Calgary Employment Lawyers Advising Employers on Employment Agreements

A carefully drafted employment agreement helps Alberta employers establish clear expectations at the beginning of the employment relationship and can significantly reduce uncertainty, disputes, and legal exposure if problems arise later.

What Is an Employment Agreement?

An employment agreement is a contract between an employer and employee that sets out the terms and conditions of employment.

Employment agreements can be written, verbal or implied through the parties’ conduct. However, a written employment agreement gives both parties a clearer record of what was agreed.

A well-drafted agreement should reflect the actual employment relationship rather than simply using a generic template for every employee.

Which Employees Should Have Written Employment Agreements?

As a best practice, employers should consider written employment agreements for all employees, including:

• Full-time employees;
• Part-time employees;
• Junior employees;
• Managers;
• Executives;
• Probationary employees;
• Fixed-term employees; and
• Employees working remotely or under flexible arrangements.

The complexity of the agreement may vary depending on the position. A junior administrative employee may require a relatively straightforward agreement, while an executive or senior employee may require more detailed provisions dealing with compensation, confidentiality, incentives, intellectual property or post-employment obligations.

Do Employers Have to Use a Written Employment Agreement?

There is no general requirement that every Alberta employment relationship be governed by a detailed written contract.

However, employment relationships still create legal obligations even where nothing has been put in writing. Without a written agreement, important terms may be determined by:

• The Employment Standards Code;
• The common law;
• Verbal discussions;
• Workplace policies;
• Past practices; and
• The conduct of the employer and employee.

The absence of a written agreement does not mean there is no contract. It usually means there is less certainty about the terms of the contract.

What Rights Do Employees Have Under an Employment Agreement?

Employees are entitled to receive at least the minimum protections required by applicable employment standards legislation.

For provincially regulated Alberta employees, those minimum standards can include rules relating to:

• Minimum wage;
• Hours of work and rest;
• Overtime;
• General holidays;
• Vacation and vacation pay;
• Job-protected leaves;
• Termination notice and termination pay; and
• Payment of earnings.

Employers and employees cannot contract out of minimum employment standards simply by agreeing to different terms in writing. However, an employment agreement may provide an employee with greater rights than the statutory minimums.

Why Are Written Employment Agreements Important for Employers?

The main benefit of a written employment agreement is certainty. A properly prepared agreement allows the employer and employee to understand the key terms before work begins. It can also reduce disputes about matters such as:

• What compensation was promised;
• Whether a bonus is guaranteed;
• Whether employment is permanent or fixed term;
• What benefits apply;
• What happens during probation;
• Which workplace policies form part of the relationship;
• What confidentiality obligations continue after employment; and
• What the employee will receive if employment is terminated.

Written agreements are particularly important because some of the most expensive employment disputes arise over terms that were never clearly addressed at the beginning of the employment relationship.

What Provisions Should Employers Consider Including?

The appropriate terms depend on the employee and the position. However, employers should generally consider the following provisions.

1. Position and Duties

The agreement should identify:

• The employee’s position;
• General responsibilities;
• Reporting relationship; and
• Other important expectations.

2. Start Date and Employment Status

The agreement should confirm:

• The employee’s start date;
• Whether employment is full-time or part-time;
• Whether the position is permanent or fixed term; and
• Any other relevant employment status.

Clear wording can prevent later disputes about length of service or the intended duration of employment.

3. Compensation

The agreement should clearly describe how the employee will be paid. Depending on the position, this may include:

• Salary;
• Hourly wages;
• Commission;
• Bonuses;
• Incentive compensation;
• Profit sharing; or
• Other forms of compensation.

4. Hours of Work and Overtime

Where relevant, the agreement should identify expected working hours and scheduling requirements.

Employers should ensure that the agreement is consistent with the Employment Standards Code and applicable exemptions or overtime rules. A contractual term cannot eliminate an employee’s statutory entitlement to overtime where the legislation requires it.

5. Vacation and Benefits

The agreement may address:

• Vacation entitlement;
• Vacation scheduling;
• Benefit eligibility;
• Waiting periods;
• Employer benefit plans;
• Retirement or savings plans; and
• Other benefits.

At a minimum, the terms must comply with applicable employment standards requirements. Employers should also avoid making contractual promises that conflict with the terms of an insurance or benefit plan.

