Transcript- Employment Contracts 101 by Angela Cao

Employment Contracts 101 – Transcript

by Sophie Odgers

(Edited for length and clarity)

Intro

The goal of this talk is to give you the information you need to understand your employment contract and negotiate terms that work for you. I would like to take a moment to acknowledge the importance of the land which we each call home. I'm speaking from the traditional, ancestral, and unceded territory of the Musqueam people.

I'm a litigation lawyer with focuses on employment law and business disputes. I practiced in law firms in Toronto for a few years, and in 2018, I started my own litigation practice in Vancouver called Queenstone Law. I'm a committee member with the advocate society, and in my spare time, I enjoy spoiling my dog and following other bully-breed dogs Instagram accounts. You may hear my dog barking in the background at some point in this presentation. That's just her hyping me up; she is the best hype woman for me.

Legal Disclaimer

Now, this probably shouldn't come as a surprise, but when lawyers deliver presentations, there will be disclaimers. The information covered in this presentation does not constitute as legal advice; it's for general information only, so you should always consult a lawyer for your specific situation.

This talk will cover employment contracts for workers located in BC, but there are contractual terms that are standard and applicable throughout the country. This talk is for workers who are employees, not independent contractors. It's also for non-unionized workers, because unionized workers are subject to collective bargaining agreements. This talk is also for employees in non-federally-regulated industries, because these workers are regulated under the Canada Labour Code.

Congrats! You Got a Job Offer! But Now What?

Congratulations! It's absolutely amazing and exciting. It's probably the culmination of months of hard work, so just imagine I'm throwing out some biodegradable confettis right now; I'm not doing jazz hands. So, everything is awesome. What now? Well, the employer sends you this employment contract. It is at least a few pages long. You just want to go sign above the dotted line and go celebrate, because you have read the parts that talk about your salary, your vacation days, and benefits. Everything else is just pretty much boiler plate nonsense, right?

Well, not quite, because buried in the legal jargons, there are a series of clauses that are essential to you, and it's important for you to understand them so that you can negotiate your contract and sail into the sunset or start your next dream job. You need to understand what you're signing. But before we talk about the employment contract itself, we need to talk about how you are protected by law as a worker.

How You’re Protected by the Employment Standards Act

The BC Employment Standards Act protects most workers in BC. It prevents the employers from doing some pretty sketchy stuff. Areas covered in the ESA include wages, hours of work, termination, public holidays, different types of leaves, severance pay, and other standards. But, you should know that the legislation, in this case the ESA, sets the minimum standards, so it's the floor, not the ceiling. I would say, if you ever run out of bedtime reading materials, feel free to give the ESA a try. I'm sure you'll find it a page turner, or it may cure your insomnia, so give it a shot.

Who’s not Covered Under the Employment Standards Act

The ESA covers most workers in BC, but not all workers. It's not applicable to independent contractors, and many of the self-regulated professionals are not protected. These are professions like:

- architects
- lawyers
- dentists
- doctors

and many more.

Also, managers are excluded from parts four and five of the ESA, which covers hours of work, overtime entitlements, and stat holiday pay. If you do not see your profession here on the list, or if you're not sure, it's good to check with an employment lawyer.

The ESA also does not cover employees in federally-regulated industries. These industries are covered under the Canada Labour Code, so these industries are like:

- banking
- marine shipping
- air transportation
- indigenous tribal councils

and many more.

Again, if you're running out of things to read before bed, check out the Canada Labour Code. Might be fun, or not. Now, keep in mind that the ESA sets the minimum standards for BC employees. Other important rights and obligations between you and the employer are set out in your employment contract. In other words, what I'm trying to say right now is that this presentation is about to get even more exciting, so pay attention.

What’s in an Employment Contract to Make it Legally Binding?

There are a few requirements in order for any contract to be legally binding or enforceable. A legally binding employment contract is no different from any other legally binding contract. There needs to be these five elements:

- #1 there needs to be a meeting of the minds, meaning you and your employer are in consensus of what is being contracted.
- #2 there needs to be an offer of employment and the acceptance of that offer.
- #3 there needs to be consideration. You can think of it as something of value given to a party in exchange for contractual promises, so in the employment context, there is an exchange of monetary payments from your employer, and work performed by you.
- #4 there needs to be capacity. This usually means the contracting parties are of age and are of sound mind.
- #5 the contract has to be legal. The court is not going to enforce a contract if your employer is asking you to break the law

Employment Contract Basics – What Should be in Your Contract (with Examples!)

