In order to be enforceable, an employment contract must fulfill the essential elements of a binding contract at common law, and must not contravene any applicable legislation. A binding contract must be formed by offer, acceptance and consideration. In the case of most employment contracts, the consideration is the exchange of remuneration for work. Courts have found that continued employment is generally not sufficient consideration, unless there is evidence that the employer intended to dismiss the employee if the post-hire agreement was not executed.
Employment contracts are subject to increasingly close scrutiny in Canada and will not be enforceable if they do not comply with minimum employment standards, occupational health and safety legislation and human rights legislation. An employee cannot waive or contract out of his or her minimum entitlements under the applicable employment standards legislation. Any ambiguity in an employment contract will generally be interpreted in the employee’s favour.
Most employment agreements are for an indefinite term. In the absence of an express agreement to the contrary, an employment contract for an indefinite term can only be terminated by the employer by the provision of reasonable notice at common law. In general, the statutory notice period is much shorter than the notice period at common law. Where an employment agreement stipulates that employment will be for a fixed term, the employee may not be entitled to notice of termination if his employment is terminated when the contractual term expires.
A probationary term will not be implied in an employment contract. If an employer wishes to hire an employee on a probationary basis to determine their suitability for the position, this should be clearly set out in a written employment contract.
All employees must be provided with notice of termination or pay in lieu thereof in accordance with the applicable employment standards legislation. Unless the parties have expressly agreed otherwise, there is a legal presumption that an employee will also be entitled to reasonable notice period under common law, which is intended to approximate the length of time it would likely take an employee to obtain similar employment. The range of the notice period that may be awarded by a court generally may range from two or three months up to twenty-four months. In exceptional cases, a notice period exceeding twenty-four months may be awarded.