The genesis of this particular blog was the result of receiving a copy of a friend’s employment “contract” and its contents prompted me to write this post.
I’ve seen many things that aren’t right in my career, particularly when it comes to dealing with Employee Agreements and unfair employers. While larger companies have lawyers and dedicated HR people, most small and medium-sized companies have these functions as just another “hat” worn by themselves or their managers.
Both business owners and associates can make agreements that benefit each other: here are a few lessons from someone who has made mistakes and learned each step of the way.
A good employment agreement acts as a living document; it helps to define roles and responsibilities for both the employer and for the associate. In my opinion, many small and medium sized businesses do themselves and their associates a huge disservice by not clearly defining basic outlines and responsibilities.
A good employment agreement should be used in tandem with an “Associate Handbook,” which lays out the rules and policies of the business. It can be as short or long as the business requires. Handbooks work best when they are written as a partnership between the owners, managers, and associates.
General Notes:
For new associates: Be careful of things that sound like a lawyer has written them. Do not be intimidated. TAKE THE TIME TO READ IT CAREFULLY AND TO ASK QUESTIONS. Remember they put every word in the document ON PURPOSE: it is important for you to understand everything you are reading.
Read carefully and agree to any “Employment Agreement”, prior to agreeing to accept the position. Reading the agreement on your first day or after you have already quit your existing job, leaves you with little room to negotiate and is very unfair.
Never sign anything you haven’t read or understand. Ask questions: now is the time to make sure everything is clear. Just as a note, an employment agreement cannot take away your charter rights, agreements do not override Labour Laws, and anyone who tells you that it does is wrong.
Your employer can change the terms of your contract or agreement. If it happens, ask for the changes in writing. If you do not think it is fair, speak to your Labour board or union representative.
If something seems wrong to you, consider that another red flag.
For businesses: Make sure your new associate understands everything in your handbook and in your employment agreement before they accept the position. It is in your best interest to be clear and concise, not only to build trust with your new associate, but also to protect yourself in the future.
Probationary Periods:
For new associates: According to the Ontario Labour Code, anyone can be terminated without reason in the first 90 days of employment. Some companies, like my friend’s employer use a 6-month probationary period. They claim that a person can be terminated for any reason in that extra 3-month period without notice or without compensation and this is incorrect, their rules cannot contravene the Ontario Labour Code.
If you are terminated after 90 days of employment, your employer is required to (1) Give you a reason, and (2) give you appropriate notice (usually 1 week) or pay-in-lieu of notice.
For businesses: Probation periods are a useful tool to make sure that your new associates have the skills, attitudes, and behaviors that they said they did in the hiring process and that they fit into your company’s culture. Make sure you make every effort to try to make the relationship work and always work within the employment laws. If you are unsure of something, businesses can get legal advice and work with the Labour Board. Many times, over the years, I called the Ontario labour board for advice and it was always provided.
Termination for Just Cause:
Any associate can be terminated at any time, but severance must be paid based on their length of employment, the size of the company, and their role within the organization. Some employers will try to avoid paying severance by releasing someone with “just cause.” There are extreme cases that are totally justified just as there are some that are not. Always consult with the local labour board, whether you are an associate or a business owner.
For new associates: I hope this never happens to you, but if it does, understand what policies and guidelines the company has in place and understand your rights. Having a little experience, in this area, it is important to realize that you should document any unusual situation that occurs: dates, times, facts, and witnesses. You will likely never need it, but it is still a good idea.
For employers: Document incidents and get good advice, I have seen business owners made significant mistakes based on assumptions and then subject themselves to costly payouts because their assumptions were wrong. In the end, being a little more generous with payouts is much less expensive than a long-drawn-out legal fight.
Severance
In my friend’s contract, one line read, “The employee will have no claim or right at common law for any notice or benefit beyond the minimum requirements as set out in the Employment Standards Act.” This would limit the amount of severance that the associate is entitled to, larger companies have greater liability and the more senior a person is in the company also entitles them to more severance as well. This is not something I would ever agree to, especially for a senior manager, and it would be something I would insist be removed from the contact prior to accepting the position.
Typically, severance is required to be paid after 5 years of service, but the amount paid can vary based on:
- Your position in the company, the higher the position, a Vice-President for example will get more severance than a normal associate.
- The payroll of the company, if the payroll is over a set amount, the amount of severance can increase
Associate Files
For associates: In Ontario, you are entitled by law to be able to ask to see your employee file at any time. It is a very good idea for you to keep copies of employment agreements, reviews, commendations, warnings, etc. Do not rely on your employer to keep these reference documents, particularly if it is not in their best interests.
