Employment Agreement

An employment agreement is an agreement with an employee. It should always be entered into with employees prior to the employee’s start date.

These are some of the important elements that are included in an employment agreement:

• job title and description
• working hours and location
• the term of employment, such as a fixed 1-year term or indefinite term
• compensation and entitlement to any benefits
• if the employee is entitled to stock options, it would refer to a stock option agreement
• conditions of employment, such as satisfactory background checks
• confidentiality and non-solicitation provisions
• intellectual property provisions confirming that the corporation will own all intellectual property created or contributed to by the employee
• the amount of notice or pay in lieu of notice that must be provided on termination (and the corporation’s right to terminate the employee without notice in accordance with provisions of applicable employment standards legislation (Employment Standards Act, 2000 in Ontario)

The provisions dealing with notice on termination is arguably the most important provision included in an employment contract. It permits the corporation to limit the notice period as long as it is not less than the minimum under employment standards legislation. In the absence of such a provision, the employee would generally be entitled to the longer common law notice, which varies depending on the circumstances, but could be about 1 month per year of service up to a maximum of about 2 years.

In order for the termination provision in an employment agreement to be effective in Ontario, the termination provisions of the agreement must all be consistent with the provisions of the Employment Standards Act, 2000 and the employment agreement should have been entered into before the employee’s start date.