6. Probationary Period

Employers commonly include a probationary period for new employees. However, simply calling the first three or six months “probation” does not answer every legal question that may arise during that period.

A probationary provision should clearly explain:

• The length of probation;
• The purpose of the probationary period;
• How employment may be ended during probation; and
• What statutory minimums continue to apply.

Employers should not assume that the word “probationary” automatically eliminates all termination obligations.

7. Workplace Policies

An employment agreement should require the employee to comply with applicable workplace policies.

Those policies might address:

• Harassment and discrimination;
• Confidentiality;
• Information technology;
• Attendance;
• Remote work;
• Health and safety;
• Conflicts of interest; and
• Other workplace expectations.

8. Confidentiality

Employees often have access to sensitive business information. A confidentiality provision may provide express protection of information such as:

• Client information;
• Financial data;
• Pricing;
• Business strategies;
• Trade secrets;
• Proprietary processes; and
• Other confidential information.

The provision should clearly identify what information is protected and what obligations continue after employment ends.

9. Intellectual Property

Depending on the employee’s work, the agreement may need to address ownership of:

• Written materials;
• Software;
• Designs;
• Inventions;
• Processes;
• Research;
• Branding; or
• Other intellectual property created during employment.

This is particularly important for businesses where employees create commercially valuable work product.

10. Restrictive Covenants

Some employers consider including:

• Non-solicitation clauses;
• Non-competition clauses; or
• Other post-employment restrictions.

These clauses require careful drafting. Courts generally scrutinize restrictive covenants very closely because they can limit an employee’s ability to earn a living after employment ends. A restriction should be no broader than reasonably necessary to protect a legitimate business interest.

Employers should obtain legal advice when drafting such provisions and before relying on a standard restrictive covenant.

11. Termination Provisions

For many employers, the termination clause is one of the most important provisions in the employment agreement.

A termination clause can define the employee’s entitlements if employment ends without cause. Without an enforceable contractual limitation, an employee may claim reasonable notice or pay in lieu of notice under the common law. Common law notice can be considerably greater than the minimum notice required by Alberta employment standards legislation.

An appropriately drafted termination clause may limit the employee’s entitlements, but it must comply with applicable employment standards requirements. The clause should be reviewed carefully because unclear or legally deficient wording can result in the limitation being unenforceable, which leads to the common law being applied.

Statutory Minimums Are Not Automatically the Employee’s Full Entitlement

The Employment Standards Code establishes minimum termination notice requirements based primarily on length of service. For example, eligible employees may be entitled to between one and eight weeks of statutory notice depending on their service. Those amounts are minimum standards.

Where an enforceable agreement does not validly limit termination entitlements, a non-unionized employee may have a common-law claim for a longer reasonable notice period than the minimum standard in the legislation. This is one of the principal reasons employers should have termination language drafted or reviewed by an employment lawyer.

When Should an Employment Agreement Be Signed?

The employment agreement should be provided, reviewed, and signed before the employee begins working. Employers should avoid presenting important contractual terms for the first time after the employee has already started work.

Why Does Timing Matter?

A contract requires consideration—something of value exchanged between the parties. For a new employee, the offer of employment can generally provide the necessary consideration for the terms of the employment agreement.

Problems can arise when the employee:

1. Accepts the job;
2. Begins employment; and
3. Is only then asked to sign a detailed agreement containing new restrictions.

At that stage, continued employment alone will not likely provide sufficient fresh consideration for new contractual terms. This can create arguments that some or all of the new agreement is unenforceable.

Can an Employer Introduce a New Agreement for an Existing Employee?

Yes, but additional care is required. Where an existing employee is being asked to accept new contractual terms, the employer should consider whether the employee is receiving fresh consideration in exchange.

Fresh consideration may include:

• A salary increase;
• A promotion;
• A signing payment;
• Additional vacation;
• A new benefit; or
• Another meaningful advantage.

The adequacy and structure of the consideration should be assessed before the new agreement is presented.

What Happens If an Employer Does Not Have a Written Employment Agreement?

Employment still exists. The problem is that important terms may be uncertain. Without a written agreement, an employer may face disputes about:

• Compensation;
• Bonuses;
• Duties;
• Hours;
• Work location;
• Benefits;
• Vacation;
• Confidentiality;
• Ownership of work product;
• Post-employment restrictions; and
• Termination entitlements.