For employers: Document any incidents of note, be careful just to record the facts, be wary of subjective opinions and gossip.
Confidential Information
For associates: If your employer wants you to sign a Confidentiality agreement, you should have a legal expert review anything that restricts your interests. This is particularly true of you no longer work for that company.
Be wary of any clauses that limit your ability to work in your field of choice after you leave a particular company.
For employers: If you do not have a lawyer on retainer, speak to the Labour Board to ensure that you protect your interests and remain within the law.
Non-Solicitation
For associates: Another warning sign can be found in any clause that forbids you from approaching your customers for a period of time after you leave a company. I am aware of many customers who are loyal to their sales person, not necessarily the company.
Equally troublesome are clauses that hinder your ability to encourage anyone else to leave a company to join another one for any period of time. My friend’s agreement set the period at 2 years.
For employers: As mentioned above, check with the Labour Board to ensure you comply with the labour laws in your region.
Legal Advice
For new associates: Be careful of statements like “The employee acknowledges that the employer has provided the employee with a reasonable opportunity to obtain independent legal advice with respect to this agreement …” This should be a red flag for you.
Perhaps the employer is very correct and there is nothing you should be worried about; however, consider the pressure that a person might be under in this particular case:
- They are reading this on their first day of a new job
- They have left their old job and really can’t go back to it
- They may have moved to a new town or city
- They have bills and responsibilities and really have no choice but to accept the terms and conditions.
- They are under extreme duress to sign because they risk losing the opportunity if they do not sign.
For employers: If you use clauses like the example above, you must allow your new associate to obtain legal advice or encourage them to check with the labour board before insisting that they sign the agreement.
Weekly Hours of Work/Over-time/Statutory Holidays
In Ontario, you have the choice of either being paid over time for time worked over 44 hours per week (you can also refuse overtime without penalty), or you can accept to average your hours to 88 over a two-week period and only be paid over-time for more than 88 hours. If any employer does not give you the choice, check with the Ontario Labour Board to see if that is correct.
Employers are supposed to have their associates sign agreements to work more than 8 hours a day; this is a reasonable request for sales type positions.
As an associate, you also have the right to change your mind. It is also worth noting that if you work a Statutory Holiday, you (a) have to be paid extra time, and (b) the employer cannot simply pay your regular rate and give you an alternate day off at some point in the next 3 months.
Ontario Labour Board
For a new associate: If you believe that you are being treated poorly, speak to your supervisor first. If that does not work, document your situation and contact the Labour Board. You have rights and no one should be bullied in 2020. Their job is to ensure that you are treated fairly. If any employer threatens you, the board’s job is to investigate and resolve the issue.
For employers: Work with the labour board when you have questions. In my experience, this organization is a partner and a source of knowledge and good practices that make good business sense.
Sales Commissions
For a new sales associate, consider:
- What is the company’s policy about penalizing a sales associate when a mistake is made?
- What is the company’s notification policy when they want to change the commission structure?
- How can a sales associate verify that they are being paid properly?
- What is the company’s policy for paying out commissions owed to an employee after they leave the company?
Many retailers pay their sales people on “delivered sales” and should have a written policy on how long they will continue to pay an associate after they have left the company. A good practice is to always be aware of your undelivered sales. If you have any concerns, contact the Ontario Labour Board.
For employers: Make sure you have written policies for all of the above questions, be open, be transparent, and do not arbitrarily “dock” commission sales people their commissions.
SUMMARY
1. When a job is offered to you, ask to read their Employment Agreement; and read their “Associate Handbook” prior to accepting the position. Good employers will have no issue with this request.
2. If you have any questions or doubts, obtain legal advice; if the company objects, consider that as a red flag.
3. Read everything and ask for clarification if you do not understand something. The employer is legally bound to explain and answer any of your questions.
4. Do not sign anything that you have not read.
5. If there are clauses that you do not want to agree to, ask them to strike the clause out and both parties sign off on the strikeout and on all copies. Be sure to keep a copy for yourself.
6. Keep copies of everything you sign.
7. Document any incident that seems unusual. This is not paranoia, it is just good business: dates, times, witnesses, and facts. Keep the copies at home, not at work.
8. Remember you can ask to read your employee file at any point. By law, your employer is not allowed to keep “secret files” on you without allowing you to read them.
9. Contact the Ontario Labour Board for clarity on anything you feel is unfair or unjust.
10. The vast majority of employers are very fair and treat their employees very well; however, never forget that you have rights and do not be bullied.
Good employers will be prepared and will not be offended by anything in this document. As a new associate, you need to protect your rights and ensure that you live up to your obligations.