Employment Contracts – Key Clauses and Their Legal Significance

Employment contracts are the foundation of the employer-employee relationship, outlining the terms and expectations of employment. In Ontario, a well-drafted contract not only protects employers but also helps employees understand their rights and responsibilities.

Some of the most important clauses to look for include:

1. Termination Clause – This sets out the notice or severance an employee is entitled to upon termination. Without a clear and enforceable clause, Ontario’s Employment Standards Act (ESA) minimums apply, and employees may also be entitled to common law notice, which is typically more generous.

2. Duties and Responsibilities – Clear job descriptions help prevent disputes about expectations and performance.

3. Non-Competition and Non-Solicitation Clauses – These restrict an employee’s ability to work for competitors or solicit clients or colleagues after leaving the company. In Ontario, non-compete clauses are generally unenforceable except in very limited circumstances.

4. Confidentiality Clauses – These protect the employer’s sensitive business information and often remain in effect after the employment relationship ends.

5. Compensation and Benefits – Clarity around wages, bonuses, commissions, and benefits helps avoid confusion or claims of unpaid entitlements.

A common mistake is to assume that all employment contracts are enforceable as written. Courts in Ontario will scrutinize contract language carefully, especially termination clauses, to ensure they comply with the ESA. If a clause breaches the Act, the entire termination clause may be invalid.

Employees should be encouraged to seek legal advice before signing, especially when starting new roles or when presented with new contract terms during employment. Employers should likewise consult an employment lawyer to ensure their contracts are legally sound and up to date with the latest legal standards.

Ultimately, a clear, fair, and enforceable employment contract protects both parties and reduces the risk of costly disputes down the line. For contract review and legal support, contact Hilborn and Konduros in Cambridge, Ontario.