Mistakes Employers Make with Employment Agreements
If your company is growing or you need to replace an employee, you will likely need to draft a new employment agreement. When drafting these agreements, there are several elements to consider to ensure that the employment agreement is both valid and enforceable. As a team of experienced employment lawyers, Linley Welwood knows how detrimental an error or mistake in an employment agreement can be. That is why we have compiled a list of the most common mistakes employers make with employment agreements to help reduce your chances of making a potentially costly error.
4 Common Mistakes When Creating Employment Agreements
When creating an employment agreement, employers can make the following mistakes:
1. Breaching the Employment Standards Act (ESA)
This is a surprisingly common mistake when drafting an employment agreement. The most common area of concern regarding the ESA is the termination clause, as employers may inadvertently attempt to give employees less notice or severance than they are entitled to by law. A termination clause is usually unenforceable if it provides less notice than the ESA, gives no statutory severance or minimum notice, and fails to provide sufficient benefits during a working notice period.
2. Ambiguous or Vague Wording
When creating an employment contract, you must clearly communicate every term of the agreement. For example, when referencing time periods in your contract, be sure to use precise terms like “10 days” or “3 weeks” instead of “a reasonable period”. If you do not use clear and concise language for every clause or condition in your contract and opt for ambiguous or vague terms, a court is far less likely to rule in your favour during a contract dispute.
3. A Lack of Consideration
For an employment contract to be enforceable, it must have 3 key elements: offer, acceptance, and consideration. Most contracts end up lacking the consideration element, especially if the employee already works for this company and they are being given a new position or new duties/responsibilities. Consideration typically refers to money and labour, with the employer providing labour and the employer providing money. While contracts for new employees typically have enough consideration, new contracts for existing employees tend to be insufficient as the employer may fail to provide “fresh” consideration in the form of a raise or increased benefits.
4. Broad Restrictive Covenants
If you wish to include a non-compete clause or non-solicitation clause in your employment agreement, they must be reasonable and clear, or they will not be enforceable. For employees, giving a non-compete clause that is too long can also increase the amount of time that is reasonable for them to give notice as the clause can prevent them from finding new employment in the event of termination. That is why it is crucial to ensure these restrictive covenants are specific in terms of time, territory, and scope.
To learn more about common mistakes with employment agreements or to inquire about our employment law solutions, get in touch with the team at Linley Welwood. We can be reached through our online contact form and will be happy to answer any questions you may have regarding our services.