The most significant exposure often arises at termination. Without an enforceable contractual term limiting notice, an employee may be entitled to common-law reasonable notice rather than only the statutory minimum.

Can an Employer Rely on a Verbal Agreement?

Potentially. Verbal employment agreements can be legally binding. The difficulty is proving what was actually agreed. An employer and employee may later have very different recollections about:

• Salary;
• Bonus promises;
• Remote-work arrangements;
• Vacation;
• Duties;
• Job security; or
• Termination terms.

A written agreement significantly reduces this uncertainty.

What Can Happen if an Employment Agreement Is Poorly Drafted?

Having a written agreement does not automatically protect an employer. A poorly drafted agreement can create its own problems. Potential consequences include:

• An important clause being found unenforceable;
• Greater termination obligations than the employer expected;
• Disputes over bonuses or commissions;
• Constructive dismissal allegations;
• Difficulty protecting confidential information;
• Unenforceable restrictive covenants;
• Disputes over fixed-term employment;
• Inconsistent obligations between the agreement and workplace policies; and
• Litigation over ambiguous language.

A template copied from another business or another province may not reflect Alberta law or the employer’s actual workplace.

Should Employers Review Existing Employment Agreements?

Yes. Employment agreements should be reviewed periodically. An agreement that was appropriate when an employee was hired may no longer reflect the employment relationship years later. Further, employment laws change over time and updates to employment agreements may be required for an employer to remain compliant.

Common Employment Agreement Mistakes Employers Should Avoid

Common mistakes include:

• Allowing employees to begin work before signing the agreement;
• Sending the agreement after the employee has already accepted an unconditional offer;
• Using the same agreement for every position;
• Copying a template from another jurisdiction;
• Failing to address termination entitlements;
• Assuming statutory notice is automatically the employee’s maximum entitlement;
• Drafting termination clauses that do not comply with minimum standards;
• Using vague bonus language;
• Assuming a probation clause eliminates all termination obligations;
• Including overly broad non-competition restrictions;
• Asking existing employees to sign new restrictions without considering fresh consideration;
• Failing to update agreements after major role changes; and
• Relying on agreements that have not been legally reviewed for years.

What to Do Next: Strengthen Your Employment Agreements

Alberta employers should consider the following steps:

• Use a written agreement for every new hire. Clear terms reduce future uncertainty.
• Prepare the agreement before making the final offer of employment.
• Have it signed before employment begins. Do not leave important contractual terms until the employee’s first day or later.
• Tailor the agreement to the position. Senior, junior, commissioned, and fixed-term employees may require different terms.
• Review the termination clause carefully. This is often the provision with the greatest financial impact.
• Meet statutory minimums. A contract cannot provide less than applicable employment standards.
• Address compensation clearly. Pay particular attention to bonuses, commissions and incentive plans.
• Use restrictive covenants selectively. Do not impose broader restrictions than the business reasonably requires.
• Review probation wording. Make clear what the probationary period actually means.
• Consider fresh consideration for existing employees. Do not assume continued employment is enough.
• Keep agreements current. Review them when roles, compensation or legal requirements materially change.
• Get legal advice before relying on a template. Small drafting differences can have significant consequences.

Getz Collins and Associates: Advising Alberta Employers on Employment Agreements

Employment agreements are one of the most effective tools employers have to establish clear expectations and manage legal risk before problems arise.

The employment lawyers at Getz Collins and Associates advise Alberta employers on drafting, reviewing and updating employment agreements that reflect their workplace and business needs.

We can assist employers with:

• New-hire employment agreements;
• Termination clauses;
• Probationary provisions;
• Compensation and bonus terms, including commission agreements;
• Confidentiality provisions and intellectual property clauses;
• Restrictive covenants;
• Fixed-term agreements;
• Agreements for executives and senior employees;
• Updating agreements for existing employees; and
• Reviewing existing employment agreement templates.

Obtaining legal advice before an agreement is presented can help employers avoid uncertainty, improve enforceability, and reduce the cost of future employment disputes.

From our Calgary office, Getz Collins and Associates advises employers throughout Alberta, including Calgary, Strathmore, Airdrie, Cochrane, Okotoks, Drumheller, Chestermere, Hussar and surrounding communities.

Call 587-391-5600 or contact us online to schedule a consultation with an employment lawyer.