Employment agreements are contracts that define the terms, conditions, rights and obligations in an employment relationship. Employment contracts can be written or oral (or a combination of the two) and can vary widely in scope and detail. Often, employers will make a written offer of employment to an employee, and once that written offer is accepted by the employee, it becomes a binding written employment agreement.
Compared to consulting or independent contracting, an employment agreement applies to the relationship between an employer and employee. An employment agreement often includes provisions for: the duration of the job; work hours; compensation; benefits; job duties and responsibilities; reimbursement for expenses and professional dues; directors and officers insurance and indemnities; workplace policies; confidentiality and intellectual property; and termination/severance.
In Alberta, employment agreements are governed by both common law and by statute - the Employment Standards Code (the “Code”).
Benefits of a written employment agreement
Having a written employment agreement to define the employment relationship has many advantages, and allows both sides the certainty of defining the rights and obligations of each party.
For employers, a well-drafted employment agreement can help ensure:
- The employer is compliant with its legal and statutory obligations to the employee;
- The employer’s risk is minimized by clearly defining the scope of the job, the expectations of the employee, and by including provisions to deal with termination, non-competition and non-solicitation; and
- The employer saves time and money by reducing the likelihood of litigation in the event of a breakdown of, or conflict in, the employment relationship.
Employees ought to be cautious when reviewing a written employment agreement and consider consulting with an experienced employment lawyer prior to signing. An experienced employment lawyer can:
- Help the employee understand the terms of the agreement, including the legal implications of the agreement;
- Advocate and negotiate for the employee’s legal rights (agreements drafted by the employer will not necessarily be the most favourable to the employee, particularly with respect to termination, severance and any restrictive covenants); and
- Help the employee articulate and clearly define the employee’s expectations of the scope of the job, their duties and responsibilities, and to consider whether those expectations are represented in the agreement.
A well-drafted employment agreement is the best safeguard for an employee’s rights. Having employers encourage employees to obtain independent legal advice relating to the agreement can also protect employers by ensuring the employee understands what they are agreeing to.
On the other hand, the implications of a poorly-drafted employment agreement can be significant: the agreement (or offending clause) may be deemed unenforceable by the courts.
Having an experienced employment lawyer on both sides is therefore beneficial for all parties, to help ensure each party understands their rights and entitlements and that the agreement is valid and enforceable.
Common legal issues that arise in employment agreements
Many of the most commonly-encountered legal problems that develop in employment relationships can be avoided by retaining experienced legal counsel to assist in drafting and negotiating the agreement before it is signed. These legal issues include:
- Language that is ambiguous or unclear: including language in employment agreements that is ambiguous/unclear or too broad, especially in the context of termination provisions and restrictive covenants, can result in the provision being unenforceable.
- Ensuring compliance with the Code: employment agreements must be in compliance with all of the statutory minimums set out in the Code.
- Restrictive covenants that are too broad and unreasonable: courts will closely scrutinize non-solicitation and non-competition clauses in order to ensure they are not overly restrictive for the employee. These clauses are binding only where the terms are not overly broad or ambiguous, and must be reasonable.
- Severance: severance provisions in a written agreement can conflict with the minimums established in the Code, and/or can be less than what the employee would otherwise be entitled to at common law.
Carscallen LLP’s employment expertise
Whether you are an employee who has been presented with a written employment agreement, or a business making a job offer, Carscallen’s experienced team of Employment, Labour and Human Rights lawyers can assist you. Our lawyers specialize in practical, individualized advice to help you understand your rights, duties and responsibilities as an employer or an employee.
Our team of lawyers provide tailored, proactive advice to help successfully navigate every stage of the employment relationship. We have the legal expertise to help minimize problems and disputes before they happen, as well as the ability to resolve conflict quickly and constructively when it arises.
Contact any member of our Employment, Labour and Human Rights team with any questions you may have about employment agreements, or any other personal or business employment-related issues.
*This update is intended for general information only on the subject matter and is not to be taken as legal advice.
Employment Standards Code, RSA 2000, c E-9.