So what is typical in an employment contract? While the employment contract should include the employee's title, it should also include a description of the employee's duties. This description is important because it establishes the employee's responsibilities and provides the benchmark for the employer's expectations. Depending on how sophisticated the employer is, sometimes the description can be very detailed, or it could be very general. I've seen contracts where the direct supervisor is even named. There are also contracts that do not include a list of duties at all and a lot of times the contract will also include work hours and work location. Of course, the contract will include the most important term to everyone, which is your compensation. This can be things like your base pay, the bonus structure, or a variable compensation scheme if there is one, or a stock option.

The contract will also set out the length of your employment, which can be a fixed term, like 12 months, or for an indefinite term. There's also the termination clause; it will set out your notice period, also known as termination pay, so don't think two weeks is the standard. A lot of times you'll see the employment contract makes reference to the ESA with regards to the length of notice period. The termination clause is important, so we will actually revisit this point again.

Your contract may also include how long your probation period will last, and usually three months is standard. It's also standard for the contract to say that your benefits will kick in after three months. Many employers will have the benefits information in a separate booklet or a separate schedule. Another common clause is the governing law clause. It enables the parties to specify what law will govern the rights and obligations of the parties, and those laws will be applied to interpret the contract and its effects if a dispute arises.

So usually the term will say, the contract will be governed by the laws of British Columbia, or another location, because sometimes you may be located in BC, but your company is based in Ontario, so the governing jurisdiction might actually say Ontario, and in those cases, the contract is likely to say that you have to go through the courts in Ontario if you want to file a lawsuit.

Very Important! Termination Pay Entitlements (with Examples!)

This has the potential to increase your costs if you have to pursue a lawsuit in another jurisdiction, and some jurisdictions will have laws that are better, or maybe worse for you, so let's take Ontario again, as an example. In Ontario, if you have a fixed-term contract and you get fired without cause, and if the contract doesn't specify what happens in early termination, the employer is actually supposed to pay you out for the remainder of the contract. Whereas in BC, your employer does not have to pay out the remainder of the contract. They only have to pay for reasonable notice.

For example, if you sign a contract for 12 months, you get fired after three months, and in Ontario your employer is supposed to pay you for the rest of the nine months if your contract doesn't talk about early termination, but in BC, you may be only entitled to one week, depending on what that contract says. There's also going to be an entire agreement clause. This means that any representation not included in your contract is not part of the contract. As an example, before you sign the contract, you receive an email from HR saying that, "Hey, you will be promoted in three years, yay!" But this is not written into the contract, so you can't rely on that email if you're not promoted after three years.

Then there's the independent legal advice clause. It means that you confirmed that you received advice from your own lawyer before signing the contract. The employer has this term in the contract to prevent an employee from saying, "Hey, I didn't know what I was signing, so I want to rescind," meaning revoke or cancel the contract.

What else, well, we've come to the point of termination again, because it's a very important term in your contact. An employee can be terminated with or without cause. You can be terminated with cause, which occurs in cases of serious workplace misconduct, like violence or embezzlement. Not to be dramatic or anything, but many judges in Canada have said in their judgment that terminating an employee with cause is the capital punishment of employment law. So as you can see, this means that a justified termination with cause rarely happens; it's a very, very high threshold for the employer to meet.

Often clients will come to me and ask, "Hey, how can an employer fire me without giving me a reason? I've always been such a great employee." The truth is an employer can fire an employee anytime without cause. They don't even have to tell you a reason. They can fire you any time, provided they're not firing you in a discriminatory way, and that they give you reasonable notice.

I have an example of discriminatory practice. I had a client who was fired after she came back from her mat leave; she was told that the company was eliminating her position completely. They paid her severance, but a few weeks later, she found out that the company posted a job posting for her exact position. There was a pretty strong case for discrimination based on gender and family status and she did end up filing a complaint with the Human Rights Tribunal.

Some common reasons for employers to terminate an employee without cause are things like an economic downturn, a company restructure, or because the company no longer requires someone to do your job, for real, not as an excuse. When an employee gets fired without cause, that employee is supposed to get reasonable notice of termination. It's also called “working notice”. This means that the employer needs to tell you in advance that you're being terminated.

For instance, your employer could tell you today that your last day working with the company will be in six months. Most employers prefer to provide severance pay and end the employment relationship immediately instead of keeping you working. Because it's super, super awkward to the employer and to you to keep working together when you have already been fired, so this is why severance pay is also called “pay in lieu of notice”. You may also hear people calling it “termination pay” or “notice pay”. Usually your contract will say, “Upon termination without cause, you will receive the minimum entitlement under the BC ESA”.

