What Employers Should Know When Drafting Employment Contracts

A carefully drafted employment agreement is critical in protecting an employer’s interests. When employment disputes arise, they often hinge on the language and content of the employment agreement.

If the agreement is unclear and ambiguous, it will generally be interpreted in favour of the employee due to the vulnerability of the individual employee and the imbalance of power in the employment relationship. Although the specifics of an employment agreement will vary depending on the position, there are many standard provisions that should be included. Some of the key provisions an employer should consider incorporating include probationary periods, termination clauses and restrictive covenants.

Probationary Periods

A probationary period is like a trial period. It allows an employer to determine the suitability of an employee for the workplace. A probationary period provision will outline a period of time in which the employee may be dismissed based on their “unsuitability” with the organization. This provision helps to protect an employer from claims for wrongful dismissal.

Termination Clauses

An employment agreement should set out terms for dismissal, including notice provisions. This includes outlining how much notice or pay in lieu of notice an employer must give an employee for termination without cause. An employer cannot contract out of the statutory minimum for notice under The Saskatchewan Employment Act. Any attempt to contract out of these standards may render the termination provision unenforceable. Employers may also wish to outline how much notice an employee must give before quitting.

Restrictive Covenants

To be enforceable, a restrictive covenant must protect the legitimate interests of the employer. Whether a restrictive covenant is reasonable will depend on the extent of the activity prohibited, the temporal range of the prohibition and the geographic range of the prohibition. Proprietary interests such as trade secrets, customer lists and other confidential information obtained during employment have all been recognized as being worthy of protection from restrictive covenants. Non-solicitation and non-competition clauses are also commonly included in employment contracts.

Amendments to the Canadian Competition Act coming into force in June 2023 will affect the enforceability of restrictive covenants.

Other Provisions

In addition to the provisions outlined above, an employer will want to ensure the employment agreement covers employee duties and responsibilities, hours of work, vacation, compensation, benefits, and confidentiality and privacy issues. The agreement may include terms related to the ownership of inventions and information, the right to impose temporary layoffs and conditions of offer. Employers should also consider other factors that may be important to the organization that should be included in an employment agreement.

Employment agreements must be periodically reviewed to ensure they comply with statutory obligations and evolving case law. Provisions within an employment contract that allow for amendments is an important consideration when drafting a new agreement.

Learn More at Our Saskatchewan Employment Law Webinar

To learn more, join on us on January 19, 2023 for our SK Top 10 Employment Law Topics Every Employer Should Understand webinar, which will include a presentation on key considerations for employment agreements. We’ll cover why every employer should implement employment contracts, the importance of using employment contracts to protect the interests of employers, and implementing employment contracts for new and current employees.

To learn more about the webinar and to register, visit our event page.

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Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.