CALGARY EMPLOYMENT AGREEMENT | LAWYER

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An employment agreement is a legally binding contract that establishes the terms and conditions of the working relationship between an employer and an employee. An employment agreement outlines the rights, responsibilities, and expectations of both parties, providing clarity and a framework for the employment relationship.

Key Considerations of Employment Agreements for Employers

A. Compliance with Applicable Employment Standards Legislation

Minimums are Non-Negotiable: The most fundamental rule is that no term in an employment agreement can provide less than the minimum entitlements set out in the applicable provincial or federal employment standards legislation (e.g., Alberta's Employment Standards Code). If a contract attempts to do so, that specific term will be void, and the statutory minimum will apply. This often results in significantly higher common law entitlements for employees, which can be costly for employers.
Regular Review: Employment standards legislation can change, and judicial interpretations of termination clauses evolve. Employers must regularly review and update their template agreements to ensure ongoing compliance.

B. Enforceable Termination Clauses

Mitigating Common Law Damages: This is arguably the most critical clause for employers. Without a properly drafted and enforceable termination clause, an employee terminated "without cause" is entitled to "reasonable notice" at common law, which can be far more generous (often 1-2 months per year of service, up to 24 months or more, depending on age, length of service, character of employment, and availability of similar employment) than the minimums required by the applicable employment standards legislation.
Specificity is Key: The clause must clearly and unambiguously limit the employee's entitlements to something specific (e.g., statutory minimums, or a formula that meets or exceeds them). Ambiguity will almost always be interpreted in favour of the employee.
All Entitlements: The clause must account for all entitlements upon termination, including base pay, benefits, and potentially bonuses, to ensure it doesn't fall below statutory minimums at any point during the notice period.

C. Consideration

New Hire vs. Existing Employee: For a contract to be legally binding, there must be "consideration." For a new hire, the offer of employment itself is the consideration. However, if an employer asks an existing employee to sign a new employment agreement (especially one that limits their common law rights), there must be fresh consideration. This means something new of value beyond continued employment, such as a raise, bonus, promotion, new benefits, or a signing bonus. Without fresh consideration, the new contract (or its less favourable terms) may be unenforceable.
Timing: The agreement should ideally be signed before the employee's first day of work. If signed after, the "fresh consideration" requirement becomes even more critical.

D. Clarity and Lack of Ambiguity

Contra Proferentem: Canadian courts apply the doctrine of contra proferentem in employment law, meaning any ambiguity in a contract will be interpreted against the party who drafted it (the employer). This highlights the need for clear, precise language in all clauses.
Avoid Generic Templates: Using generic online templates or contracts are all too often not tailored to specific employment jurisdiction's laws (be it provincial or federal) and the specific role can lead to significant enforceability issues and unexpected liabilities.

E. Restrictive Covenants (Non-Competition, Non-Solicitation, Confidentiality)

Protecting Business Interests: These clauses are vital for protecting trade secrets, client relationships, and the employer's competitive advantage.
Enforceability Challenges: Courts generally view restrictive covenants as a restraint of trade and will scrutinize them heavily.
- Non-Competition: Extremely difficult to enforce unless absolutely necessary to protect a legitimate proprietary interest, and even then, they must be reasonable in scope, duration, and geographic area. Courts often prefer non-solicitation over non-competition.
- Non-Solicitation: Generally easier to enforce than non-competes, but still must be reasonable in scope (e.g., specific clients the employee dealt with) and duration.
- Confidentiality: Most enforceable, as employers have a strong interest in protecting their proprietary and confidential information.
Drafting Precision: These clauses must be narrowly tailored to protect a legitimate business interest and not simply to prevent competition. Vague or overly broad clauses are likely to be unenforceable.

F. Probationary Periods

Express Agreement: While the provisions in many employment standards legislation allow for a short initial period (e.g., 3 months) where notice for termination is not required, common law often implies a duty of reasonable notice even for short-term employees. To rely on a probationary period for termination with little or no notice, it must be expressly stated in the written employment agreement.
Purpose and Criteria: The agreement should define the length of the probationary period and state that termination during this period can occur if the employee is deemed "unsuitable" for the position (not just "without cause").

G. Right to Layoff

Constructive Dismissal Risk: In Canada, unless the employment agreement specifically grants the employer the right to impose a temporary layoff, doing so can constitute a "constructive dismissal." This means the employee can treat the layoff as a termination and sue for wrongful dismissal.
Clear Clause: If the employer wants the flexibility to implement layoffs, a clear clause explicitly allowing for this without it being considered a termination is essential.

H. Changes to Terms of Employment

Flexibility for Business Needs: Businesses evolve, and employers may need to change job duties, reporting structures, or even work locations. Without a clause allowing for reasonable changes, significant alterations could also lead to a claim of constructive dismissal.
Right to Assign Duties: Including a clause that grants the employer the right to assign or re-assign duties can be beneficial.

I. Intellectual Property (IP) Ownership

Clarity on Creation: It's crucial for employers to ensure that any intellectual property (inventions, software, creative works, etc.) created by the employee in the course of their employment belongs to the company.
Assignment Clauses: The agreement should include clear assignment clauses transferring all IP rights from the employee to the employer.