The ESA says that you get one week of pay after you have worked for more than three months but less than one year. You get two weeks pay for one year of work, and one additional week per year for up to eight weeks, meaning if you work at a place for 10 years, you still only get eight weeks. But remember what I said earlier? The ESA is the floor, it's not the ceiling, so without a valid and enforceable termination clause in a written contract which specifically limits an employee's entitlement to the minimums prescribed by the ESA, an employee will instead be entitled to what is colloquially referred to as common law reasonable notice.

Common law means judge-made law, instead of legislated law, like the ESA. Common law notice is assessed by considering the employee's length of service, availability of equivalent employment, relevant education, training, experience, age, and any other personal characteristics or circumstances a judge may deem relevant. When an entitlement is established, common law reasonable notice is inclusive of and often considerably greater than an employee's statutory minimum entitlements.

There are many instances where the courts have determined that for each year of service, you are entitled to one month of notice pay. This is not a hard and fast rule, but it's very fact-specific. As you can see, there's a big difference between when an employer limits your severance pay entitlements versus when there's no limiting language in your contract. Recently, I reviewed an employment contract for a finance director for a relatively large organization. Her severance pay entitlement was limited to the ESA minimum. However, I suggested that based on her level of experience and the level of her role and responsibilities, and that she's probably going to have a hard time finding a comparable job if she's terminated, she should negotiate for a better severance pay. She did, and she was able to increase it up to one month per year of service. You should understand that the underlying purpose of common law reasonable notice is to provide the employee with time, or pay in lieu of time to secure similar employment; it is not a penalty against the employer for firing someone.

In our current economic state, you really need to consider how easy or difficult it will be for you to find a comparable job; it is definitely in your interest to negotiate a higher severance package. Instead of assuming two weeks is the standard or the ESA should be the default, you should try to negotiate. And in the case of termination with cause, you get nothing, but as mentioned before, most employers will not allege that you have committed something so serious or so bad that they are dismissing you without paying you at all, because employers know how hard it is to successfully justify their position in court.

To summarize, it's important to understand your termination pay entitlements. Think about whether it's fair for your level or position, experience, et cetera. You also need to understand how the termination clause interacts with your incentive plan, like bonuses and commission. A lot of times, the terms of bonus or incentive plans stipulate that active employment is required. But the existence of this language, active employment, does not automatically disentitle you from payment of your bonus or incentive. In order for a term that talks about active employment to successfully exclude an employee's entitlement to a bonus payment after termination, the language in the plan has to be, has to be, absolutely clear and unambiguous, and it must clearly cover the exact circumstances in question. For instance, if an incentive plan only refers to the loss of bonus pay in circumstances of a termination with cause or without cause, it may not be enforceable where the employee's dismissal is wrongful, meaning the employee is let go without receiving the proper notice for severance pay.

In many cases, bonus or incentive plan documents are drafted by the employer, and without negotiation or consultation with the employee at all. If the employer alone drafts the documents, the courts will strictly construe the terms of the document and will rely specifically on the language used, rather than trying to interpret the employer's intended meaning. If interpretation is required, then the courts will usually find in the manner most favourable to the employee. Well, that's pretty comforting to know, that most likely it's going to be interpreted in your favour, but it's way better to clarify things before a dispute even arises. It's better to be clear now and clarify everything upfront than to fight it out in the court in the future, because chances are, you and your employer are both happier at the beginning of your employment.

Considerations for Work From Home & Remote Work Contracts

Since the pandemic, working from home has become more popular. Terms dealing with working remotely are making their way into the employment contract, so when looking at this clause, you may want to consider things like, “If you are required to show up in person from time to time, whether you have to be physically present in Vancouver”, for example, “If there is any compensation for setting up your workstation at home.” Another common term in the contract is the “non-disclosure clause” or “confidentiality clause”. It is very common, especially in technical industries.

Demystifying Confidentiality, NDAs & Intellectual Property (with Examples!)

This can be presented in an agreement in addition to the employment contract, or a clause in the employment contract itself. It is for any employee that deals with confidential information or trade secrets in their work. It mandates that the information not be shared with anyone outside of the company, including but not limited to your future employers. Definition of what's considered as confidential is usually included in the agreement. You're generally not to disclose things like suppliers, workflows, processes, and other proprietary information.

Sometimes confidential information also includes things the employer is thinking of doing but has not done so yet; it could be a research project that they have thought about doing, for example.

This might make you feel a little bit uneasy about what you can and cannot disclose. In this situation, just try to remember that what the employer is trying to protect is their competitive advantage. Information easily found online is not confidential; standard processes most people use in the industry aren’t usually considered as confidential.

