Can an Employment Contract Supersede Law?

Imagine this: you’ve just been handed an employment contract for a promising new job. It’s tempting to skim through and gloss over the details because you want your new employment relationship to start off on the right foot. 

But what happens when you spot clauses that feel off—ones that seem to undermine your legal rights? The employer might say, “It’s standard; the contract is final.” But can an employment contract supersede the law by offering below the standards laid out in legislation? In Ontario, the answer is clear: no. 

If the terms of a written employment contract attempt to diminish your rights as set out by provincial laws, those terms are invalid. Yet, understanding where the law ends and your contract begins can be murky.

Employment Contracts: The Basics

Employment contracts are legally binding documents that define the employer / employee relationship. They outline the employee’s role, responsibilities, benefits, work hours, pay, and often terms for ending the relationship. Some contracts are as simple as a verbal agreement or handshake, while others are long, written documents. Whether you’re entering a fixed term contract, project-based, or an indefinite term employment agreement, the contract solidifies the terms of your job.

But what’s often misunderstood is that no matter how detailed or strict, the minimum standards laid out in the law trump any attempts in the contract to offer less than those. In Ontario, for example, employment contracts must comply with the Employment Standards Act (ESA), which sets minimum employment standards for things like minimum wage, overtime pay, vacation time, statutory holiday pay, and termination entitlements.

The ESA and Contractual Limits

The ESA is the baseline for employment rights in Ontario. Employers cannot draft a contract that offers you less than what the ESA mandates. For example, if a contract tries to sidestep the ESA by offering less than the legal minimum wage or fewer vacation days than required, that part of the contract is unenforceable. Ontario courts won’t hesitate to void clauses that violate these minimum standards.

So, if your employment contract attempts to set conditions that fall below the ESA’s protections, the law prevails. Terms like severance pay, termination pay, and reasonable notice—no matter what’s written into a contract—must comply with Ontario’s employment laws. The Supreme Court of Canada has also been firm on this point: you can’t sign away your fundamental employment rights, even if both parties agree to it in writing.

Common Pitfalls: Termination Clauses

One of the most contentious areas in employment contracts is the termination clause. Employers often include language that limits their obligations when letting an employee go, sometimes offering only the minimum standards required by the Employment Standards Act (ESA) for notice or termination pay. In some cases, they may even attempt to deny additional compensation. However, Ontario courts frequently find these clauses invalid, especially if they attempt to restrict an employee’s right to common law notice, which typically provides more generous entitlements than the ESA minimums.

Under the common law, employees are entitled to reasonable notice upon termination, which often exceeds the ESA’s requirements. If a termination clause limits entitlements and is found to be unfair, courts can disregard the clause and grant employees greater compensation in line with common law principles.

Misclassification and Independent Contractors

Another common issue is misclassification. Sometimes, contracts attempt to label workers as “independent contractors” instead of employees. The reason? Employers often do this to sidestep responsibilities like statutory holiday pay, severance pay, and overtime, which apply only to employees. But classification isn’t up to the employer—it’s determined by the nature of the working relationship. Ontario courts look at several factors, like control over work, integration into the company, and the presence of financial risk.

So, if your contract classifies you as an independent contractor, but your work hours, job title, and responsibilities suggest otherwise, you may be entitled to employee rights. Courts won’t hesitate to protect individuals misclassified under such agreements.

Restrictive Covenants: Are They Enforceable?

Another tricky element in many employment agreements is the use of restrictive covenants, like non-solicitation or non-compete clauses. These clauses attempt to prevent employees from working for a competitor or soliciting clients post-employment. 

Changes made to the ESA in October 2021 mean that non-competes can only be enforced for executive-level employees, those selling a business, or if the employment contract was signed before this date. However, under the common law, even non-competes signed before  the amendments to the ESA will seldom be found reasonable and thus enforceable by the courts. If your employer asks you to sign a non-compete or you are unsure of its legality, seek legal advice prior to signing. 

Constructive Dismissal: When a Contract Changes Without Your Consent

What happens if your employer decides to change the terms of your contract without your agreement? This could be a reduction in pay, a significant shift in job responsibilities, or a cut to benefits. If these changes are significant, it could be considered constructive dismissal. Essentially, this means that by changing the terms of your employment in a fundamental way, your employer has effectively terminated you, even if you haven’t been formally dismissed.

If this happens, you may have the right to reject the new terms and seek severance pay or reasonable notice under common law. In many cases, employees have successfully argued that such changes made their original contract invalid, allowing them to claim constructive dismissal. An employment lawyer can help assess your situation and determine what your options are.

Why You Should Have Your Employment Contract Reviewed by an Experienced Employment Lawyer

In Ontario, employment contracts are not a free-for-all. They must meet or exceed the minimum standards set out in the ESA and respect broader employment law principles. 

While employers may try to claim that “it’s in the contract,” the truth is, contracts don’t stand above the law. If you sign an employment contract that attempts to limit your statutory rights, those parts of the contract are likely void. It’s important to know your rights and seek legal advice to protect yourself.

At Whitten & Lublin, our employment lawyers help employees make sense of their contracts and make sure that their rights are upheld. If you have questions about your employment situation, our virtual lawyer tool can help you better understand your rights in the workplace. While it does not provide legal advice nor should it be used as a substitute for specific legal advice, it can empower you with a clear sense of your legal standing based on common scenarios.  

If you have specific questions, or if you’ve been presented with a new employment contract or are unsure of the terms of your current agreement, reach out to our team of Toronto employment lawyers. We’re here to protect your rights and help you navigate your employment matters with confidence. Reach out online or call us at (416) 640 2667