Hiring an employee is an investment, and it’s important that you and your staff understand roles, rights, and responsibilities during their employment.
You should set the terms of employment through a written employment contract. A well-drafted employment contract will help minimize future conflicts or disagreements about each parties’ rights and responsibilities.
In this guide, we’ll explain what terms of employment are, what to include in the employment contract, and the difference between express and implied contract terms.
What are Terms of Employment?
Terms of employment are the specific conditions that govern the employment relationship. They are a mutual agreement that both parties can utilize to avoid misunderstandings in the future.
The terms of employment should be set out in the employment contract. For example, many contracts contain a description of job duties. An employer can rely on the contract that stipulates the employee agreed to perform the job duties as described.
There are three types of terms of employment in Canada:
- Express terms.
- Implied terms.
- Statutory terms.
What are Express Terms of Employment?
Express terms of employment refer to the terms agreed upon by the employer and the employee. These can either be written down in an employment contract or verbally agreed upon.
For example, an employer can agree that the employee may work from home two times a week and must be at the business’s primary location for the rest of the week.
What are Implied Terms of Employment?
Implied terms are not communicated or written down between the employer and employee but are reasonably expected by the parties.
For example, in every employment relationship, there is an implied term that the employer will provide reasonable notice to an employee upon termination. Another example of an implied term is the expectation the employee will perform their job duties with reasonable skill and judgment.
What are Statutory Terms of Employment?
Statutory terms of employment are stated in provincial and federal employment standards legislation that are inserted into the employment contract.
Examples of Terms of Employment
Below are a few common terms of employment in a written contract.
Compensation and Remuneration
Every employment contract should have a term regarding the employee’s compensation or remuneration. This is the amount of money that the employer will pay the employee for their services. Employers can calculate this on an hourly basis or an annual salary. Employers may have additional compensation such as bonuses, health benefits, or RRSP matching.
A probation period is a time generally at the start of employment when the employee is being assessed for their suitability in their role. If you feel that the employee is not a good fit, the employer may terminate the employment without providing any notice or pay in-lieu thereof.
Termination of Employment
A termination of employment term (clause) are the conditions set out if the employer wishes to terminate the employee. Employers must draft clear, lawfully enforceable, termination provisions within the employment contract. It’s important to clearly state the employee’s entitlements in the event of termination.
Employers may restrict the actions of employees who are dismissed or who resign. Restrictive covenants may restrict the employee from divulging confidential business information, and prevent soliciting employees or the employer’s clients (non-solicitation).
These terms protect the interests of your business including existing clients and proprietary rights that belong to the business.
What are the Benefits of Terms of Employment?
There are various benefits of establishing the terms of employment, which include:
- Clarifying expectations of the employer and employee.
- Protecting the rights of the employer and the employee.
- Preventing disputes or disagreements from arising.
- Ensuring that the employer and employee are aware of their obligations.
If the terms of employment are not properly drafted, this could lead to unintended consequences for the employer. For example, improperly drafted termination provisions that are not compliant with employment standards legislation may be deemed void.
Can an Employer Change the Terms and Conditions of Employment?
An employer may change the terms and conditions of employment if the changes do not fundamentally alter the employment relationship.
For example, an employer may change the dress code policy from casual to formal. This would not constitute a fundamental change in the employment contract.
If the employer makes any fundamental changes to the employment contract without the employee’s consent, they may claim constructive dismissal. A constructive dismissal claim would result in monetary compensation for the employee.
An example of a fundamental change to the employment contract is changing the hours of work from day shift to night shift.
How to Change the Terms and Conditions of Employment?
An employer and employee may come to an agreement about the terms and conditions being changed. An employer and employee may agree to remove the terms of employment, add new ones, or even alter ongoing terms. This is commonly referred to as ‘amending the employment contract’.
Amending an employment contract can be done by signing a separate document, identifying the changes being made. Both the employer and the employee should sign this document.
For example, if the employer is changing the hours of work for the employee, the employer and employee must agree prior to the employer making the changes.
What if the Employee wants to change the Terms and Conditions of Employment?
In some cases, employees want to change the terms and conditions of employment. If an employee wants to change the terms and conditions of employment, the employer must agree to the changes. The employee cannot unilaterally make changes to the employment contract.
For example, if the terms and conditions of employment state that the employee must be present at the office during their hours of work, the employee must not decide to work from home.
How to Negotiate Terms of Employment
During employment, an employee may approach you to negotiate new terms of employment. This can range from salary increases to remote work arrangements. You must assess each change of employment on a case-by-case basis.
For example, you should research the job market and availability if an employee wants to negotiate an increase in salary.
It’s best practice to speak with your legal counsel or HR representative prior to agreeing to any changes of employment.
Tips for Employers for Drafting Terms of Employment
Terms of employment are extremely important in employment relationships. Employers are strongly recommended to use the following tips when drafting contract terms:
- Identify the parties involved in the employment contract.
- Use clear and unequivocal language in the contract.
- Describe the job responsibilities.
- Ensure that the terms of employment comply with employment standards legislation.
- Include information about relevant company policies.
Get Advice on how to Draft Terms of Employment with BrightHR
Implementing terms of employment ensures that you and the employee understand the roles, rights, and responsibilities during the employment relationship.
Without terms of employment, you are at risk of legal consequences arising out of any disputes with your employees.
If you need assistance with drafting terms of employment or changing them, our BrightAdvice service allows you to receive quality advice on any employment issues you may have.