Employment Contracts
Know how to negotiate the best terms
When starting a new position or changing positions with the same employer, your employer may ask you to sign an employment contract. Before signing anything, learn more about employment contracts, termination provisions, layoffs (furlough clauses), non-compete agreements and non-solicitation clauses.
An employment contract is a legally binding employment agreement between an employee and their employer that outlines the employment terms of the working relationship. It may include details about salary, hours of work, compensation, vacation, benefits, bonus, shareholder agreements, and any post-employment restrictions like non-compete or non-solicitation agreements. Some employment contracts contain termination clauses that can greatly impact employee rights—like reducing severance pay or limiting the ability to work in the same field, which is why it is recommended to review your employment contract with an employment lawyer to protect your legal rights.
What is a termination provision?
A termination clause is a section in an employment contract that typically tries to reduce your fair severance pay entitlement down to just your bare minimums. You may think that the Employment Standards Act (ESA) describes your severance entitlement. It does not. The ESA merely tells you what your bare minimum entitlement is, like how the ESA tells you what minimum wage is. In fact, when you start the employment relationship, you are entitled to much fairer and much more lucrative severance.
Employers routinely use termination provisions to deprive employees of that fair severance and reduce it to the bare minimum. Any ambiguous language in these clauses should be evaluated by an experienced employment lawyer, but it's not just ambiguity that matters. How the clause is written—whether it complies with employment laws and common law entitlements—determines if it will stand up in court. Even a clear clause may be unenforceable if it violates statutory rights or attempts to limit your severance below what the law allows.
What is a layoff (furlough) provision?
Many employees do not know this, but it is illegal to place you on a temporary layoff, often called a furlough. The exception to this rule is if you consent to being laid off. One way that employers obtain consent is by having you sign a written employment contract that permits temporary layoffs. There is often no reason to give your employer the right to deprive you of your ability to work and earn a living.
What is a non-compete agreement?
A non-compete agreement is typically a clause found in an employment contract that bans you from working for a competitor or accepting business from a former client/customer. Non-competes are presumptively illegal, and it is very hard for employers to rely on these. In most cases, you will be informed that your non-compete is illegal, and that you are free to work wherever you want if you quit or are let go.
What are the rules regarding non-compete agreements?
Changes to Ontario’s Employment Standards Act prohibits non-compete agreements for most employees as of October 2021. The law allows non-competes only for executive-level employees, those selling a business, or if the employment contract was signed before this date. If your employer asks you to sign a non-compete or you are unsure of its legality, seek legal guidance from an employment lawyer.
What are the exceptions to the Ontario ESA non-compete rule?
There are three exceptions to this rule:
- Executives are exempt from this rule. If you are a CEO, President, COO, CFO, CIO, CMO or any other chief executive position, then your employer can include a non-compete clause in your contract.
- If you sell or lease your business or part of your business and become an employee of the business you sold, the new owner has the right to enter into a non-compete agreement with you.
- If you signed your non-compete before October 2021.
What rules apply if you signed your contract with a non-compete clause prior to October 2021?
If you have a non-compete agreement that was entered into before October 2021, your non-compete is most likely still illegal.
What is a non-solicitation agreement or clause(s)?
A non-solicitation agreement is often found in an employment contract. It attempts to prevent you from contacting or soliciting clients or old colleagues, or working in the industry, after you have left your employer for a certain period of time.
Is a non-solicitation agreement enforceable?
Non-solicitation clauses are far more likely to be legal than non-competes. However, many non-solicitation agreements are poorly drafted, and cannot be relied upon by the employer.
What should you know before signing a non-solicitation agreement?
Things to consider when signing a non-solicitation agreement:
- Is the agreement part of your employment contract? Given a non-solicitation agreement is a “restrictive covenant”, you must agree to it before you accept the job.
- Were you forced to sign the non-solicitation clause? If you were under any form of duress such as feeling threatened about losing your job, a court will set aside the non-solicitation agreement.
- Is the clause or agreement reasonable? Because restrictive covenants have the potential to do significant harm, the courts have the power to overrule them if the restrictions appear unfair. Courts will assess the length of time the restriction applies, the geographical scope of the restriction and whether it is even necessary.
Why is it important to speak to an employment contract lawyer?
Employment contracts are more than just a set of rules for your current job—they define your obligations and responsibilities during and following your departure from your employer. Since most employment contracts are drafted to benefit the employer, it’s essential to know exactly what you’re agreeing to before you commit. Certain clauses can have a lasting effect on your future livelihood. This is why an employment lawyer review is so important.
If your former employer is telling you, following your departure, that you are forbidden from working for competitors, or other companies in the same industry due to a non-compete agreement or a non-solicitation agreement or clause, speaking to an employment contract breach lawyer will help you understand your options. A thorough review will help you identify any unfavorable terms and provide legal guidance on how to proceed. Whether it's understanding the obligations outlined in your employment contract or assessing restrictions on future job opportunities, having a contract review can protect your interests and give you confidence to move forward.
The employment contract lawyers at Whitten & Lublin have extensive experience drafting, negotiating, disputing, challenging, interpreting, and successfully litigating thousands of employment contracts, non-compete agreements and non-solicitation clauses. Our employment contract review lawyers can help you negotiate your employment contract before your employment commences. Or we can help you fight the terms and conditions upon your termination. We have helped countless individuals negotiate better deals with their employers.
Our skills, experience and reputation are widely recognized in the industry, leading to our being named one of Canada’s top Employment and Labour Law Firms by Canadian Lawyer Magazine for 4 years, most recently in 2024.
Know what you’re signing and negotiate on your terms with the help of the skilled employment lawyers at Whitten & Lublin. A better tomorrow awaits.
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