If you're not sure if something is confidential, ask about it and have it put into the contract, or have it excluded from the contract. Sometimes there will be an IP agreement appended to your employment contract. (This is especially common for people in the tech industry.) The IP agreement deals with the ownership of intellectual property rights in the employment context.

The agreement provides for the assignment of all employee-created IP rights to the employer throughout the term of employment. These IP can be ideas, methods, spreadsheets, inventions, codes, et cetera. When in doubt, it is better to be specific and outline different situations that may occur.

For example, what happens to IP created by an employee outside of work hours but with the use of company knowledge and resource? Often, strict provisions will stipulate that all IP created by an employee during their tenure, regardless of the specific circumstances, become the property of the employer. So, what if you create something that is not related to your employment? You may want to have specific wording that excludes those inventions. The contract might also say that if the employee creates any work that may be subject to copyright, they will transfer the copyright to the employer. And copyright protection extends not only to artistic work like music, paintings, but also very common developments, like website design, software, and marketing content.

In Canada, the creator of the copyrighted work also owns moral rights to the work, which can dictate the manner in which the work is used and the right to be associated with that work, so a waiver of moral rights is also included in the contract. A term requiring the employee to assist the employer in obtaining protection for any IP created is also often included in the contract, since for example, declarations from the inventors may be necessary to apply for patent protection.

Sometimes there's also appended to the agreement an addendum where the individual, (the employee), identifies all the intellectual property in which they have an ownership interest prior to the commencement of their employment with the company. So it's clear that you owned these IP before you started working for the new company.

What to Consider About Non-Compete & Non-Solicitation Clauses

Another common term in the employment contract is the “non-compete clause”. It's a type of restrictive covenant that prohibits a former employee from entering into or starting a similar business as their former employer. This is an important term because it affects an employee's ability to work or start their own business in the same industry for a period of time after their employment term ends. It will also include a spatial restriction, meaning it might say you can't work for a competitor within all of Canada, so when disputes arise relating to this term, the courts will look to see whether a non-compete clause is necessary to protect a legitimate interest of the employer, not an imagined interest of the employer, or whether a non-solicitation clause would be sufficient.

Where a non-solicitation clause would be inadequate, the court will then examine the scope of the non-compete clause to ensure that it is reasonable. Meaning the clause is no broader in terms of spatial, temporal, and activity restrictions to protect the interest of the employer.

“Reasonableness” depends on your specific situation, and courts generally don't like overly restrictive non-compete clauses. Another common restrictive covenant is the “non-solicitation clause”, which restricts an employee from soliciting customers, clients, staff, accounts, or vendors, et cetera, during their employment and for a specific period of time when they depart the employer. So simply put, don't poach from your employer. Most employees find this term less onerous than the non-compete clause. This term is also subject to the reasonable standard as the non-compete.

How Side-Hustles Could Affect an Employment Contract

What if I have a side-hustle? Nowadays, many people have a side-hustle outside their 9 to 5. However, there is an implied condition that an employee owes loyalty to their employer. So generally speaking, non-compete and non-solicitation are applicable during the employment as well. In this case, if you have a side hustle or another job, you do have to consider whether you are contravening any of the restrictive covenants. Think about things like, can you do the work after hours or for your own business or for someone else's? Can you even do it at all? Do you need approval from your employer?

You can clarify these with your employer and have those terms drafted into the contract. I have seen contract that says the employee is allowed to work at X, which was the employee's own company, while working for the employer.

Make Contract Clauses Clear & Specific to Decrease Chances of Dispute

I want to reiterate that the terms of your contract should be as clear and as specific as possible to decrease the chances of dispute in the future. Some employers also include an arbitration clause in their standard-form employment agreements. This means that an employee will not be able to seek a trial in front of a judge or jury. Rather, the dispute will have to be heard and resolved by a third party called an arbitrator.

This process can be more cost- and time-effective than going through the courts. But if you receive an unfavourable result from the arbitrator, you may not be able to appeal it as you can in the court system. There's a 2020 Supreme Court of Canada case called Uber Technologies Inc versus Heller. This was a class action lawsuit. In this case, Heller is an Uber driver who signed a contract with Uber, and there was a mandatory arbitration clause in it. The court found that the mandatory arbitration clause was unconscionable. Therefore, it's unenforceable. The unconscionability comes from the great power differential between Uber and its drivers, and it resulted in an improvident bargain. Meaning that the arbitration clause was overly onerous on the Canadian drivers, because the clause said that the arbitration has to take place in the Netherlands, even though the drivers are based in Canada. So if you're not sure about a clause, ask your employer to clarify, and ask a lawyer.

