• First Reference
  • About us
  • Contact us
  • Blog Signup 📨

First Reference Talks

Discussions on Human Resources, Employment Law, Payroll and Internal Controls

  • Home
  • About
  • Archives
  • Resources
  • Buy Policies
You are here: Home / Employee Relations / Why bother with employment contracts?

By SpringLaw | 2 Minutes Read October 14, 2016

Why bother with employment contracts?

Employment Contact being signed by the employee

I had a client recently ask why he would bother going through the cost and efforts of doing up an employment contract, if he was going to have to fight with ex–employees’ lawyers and pay out a package in a without cause situation anyway. Good question.

Without cause termination entitlements

It remains very difficult to meet the “just cause” termination threshold in Canada, and in the vast majority of cases, the employee will be entitled to notice or pay in lieu of notice if the employer wants to end the relationship for any reason, other than just cause. Reasons such as a decline in business or moving a division of the company off shore are not just cause, even if they may be a legitimate reason to terminate an employee’s employment.

All employees must get at least the minimum amount of notice or pay set out in the applicable employment standards legislation. If there is no written employment contract that clearly sets out the entitlements upon termination (either capping the amount to the statutory amount or providing a bit more on top of the statutory minimums), the employee will be entitled to the common law amount.

The common law amount includes the statutory amount, is typically much more than the statutory minimums, and is an unpredictable range depending on the unique factors of the individual and how similar cases have been decided in the past. The judge must look in her or his crystal ball and decide what sort of cushion this individual needs to find similar employment. It can be a highly subjective exercise, although based on caselaw precedent.

Is rolling the dice better?

Some employers prefer to roll the dice and see what sort of package they can negotiate on termination. By promising a more generous amount in the contract, they worry that they are stuck with having to pay that generous amount at termination, even if the parties have degenerated into a fairly hostile relationship.

So why bother spending resources and effort on termination provisions? Because it is usually more cost–effective to have the certainty of a known cap than to enter into extensive, heated negotiations with the employee regarding the common law amount. It enables employers to plan and to think through budgets when deciding whether to terminate an employee.

Perhaps most importantly, it can help focus the parties on a winding up process already agreed upon, rather than diverting resources and time on the emotional arguments about what that employee is worth. Courts award termination damages to cushion the employee to the next job, but most employees see the entire exercise as a commentary on whether their employer valued the loyalty, sweat and soul they gave to the organization over the years.

Rarely is it just a business decision to the employee, even if they intellectually can accept that. The raw emotion of being fired will never go away, but a contract with a valid termination clause can help lower the temperature, facilitate a faster resolution and focus the parties on agreed upon terms.

  • About
  • Latest Posts
Follow me
SpringLaw
Employment and Labour Law Firm at SpringLaw
SpringLaw is a virtual Canadian boutique law firm, practicing exclusively in the areas of employment, labour and human rights law. We work with a wide range of employers - from global companies with operations in Canada to local owner-operators and start-ups - advising on the wide range of legal issues that arise out of the workplace, particularly workplaces in the tech and creative space. We also provide legal and strategic advice to employees throughout their employment journey. Blog posts are written by Lisa Stam, Hilary Page, Emily Siu, Danielle Murray, Lindsay Koruna, Jessyca Greenwood, Marnie Baizley, Matt Chapman, Evaleen Hellinga and Tiffany Thomas.
Follow me
Latest posts by SpringLaw (see all)
  • Ontario requirement for naloxone in the workplace - January 11, 2023
  • New year, new employment agreements? - December 14, 2022
  • Termination clauses going into 2023 – What employers need to know - November 9, 2022

Article by SpringLaw / Employee Relations, Employment Standards, Payroll, Union Relations / employment contracts, employment law, Employment Standards legislation, entitlements upon termination, Just cause termination, pay in lieu of notice, terminate an employee, termination damages, Termination provisions, Without cause termination

Share with a friend or colleague

Get the Latest Posts in your Inbox for Free!

Electronic monitoring

About SpringLaw

SpringLaw is a virtual Canadian boutique law firm, practicing exclusively in the areas of employment, labour and human rights law. We work with a wide range of employers - from global companies with operations in Canada to local owner-operators and start-ups - advising on the wide range of legal issues that arise out of the workplace, particularly workplaces in the tech and creative space. We also provide legal and strategic advice to employees throughout their employment journey. Blog posts are written by Lisa Stam, Hilary Page, Emily Siu, Danielle Murray, Lindsay Koruna, Jessyca Greenwood, Marnie Baizley, Matt Chapman, Evaleen Hellinga and Tiffany Thomas.

Reader Interactions

Trackbacks

  1. Monday Pick-Me-Up « Legal Sourcery says:
    October 17, 2016 at 11:51 am

    […] Why Bother with Employment Contracts?  (First Reference Talks) […]

Footer

About us

Established in 1995, First Reference is the leading publisher of up to date, practical and authoritative HR compliance and policy databases that are essential to ensure organizations meet their due diligence and duty of care requirements.

First Reference Talks

  • Home
  • About
  • Archives
  • Resources
  • Buy Policies

Main Menu

  • About First Reference
  • Resources
  • Contact us
  • 1 800 750 8175

Stay Connected

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

We welcome your comments on our blog articles. However, we do not respond to specific legal questions in this space.
We do not provide any form of legal advice or legal opinion. Please consult a lawyer in your jurisdiction or try one of our products.


Copyright © 2009 - 2023 · First Reference Inc. · All Rights Reserved
Legal and Copyright Notices · Publisher's Disclaimer · Privacy Policy · Accessibility Policy