Sultan Lawyers on Employment Contracts & Severance Pay, Pt. 2

In this second part of our three-part series on employment contracts and severance pay, we are addressing various aspects of employment contracts which we believe are worth negotiating.

Part two is intended to build on part one of our series, where we discussed the importance of employment contracts in defining relationships with employers. 

Specifically, because of the fundamental impact that employment contracts have on employee rights, in our opinion most employees should at least consider negotiating key aspects/clauses of the contract.     

It is understandable if employees/prospective employees may be hesitant to negotiate employment contracts for fear of losing the position. However, in our experience, employers are often willing to compromise on various aspects of the contract, if they feel that the employee is bargaining in good faith.  This includes negotiation with respect to a wide range of terms, from compensation to termination, to post-employment restrictions (non-solicitation, non-competition, etc.).

Given the above, the following provides insight regarding various parts of an employment contract we believe are worth considering negotiating prior to commencing employment (or moving to a new role):

WHAT ARE THE MOST COMMON ASPECTS OF MY EMPLOYMENT CONTRACT THAT I SHOULD CONSIDER NEGOTIATING?

• Start Date: If you are employed when you receive a job offer, you may be required to provide your current employer with a fixed period of notice for your resignation. You may want to negotiate an alternative start date with the new employer, particularly if the start date provided in your new job offer does not correspond with the notice required for your current employer. This can help to maintain a positive relationship with your soon to be ex-employer, which can be critical to ensuring that you have allies as you move through your career. 

• Working from Home: Since we are working through COVID-19, many employers have adopted work from home policies. If it is feasible for your employer to offer work from home arrangements and this is an arrangement that you may wish to consider long term, you can raise this with your employer at hiring. Not only can this benefit you, but the employer may also appreciate you indicating this early as it can help with their return to work plans, including efficient planning of office space. 

• Probationary Period: If you are leaving a job and/or your prospective employer has been aggressive in pursuing you, it may be worth negotiating the removal of any probationary clause. The reason is that if the employer elects to end your employment earlier than you expect, you will want support as you transition to alternative employment. Further, you may be extremely disappointed to find that you have traded substantial termination protection (in your old job) for little to no protection (i.e. minimum Employment Standard entitlements) protection in the new job.

• Termination clause: Employment contracts may include clauses that limit an employee’s entitlement to compensation if the employer terminates the employee’s employment. Many employers restrict an employee’s entitlement to termination pay down to the minimum entitlements under the ESA. This means that an employee would be entitled to significantly less protection upon termination than what the common law provides to employees. We strongly suggest that employees carefully review their entitlements upon termination as this can be critical to ensuring a successful transition post-employment.  

• Vacation days: In Ontario, the Employment Standards Act, 2000 (“ESA”) provides employees with two (2) weeks or ten (10) days of vacation per year, for employees with less than five (5) years of service. If you are an employee that is beginning in a position that is more senior in nature, or if you are coming into a new role with previous experience, you may consider negotiating your vacation days with your new employer to secure more vacation than what is offered under the ESA.

• Restrictive Covenants: Restrictive covenants are clauses that restrict what an employee can do following termination of employment (whether as a result of resignation or termination by the employer). These include clauses such as those relating to soliciting clients of the employer or employees to leave your former employer.  It can also include strict restrictions regarding the use of information or from competing for a defined period (including by working for a competitor). 

If your contract includes any restrictive covenants, it may be worth considering negotiating for a loosening or removal of these clauses, particularly because they can significantly limit your re-employment options and/or ability to generate work through pursuing business opportunities. Having said this, in some cases it may be smarter to not bother negotiating with the employer on these clauses, simply because there is a good chance that the clauses will be found to be unenforceable at law.  In this case, it may be decided that it is best to let the clause be and instead focus your energies on negotiating other terms of the contract. 

TAKEAWAYS ON NEGOTIATING EMPLOYMENT CONTRACTS

An employment contract is a critical document that should not be taken lightly. It almost always defines the working relationship with an employee but also potentially following the end of your employment. Sultan Lawyers is not suggesting that employees should be aggressive or confrontational with their employers (or prospective employers), but rather that a strategic rational decision should be made based on an intelligent risk/reward analysis. 

If you are an employee who has received a job offer and would like to have the offer reviewed by one of our employment lawyers to know what elements of the offer may be worth negotiating and to review practical strategies on how to approach your employer with proposed adjustments, or if you have questions relating to termination, wrongful dismissal, or otherwise, please contact Toronto employment lawyers, Sultan Lawyers at 416-214-5111 or here.

Keep an eye out for the next blog in this series which discusses entitlements and negotiation strategies with respect to severance packages!