Employment Contracts: Key Clauses to Watch Out For

Employers and employees are bound to each other in a professional setting. A disciplined approach is needed that allows both parties to interact without collision. Employers should be clear about their expectations. On the other hand, employees should ensure that biases do not victimize them.

When you sign an employment contract, employers and employees are legally bound together. The document includes details about the responsibilities, salary, perks, work hours, termination policy, and other essential pointers. It dictates the rights and obligations of the employer and the employee. This aims to ensure that both parties understand each other and respect individual rights, protecting against legal disputes.

As we attempt to address the topic of this blog, understanding the employee contract is crucial for job seekers because it will help them make informed decisions. What happens if you don’t? Many employees make the mistake of not reading the contract through and through. They overlook the clauses, which include non-compete agreements, termination clauses, and terms for dispute resolution. Not understanding these will land you in a misfit job where you’ll drain your energy without achieving growth. 

Let’s understand the 11 important clauses you should check in your employee contract before agreeing to and signing them.

Types of Employment Contracts

The different types of employment contracts include:

• Permanent Contracts

  These are long-term agreements that offer job security, perks and establishment. Employees are granted statutory rights, paid leaves and protection against termination.

• Fixed-Term Contracts

  Fixed-term employment contracts are explicitly prepared for project-based works, stating a pre-determined date on which the employee’s job responsibilities will end. However, the contract may be renewed or extended based on work progress or needs.

• Zero-hours Contracts

  These contracts offer no fixed working hours, enabling employees to work on demand while providing flexible arrangements. However, these jobs do not offer job security in the long run.

• Freelance or Consultant Contracts

  These agreements are made for individual contractors or consultants. Unlike permanent employees, they are not entitled to the usual benefits, such as health insurance or paid leave.

Key Clauses to Understand

• Job Description and Responsibilities

  Prolonged job performance depends on well-defined job descriptions that match employers’ expectations and employees’ job responsibilities. Job descriptions that lack precision can result in employees working extra hours without pay. Before signing the contract, verify the specific limits of your work duties with your employer and make necessary modifications.

• Compensation and Benefits

  Companies should clearly state all employee compensation details, including base pay, bonuses, commission structure, and payment frequency. They should also clearly mention added benefits like health insurance plans, retirement benefits, paid time off, and performance incentives. 

• Working Hours and Overtime

  The document should mention standard working hours, pay rates for overtime, and conditions for working shifts, weekends, and public holidays. Understanding whether the work requires overtime services before accepting an agreement is essential. Some contracts might contain provisions that eliminate extra pay for extended work periods.

• Probation Period

  Most employers maintain a probationary period to evaluate new employees’ potential. The employment agreement should detail the probation duration, techniques for performance review, and actions that may lead to confirmation or termination. Employers should also prevent any unlawful extension of their employment probation period.

• Leave Entitlements

  The contract should mention annual leave policies, including sick and maternity/paternity leave. Some employers may restrict leave policies that oppose labour regulations, making it essential for employees to check this clause properly.

• Non-Compete and Restrictive Covenants

  Some employment agreements include clauses which limit workers from accepting job offers from a competitor for significant periods after leaving the organization. To avoid future employment limitations, you should verify that employment restrictions are practical concerning the specified period length, geography and industry.

• Termination and Notice Period

  Conditions under which an employee can be terminated and the notice period for both parties should be mentioned in the contract. Review your employment agreement for clauses enabling wrongful employee dismissal or employees required to serve long notice durations while allowing the employer to dismiss the employer within short notice.

• Dispute Resolution

  The dispute resolution clause establishes fair procedures to handle work-related grievances. It should list available options for resolving employment disputes, including mediation, arbitration, and legal guidelines.

• Intellectual Property Rights

  Employees from creative and technical positions need to check if their contract includes clauses about intellectual property ownership. Understanding who possesses rights to the work created during your employment will prevent you from losing ownership of your creations.

• Confidentiality and Data Protection

  Contracts often mention limitations to employees when disclosing internal information about the company. Ensure these clauses are reasonable and do not limit your ability to apply the general knowledge you have learned while working for the company.

• Amendment and Flexibility Clauses

  Some contracts allow employers to unilaterally change working conditions. However, all changes to the agreement shouldbe mutually agreed upon, or the alterations may become unfavourable.

When to NOT Sign the Contract

Here are some red flags to spot and act upon when signing contracts:

• Vague or Broad Job Descriptions

  Such descriptions may land you a job where you’d need to work for extended periods without extra pay.

• Unclear Salary and Benefits Information

  You may later end up in a dispute, arguing your right to adequate salary and benefits.

• Excessive Restrictive Covenants

  Unreasonable, restrictive clauses may limit your future job opportunities.

• Unilateral Amendment Clauses

  You will end up letting your employer make modifications to the contract without your consent. 

• Ambiguous Termination Conditions

  Without a clear understanding of the termination clause, you may be dismissed from a job without prior notice, requiring you to serve long notice periods.

Tips to Sign an Employment Contract Successfully

We have listed some important considerations to ensure you sign your contract without agreeing to unreasonable clauses:

• Take time to read and understand the clauses mentioned in the contract. Avoid rushing through.
  
• Consult with an employment lawyer in Toronto to ensure the clauses are just. They can help simplify your doubts if any arise.
  
• Talk with your employer if any of the clauses need to be modified.
  
• Request to provide a clear understanding of any clauses that seem vague.
  
• Keep a signed copy of the contract to retain later if needed.

Conclusion

Everything a job seeker needs to know about the position they are agreeing to work for is mentioned in the different clauses of the employment contract. Not reading these clauses and misunderstanding them can create bottlenecks for your future goals and, at the same time, drain your energy and efficiency.

In this blog, we have explained the different clauses you should expect to review in your contract. We have also mentioned the red flags and tips for signing a contract and entering a fulfilling professional relationship.

Understanding labour law and workers’ rights and obligations becomes essential for someone seeking a job in Canada. Many find it challenging to understand the country’s legal requirements. Sultan Lawyers’ employment advisory services can help. Our employment lawyers have experience guiding job seekers worldwide, helping them enter and settle in Canada amicably. 

If you need legal advice before signing your employment contract, contact us to schedule your consultation today!

FAQs

• What happens if I sign a contract without understanding all the clauses?
  When you sign a contract without understanding the clauses, you agree to unjust obligations and limitations. The terms in your contract may be unfair, denying your rights, pay or job security.
• Can I negotiate terms in an employment contract?
  Yes, you can always negotiate if you find any terms of your contract need to be modified. Evaluate the clauses to see if there are any unfair terms. Discuss this with your employer and request clarification if needed. To ensure you are in a favourable position, always negotiate salary, benefits, non-compete clauses and notice periods before signing the contract.
• How enforceable are non-compete clauses?
  The scope, duration and location of the non-compete clauses should be practical. Courts may consider over-restrictive clauses invalid anyway. Review your clauses carefully and consult an employment lawyer to clear any ambiguities.
• What should I do if I believe a clause is unfair or illegal?
  If you feel the terms mentioned in your agreement are unfair or illegal, consult an employment lawyer or labour rights organization. You can also discuss this with your employer and request modifications or refuse to sign if a mutual agreement is not reached.