Employment Agreement Pitfalls
Written employment agreements can benefit both employers and employees. They provide clarity about each party’s entitlements and obligations. Perhaps because of this, written employment agreements appear to be increasingly common. But before signing on the dotted line, employers will want to avoid these common pitfalls:
- Failing to ensure that the employment agreement is signed prior to the first day of work. An employment agreement is like any other contract. It requires an offer, acceptance and consideration (i.e., the transfer of something of value) in order to be valid. If an employee commences work prior to signing the agreement, certain terms of the employment agreement will be unenforceable due to lack of consideration.
- Failing to expressly incorporate any workplace policies, handbooks or codes of conduct in the employment contract in order to increase the likelihood of enforceability.
- Failing to ensure that the terms of the employment agreement comply with the minimum standards required by the British Columbia Employment Standards Act (“ESA”). This is one of the most heavily litigated employment law issues. The ESA sets out the minimum standards for wages (e.g., overtime pay, vacation pay and termination pay) and working conditions (e.g., hours of work, deductions and assignment of wages, and vacation entitlement) in most workplaces. An employment agreement cannot provide an employee with less than what he or she is entitled to under the ESA. Any term that attempts to “contract out” of the ESA will be null and void, potentially leaving employers with increased liability. Ensuring compliance is of particular importance when dealing with termination provisions.
- Failing to ensure that an employment contract is clear and unambiguous. Any ambiguity may result in certain terms of the employment agreement being unenforceable. Alternatively, the terms of the agreement may be construed against the party who drafted the contract pursuant to the contractual interpretation principle known as contra proferentem.
- Failing to make sure that non-competition and non-solicitation clauses are reasonable. The "general rule" is that restrictive covenants, being restraints of trade, are contrary to publicpolicy and therefore void. As such, restrictive covenants must be carefully crafted to be enforceable.
- Failing to understand the different notice obligations in fixed-term and indefinite term employment agreements. If an employer terminates a fixed-term employment agreement prior to its conclusion, the employee may be entitled to compensation for the balance of the fixed-term agreement. Fixed-term employment agreements should include a clause that outlines an employee’s entitlement if the employer prematurely terminates the agreement.
Employment relationships and (consequently) employment agreements are becoming increasingly complex. Given the numerous pitfalls, it is wise to have an experienced employment law lawyer draft or review your employment contracts.