Negotiating a Better Employment Contract

No one likes to think about getting fired or laid off. And it’s certainly not on most people’s minds when they start a new job.

In the excitement of taking on a new challenge (and maybe a new, higher salary!), many people don’t take the time to read or understand their entire employment contract. This mistake can hurt you later if the new position doesn’t work out.

Here are a few things to look for.

SEVERANCE PAY

What does your new contract say about termination without cause? Under the Ontario Employment Standards Act, employees are entitled to a minimum of one week’s notice per year of service. You can learn more about your basic entitlements to severance pay or notice pay here.

However, employees who sue in court after a wrongful dismissal often get significantly more compensation (lawyers call this “wrongful dismissal damages” or “reasonable pay in lieu of notice”) – unless their contract says otherwise. Unfortunately, suing your employer in court can be stressful and expensive, or may not be successful if your employer is protected by a solid employment contract.

Take a hard look at termination provisions in your new contract and ask: can I live with this if my employment is terminated?

One relevant consideration is how closely this aligns with what you might get if you successfully sued. Some of the factors courts consider in assessing what is fair include:

• How old are you? If you’re an older worker, you may need more time to find new work if you lose your job.
• What is your job? If there aren’t many jobs like yours, you may need more time – by contrast, if workers like you are in high demand, you may find a new job quickly.
• What are the current economic conditions? If you lose your job during a recession or after layoffs in your town or industry, you may face more difficulties in your job hunt.
• How long have you worked for your employer? Longer service employees are generally entitled to more compensation or notice if they lose their jobs. Normally, when you’re signing a new contract you are joining a new organization, but you should consider your prior service when reviewing a contract for a promotion or new position.

FRIENDLY COMPETITION

You should also consider whether your contract includes a “non-compete” or “non-solicitation” clause or any other obligations that continue after you leave.

Canadian Courts generally won’t uphold non-compete or non-solicitation clauses that are too restrictive. The goal of these provisions should be to reasonably protect your employer’s business, not to prevent you from earning a livelihood. To decide whether a contract achieves this balance, some of the factors Courts consider are:

• The geographic scope: It is harder for an employer to justify a clause that prevents you from working for any competitor anywhere than one that prevents you from working for local competitors in Hamilton, Ontario.
• The duration: a clause that prevents you from ever working for one of your employer’s competitors will be a lot harder to defend than one that says you can’t work for a competitor for 6 months or a year.
• Your job: it might be fair to hold former presidents or CEOs to a higher standard than other employees, even less senior managerial employees. Some professions, like lawyers, may have special rules about their duties to customers or clients that have to be taken into consideration. Other fields, like advertising or tech, may be subject to unique industry practices that have an impact on what is considered appropriate.
• The nature of the restriction: in Canada, non-competition clauses are generally harder to defend than non-solicitation clauses. A non-competition clause tries to prevent you from working for your employer’s competitors. A non-solicitation clause tries to prevent you from actively taking business, clients or, in some cases, employees from your employer with you to your new job.

Other obligations that might follow you after you leave your job might include confidentiality agreements or social media policies that limit what you can say about your work, your boss or the company.

WHAT DO I DO?

Understand your contract before you sign. If you have questions, or think that the contract you’ve been offered might not be fair, consider speaking to a lawyer about your concerns.