With regard to bonus entitlements, employers should think
about things like:
■■ Is the bonus discretionary or nondiscretionary?
■■ If it’s nondiscretionary, what are the objectives to be met and
how much money does the employee receive for meeting those
objectives?
■■ What happens if an employee resigns?
■■ What happens if an employee is terminated for just cause?
■■ What happens if an employee is terminated without just
cause? In this instance, employers should also consider
whether they wish to have bonus entitlements continue to
accrue beyond a termination or whether the bonus entitlement
should cease upon an employee being provided with a letter
of termination.
Once an employer has considered what and how it wishes to
pay its employees, the language in the contract must clearly reflect
that intention. That is often easier said than done and may require
the assistance of legal counsel.
Another key term for all employment agreements is one dealing
with confidentiality, intellectual property and restrictive cove-nants.
Employers will wish to ensure that the agreement properly
defines “confidential information” in the context of its particular
business. Employers will also wish to ensure that they have lan-guage
that properly outlines who owns the intellectual property
that is created during the term of employment. Additionally, in or-der
to protect the business from departing employees, employers
are well advised to include appropriate, narrow and enforceable re-strictive
covenant provisions and to not try to be overreaching in
that respect.
Additionally, and perhaps most obviously, employers are well ad-vised
to include termination language in each of their employment
agreements. There are essentially three ways that an employment
contract can be terminated: for just cause, without just cause and
by way of employee resignation. While termination clauses could
be the subject of an entire article unto themselves, this article will
touch upon the key issues to be addressed in relation to without
just cause terminations only.
The key considerations to be had in this respect are essentially
whether the employer wishes to limit termination entitlements to
those set out under applicable provincial employment standards
legislation, or whether the employer will be providing an entitle-ment
that is more generous. In either case, the termination clause
has the potential to be hotly litigated if it has not been properly
drafted. Once again, clear and precise language is needed to ensure
enforceability. If the intent is to limit to applicable Employment
Standards Act minimum entitlements, then the employer must
ensure that all applicable minimum entitlements are properly con-sidered
and properly reflected in the termination clause. If a more
generous termination provision is included, then the formula and
its integral components must be explicitly listed. Again, care needs
to be taken that any termination formula does not provide for less
then statutory minimum entitlements.
Finally, all employment contracts should have a severability pro-vision
which clearly stipulates that if one paragraph, subparagraph
or part of the contract is found to be null and void, the rest of the
contract remains in force. This can be called the “Humpty Dumpty
provision” – if Humpty Dumpty takes a great fall (if your contract
is challenged) you want all the kings horse and all the kings men
(the lawyers, judges and any one else legally debating or presiding
over the contract) to be able to put Humpty together again (not
have the contract completely fall apart).
KEY TERMS FOR NEW HIRES
Hiring a new employee is exciting both for the employer and
the employee. However, that new relationship has some special
intricacies that need to be properly dealt with in this type of em-ployment
contract. Is the employee being hired from a state of
unemployment or is the employee currently engaged in employ-ment
with another organization? Employees who are leaving
other employment to join the company should be required to
confirm in their employment contract that they are joining the
company voluntarily and without any inducement to leave their
prior position. (In non-legal language, that means you want
them to confirm that they wanted to come to work for your com-pany,
sought you out and weren’t promised the sun, the moon
and the stars to leave their current secure job to come work for
your company).
Also, there should be a “getting to know you” period – other-wise
known as the probationary period. The probationary clause
would stipulate that the probationary period is a time for the em-ployer
and the employee to assess suitability of longer-lasting
employment and that, if the employee is terminated during the
probationary period, such termination could be without cause and
without notice or payment in lieu of notice except for such min-imum
termination, severance pay or benefit continuation as may
be required by the provisions of the applicable employment stan-dards
legislation.
Also, the last thing an employer wants is to receive a threatening
letter from another company alleging that the newly hired employ-ee
has breached his or her non-competition agreement by joining
its organization or improperly disclosed the other company’s con-fidential
information. So, new employees should be required to
warrant that they are not breaching any restrictive covenants that
they may be bound to with previous employers and that they are
not to use any confidential information relating to previous em-ployers
in the context of their current employment.
KEY TERMS FOR EXISTING EMPLOYEES
When presenting an existing employee with a new employment
contract (or even a written contract for the first time), the most
important item to address is consideration. That is, what is the
employer providing to the employee that the employee did not al-ready
have, in exchange for the employee agreeing to enter into
this new contract? If the answer to that question is nothing, the
contract will be unenforceable. The consideration need not be an
extraordinarily large sum of money but it needs to be new and,
from a practical perspective, sufficient enough for the employee to
agree to the new terms.
Of course, the employee should also be given the opportunity to
obtain independent legal advice and the contract should confirm
in writing that the employee has been given that opportunity and
employment contracts
42 ❚ OCTOBER 2017 ❚ HR PROFESSIONAL
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