is enforceable, changing its terms typically requires the consent of both parties. Attempting to unilaterally change terms may be viewed as a breach of contract. If either party breaches the terms of the contract, the other party may seek remedies through the courts, such as damages for financial losses incurred because of the breach.

How the team at Sultan Lawyers can help you

Whether you are an employee or an employer who needs assistance with workplace matters, including review of an employment contract, we would be happy to assist you. Please contact Toronto employment and immigration lawyers, Sultan Lawyers, at (416) 214-5111 or here.

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