(Note: The following discussion is based on the common law and applies to all provinces except Québec, which is governed by the Civil Code of Québec).
Employment agreements play an important role in any employer-employee relationship, even in charitable and not-for-profit organizations. Without a properly drafted employment agreement an organization can find itself in a situation where it ends up having to pay out more money than expected, when it lets an employee go, or with having an employee leave on short notice, when there has been no notice provision drafted in their contract.
No matter what province an organization is registered in, an employment agreement must comply with the applicable employment standards legislation (“ESL”). Employers and employees cannot contract out of the minimum standards of ESL, and in most terminations, statutory notice, payment in lieu of notice, or a combination of both is required (unless there has been serious and intentional employee misconduct). Employers should also note that terminated employees also have the right, during the notice period, to a continuation of any benefits that the employee was receiving at the time of termination.
If there is no written enforceable termination provision in an employment agreement, or no agreement at all, then the common law can apply. If a contract does not limit the amount of notice an employee can receive at common law, then a termination without just cause could result costing an organization more money than expected. An example of this is the recent case of Markoulakis v SNC-Lavalin Inc., 2015 ONSC 1081, where the Court ended up granting an individual 27 months of pay in lieu of notice. Even though employers cannot contract out of the obligation to pay the minimum statutory termination pay, courts have allowed employers to contract on how much common law notice will be given. Therefore, should an employer wish to only offer the minimum employment standard notice, then it is up to the employee, after having the opportunity to meet with their own legal counsel, to agree with the termination provision or not.
Along with a properly drafted termination clause organizations should also ensure that their employment agreements address the following issues:
- compensation (this can include salary, any RRSP matching, car allowances, raises etc.);
- probationary period (if any);
- benefits (whether or not they will be available and any conditions associated with them);
- any other benefits of the position that will be offered;
- duties of the position;
- hours of work (if applicable);
- conflict of interest (especially if the employee will be a manager or executive director of the organization);
- privacy and confidentiality;
- intellectual property; and
- place of work (as some organizations may allow an employee to work from home).
As you can see, drafting proper employment agreements is essential, and organizations should ensure that they receive the proper counsel before signing any contracts with employees. Doing so will ensure that the risk of liability to the organization, and the directors themselves, will be minimized should a termination occur.