You should get a lawyer to review a contract before you sign, or live dangerously, because we have all agreed to some random terms and conditions without reading them. But this is not the case of clicking on the “agree” button to get to some website; this is your livelihood. It is where you spend maybe over 40 hours a week; it is a part of your identity, so be sure to understand what you're signing, what you're agreeing to, and what rights you are getting and what rights you are giving up. Understanding your contract and getting it right at the beginning of your employment is helping your future self. Don't let things come as a surprise.

I had a client who was fired after 20 years at a company and got eight weeks of severance; there was no language in the contract that limited his entitlement to ESA minimums only. You don't want to assume or think that the employer is right, or is doing the right thing. It was a good thing that he thought something might not be right, that it wasn't sitting right with him. He contacted me and we reviewed it, and we were able to get him a way better result.

I also had another client who was told that the company was transferring her to Northern BC. She was really surprised by that, but when we reviewed the contract together, she realized that there is a clause that specifically dealt with this issue. The clause was not perfect, so there was a lot of room for negotiation and discussion. But if she had reviewed the contract at the beginning, she may not have been caught off guard and she might have negotiated with the employer for, say, a relocation compensation.

You don't want to be surprised by a letter from your former employer telling you to stop working at your current job because you're in breach of a non-compete, and if you don't stop, they will get an injunction against you. This also happened to a client. So I have told you to get a lawyer, so what can a lawyer do for you? A lawyer will review the contract with you. They will flag any issues that might be important. They will explain the contract to you and provide you information on what is standard and maybe something that is way out of the ballpark. It can help you focus on the important issues. For example, some people might be really focused on the IP clause because they feel like it is very stringent and they might feel singled out, but that IP clause might be normal and standard.

And some clients will think that two weeks severance is normal, but as you move up in seniority, it's probably too low and it can be negotiated. Lawyers will also give you some negotiation advice.

Why & How Lawyers Review Your Employment Contracts (with Examples!)

So how do I get my contract reviewed? Well, first thing to look for, an employment lawyer. I think the best source is always a personal referral from a friend, someone you know, or a colleague. You can also consult Google; they always have the answer. You can also contact “Access Pro Bono”. They offer a service called “Lawyer Referral Service” and will connect you with an employment lawyer where you will get a 30-minute free consultation.

During the consultation, you will get some general information, but not necessarily information that is specific to your situation. And of course you can contact me. I offer a free 15-minute call to determine if we are a good fit, and when you call me, it will usually be me who's picking up the phone instead of my receptionist.

The Contract Review Process (see Links!)

The contract review process is actually pretty simple: once an appointment is set up, I will ask the client to send me a copy of the contract. I'll review it before the meeting, and during the meeting we'll go through the contract in its entirety; I'll go over any questions or concerns; I'll make some recommendations and offer some negotiation strategies if needed.

Some clients will go back and negotiate with the employer or make revisions. In those cases, they can make a follow-up appointment for a final review of the contract. The appointment is usually about one hour. The turn-around time will depend on how busy the lawyer is. Generally speaking, I can schedule you in a couple of days, because these appointments are not too long, and if you're running out of time to return your signed offer letter or employment contract, don't panic. Ask for an extension!

The fact that you got an offer from the employer, it probably means that they like you, so they are going to give you the courtesy of an extension. The cost depends on the length of your appointment and the experience level of the lawyer, but you can expect somewhere between $200 to $500. I'm not trying to be sales-y here. Bottom line is that I want you to see a lawyer, and it doesn't have to be me. The cost may feel high, especially when you are in between jobs, but some of the things you're getting an employment lawyer to look at can worth quite a bit in the long term, like severance pay or bonuses. This is not like agreeing to accept a website's cookies. This is your employment, which is a big part of your life.

Getting Your Money’s Worth out of a Lawyer Review

So, how do I get my money's worth when I meet with the lawyer? Well, review the contract beforehand. You don't have to understand everything, but you should try to highlight your concerns and questions, and during the appointment, ask questions! There are no stupid questions! I'm not trying to be nice here. We're lawyers. This is the job. We answer legal questions, we resolve disputes, we advocate for our clients, and you can also ask for some negotiation tips if you do want to negotiate. You can ask for things like what's normal at your level of experience. You can ask the lawyer to review the updated contract if you go back and negotiate. Sometimes it's included in the original fee. I tend to offer a flat fee to people who consult with me.

Final Thoughts

Review and understand your contract before you sign. A lot of terms are negotiable, so don't be afraid to negotiate, and if they say no, it's not the end of the world. Make sure that the terms are specific and narrow, especially when you are signing away your rights. When in doubt, ask an employment lawyer!

Employment Contracts 101 – Transcript

transcript

Employment Contracts 101