It has become common practice for employers to require that employees sign was written employment contracts before starting a new job. The terms and conditions of these contracts, which can vary widely from contract to contract, have a significant impact on an employee’s rights. Whereas some contracts simply confirm basic employment details (such as the employee’s start date, hours of work, and rate of pay), other contracts go into much greater detail defining – and limiting – the rights of the employee.
Although employers usually have their employment contracts prepared and reviewed by legal counsel, it is much less common than employees seek out legal advice. This causes major issues for employees, who regularly agree to terms without knowing the full legal implications. Because employment contracts can significantly limit an employee’s legal rights, they should not be considered a mere formality.
There are countless red flags to look out for in an employment contract that will limit an employee’s rights. As an example, a few issues that arise frequently in employment contracts are:
– Termination clauses: Usually an employee is owed reasonable notice of dismissal before an employer can lawfully terminate the employment without cause. But employment contracts can – and often do – take away this right from an employee. Instead, an employment contract may specify that the employer is only required to provide a much shorter period of notice (often specifying that the employee will receive the minimum notice required under BC’s Employment Standards Act). Months or years later, if and when an employee is terminated without cause and without any notice, they may be surprised to learn that their severance entitlements are minimal and the contract prevents them from bringing a wrongful dismissal claim.
– Arbitration clauses: Generally if a legal dispute arises between an employee and an employer, that dispute can be taken to court. For example, an employee who is wrongfully dismissed might sue if negotiations are unsuccessful. However, an arbitration clause can take away that right. Instead of being permitted to sue at court, an employee may be forced to go through private arbitration. While there can be some benefits to private arbitration, the costs of arbitration often outweigh those benefits. Whereas an employee who sues does not have to pay to hire a judge, an employee will usually be required to pay for at least some of the costs to hire an arbitrator.
– Non-competition/non-solicitation agreements: Many employment contracts will also include non-competition and non-solicitation clauses. These clauses can prevent an employee from obtaining or performing certain types of work following the termination of the employment. While some employees assume that these types of clauses will be unenforceable, courts can and often will enforce them so long as they are clear and reasonable. And even if they appear to be unenforceable, these types of clauses still may cause future problems for an employee (eg. an employer may sue the employee anyway, believing that the clause is enforceable; or future employers may refuse to hire an employee who is currently subject to a non-competition or non-solicitation clause, regardless of whether it may eventually be determined to be unenforceable).
It is common for employees to seek out legal advice after an issue arises (eg. once there has been a dismissal). However, by this time it may be too late for a lawyer to help. The employee’s rights will have already been signed away long ago. This is why it is recommended that employees obtain legal advice before signing an employment contract. There are a number of benefits to obtaining advice prior to signing the contract, including:
– Avoiding future litigation/legal fees: Seeking advice on an employment contract at the outset can help to prevent significant legal costs at a later stage. Employment contracts with unclear, vague, or unreasonable terms are a major source of legal disputes and litigation, which can result in substantial legal bills at a later date.
– Negotiating fair terms: Once an employee understands which terms are problematic, they may choose to propose changes that could make the contract fair. Whereas employees often just think to negotiate on their compensation and benefits (salary, vacation days, etc), other terms can be negotiated as well. An employment lawyer can help to identify which terms will be important to address, and also advise on the potential benefits and risks of negotiating the terms of an employment contract with a potential employer.
– Avoiding unfair contracts: Some employment contracts may be so unfair that an employee may want to avoid them at all costs. For example, a contract that includes both a broadly worded non-competition agreement and a short termination period means that an employee could be terminated with minimal severance and then have no ability to work in their profession for a period of time.
– Knowing one’s rights and responsibilities: Even if an employee agrees to sign the employment contract after obtaining legal advice, there is value in understanding one’s legal rights and responsibilities. For example, if the employment contract allows the employer to terminate the contract on short notice, the employee may be incentivized to look for more stable employment when an opportunity arises. Or if there is a potentially valid non-solicitation clause, it is helpful for the employee to know what types of career opportunities they must steer away from in the future. On the other hand, if the employment contract is generally fair and reasonable, this may provide reassurance that the job is a good opportunity worth accepting.
It is important not to underestimate the implications of signing an employment contract. The contract may have consequences that are not immediately obvious, but which greatly limit an employee’s rights or lead to legal disputes and litigation at a later stage. Seeking legal advice prior to signing an employment contract places an employee on more equal footing with the employer and helps to avoid nasty surprises at a later date.
Employees looking to have their employment contracts reviewed are welcome to reach out to us by phone at 604-988-1000 or by sending an online inquiry.
About the Author
Brendan Harvey advises and represents employees and small businesses at all stages before, during, and after the employment relationship. His primary areas of practice include wrongful dismissal, employment standards, and human rights litigation. If you would like to schedule a meeting with Brendan Harvey or any other of our lawyers, give us a call at 604-988-1000.