J. Compensation and Benefits

Clarity on All Elements: Clearly define base salary, any bonus structures (including discretion), commissions, vacation entitlements (ensuring they meet the applicable employment standards legislation minimums), sick leave, and all benefits (health, dental, RRSP, etc.).
Bonus Discretion: If bonuses are discretionary, state that explicitly to avoid claims for lost bonuses upon termination.
Vacation Accrual and Payout: Detail how vacation accrues, if carryover is allowed, and how it's paid out upon termination.

J. Dispute Resolution

Mediation/Arbitration: Employers may consider including clauses that require mediation or binding arbitration for disputes, potentially avoiding lengthy and costly litigation in court.

L. Entire Agreement Clause (Integration Clause)

Prevents Outside Claims: This clause states that the written agreement constitutes the entire agreement between the parties, superseding any prior verbal discussions or representations. This helps prevent employees from claiming reliance on unwritten promises.

M. Independent Legal Advice (ILA) Recommendation

While not always legally required, it's good practice for employers to advise employees to seek independent legal advice before signing the agreement. This can bolster the enforceability of the contract by demonstrating that the employee had an opportunity to understand its terms.

Key Considerations of Employment Agreements for Employees

A. Understanding Your Role and Responsibilities

Job Title and Description: Is it accurate and comprehensive? Does it reflect what you discussed during interviews? Vague job descriptions can lead to scope creep or disputes later on.
Reporting Structure: Who do you report to? This clarifies the chain of command.
Location of Work: Is it explicitly stated? If it's remote or hybrid, are the terms clearly defined (e.g., ability for the employer to recall to office)?

B. Compensation and Benefits

Base Salary/Wage: Is the amount clear? What is the payment schedule (bi-weekly, monthly)?
Overtime: Are you eligible for overtime, and how is it calculated?
Bonuses/Commissions: Are the terms for earning these clearly outlined? What metrics or conditions must be met? Are they discretionary or guaranteed?
Benefits Package: What health, dental, vision, life insurance, and disability benefits are included? When do they start? What are the employee contributions?
Retirement Plans: Details about RRSPs, pension plans, or other retirement savings, including employer contributions and vesting schedules.
Paid Time Off: Vacation days and vacation pay, general holidays and general holiday pay, sick leave, and personal days. How are they accrued and used?
Expense Reimbursement: Clear policies on what expenses are reimbursable and the process for claiming them.

C. Termination Clauses

Termination Specifications and Payment Particulars: Although the legal terms pertaining to the termination of an employment arrangement are particularly significant, given they are hopefully a long time off, if ever, and your focus is on commencing your employment, not ending it before it starts, it is all too often given too little attention, if any. In most circumstances, the key to reviewing termination clauses is ensuring that they aren't unreasonable.
Temporary Layoff Clauses: Does the agreement permit the employer to temporarily lay you off? Without such a clause, a layoff could be considered a "constructive dismissal," entitling you to severance.

D. Restrictive Covenants

Confidentiality/Non-Disclosure Agreements (NDAs): These are common and generally enforceable. Understand what information is considered confidential and your obligations.
Non-Solicitation Clauses: These prevent you from soliciting clients, customers, or even other employees after leaving the company. Review the scope (timeframe, geographic area, definition of "clients"). These are more likely to be enforceable than non-competes.
Non-Compete Clauses: These are highly scrutinized by Canadian courts and are often unenforceable, especially for non-executive employees. They prevent you from working for a competitor or starting a competing business. If present, evaluate the reasonableness of the scope (geographic area, duration, type of business). An overly broad non-compete is likely unenforceable.

E. Intellectual Property (IP) Ownership

The agreement will likely state that any intellectual property created during your employment and related to the business belongs to the employer. Understand these terms, especially if you have hobbies or side projects that could be perceived as related to the employer's business.

F. Probationary Period

Is there a probationary period? What is its length? During this period, termination usually requires little or no notice or severance. Ensure it complies with the applicable employment standards legislation (e.g., minimum notice after 3 months in Alberta, even during probation).

G. Changes to the Agreement

How can the agreement be amended? Typically, it requires mutual consent. Be wary of clauses that allow the employer to unilaterally change significant terms of your employment, as this could lead to a constructive dismissal claim if the changes are substantial and you don't agree.

H. "Entire Agreement" Clause

This clause states that the written agreement is the complete and final agreement between the parties, superseding any prior verbal discussions or understandings. This means if it's not in the contract, it likely doesn't apply. Ensure all promises and agreed-upon terms are in writing.

I. Independent Legal Advice

It is strongly recommended that you seek independent legal advice from a knowledgeable employment lawyer before signing an employment agreement, especially if it's for a significant role, includes restrictive covenants, or you have any doubts. Employers often build in a clause confirming you've had the opportunity to seek legal advice; this helps them later argue the contract is enforceable.
Timing: Ideally, you should receive the contract and have time to review it before your first day of work. If you sign it after you've started, for a new employee, it can sometimes be deemed unenforceable due to a lack of "fresh consideration" (you need a new benefit, not just the continued offer of the job you already started). For existing employees, any new contract or changes to an existing one must be accompanied by "fresh consideration" (e.g., a raise, bonus, promotion) to be enforceable.

Our law firm provides strategic legal advice, review and drafting of employment agreements for both employers and employees in Calgary and beyond. Schedule an initial consultation with our law firm to learn more about how our extensive employment contract legal experience can be put to your advantage. Call 403-400-4092 or email our law firm at Chris@NeufeldLegal.com today.

Limits of Employment Agreements