Employment Contracts
What Is an Employment Contract?
An employment contract is an agreement between an employer and an employee that sets out the terms and conditions of the employment relationship. It defines each party’s rights, responsibilities, and expectations from the outset.
Even when an employment contract is in place, it must comply with the minimum standards set out in the Employment Standards Act (ESA).
Is a Written Employment Contract Required?
A written contract is not required to create a valid employment relationship. An agreement may be formed verbally or even implied through the conduct of the parties.
However, without a written agreement, the terms of employment will be governed by the applicable legislation and common law. This can create uncertainty (particularly regarding termination entitlements). A properly drafted agreement provides clarity and helps manage risk for both employers and employees.
What Should Be Included in an Employment Contract?
An employment contract should clearly outline the essential terms of the relationship. Key provisions often include:
· Job title and description
· Compensation (salary, bonus, commission, etc.)
· Benefits
· Vacation entitlement
· Hours of work
· Location of work
· Termination
Depending on the role, additional clauses may be appropriate (such as confidentiality, non-solicitation, or remote work arrangements).
Clear and precise language is critical. Ambiguous wording can lead to disputes and may result in clauses being interpreted in favour of the employee or struck down entirely.
Can an Employer Change the Terms of an Employment Contract?
An employer cannot unilaterally change a fundamental term of employment without the employee’s consent. Doing so may give rise to a claim for constructive dismissal.
Constructive dismissal occurs when an employer makes a significant unilateral change to a fundamental term of employment (such as compensation or duties) without the employee’s consent. If established, constructive dismissal is treated as a termination without cause.
Therefore, to introduce new terms to an existing agreement, employers should generally provide fresh consideration (something of value, such as a raise, bonus or promotion) in exchange for the employees’ agreement to the changes.
From an employee’s perspective, it is important to seek legal advice before accepting major changes to your role. Continuing to work under new terms without objection may be viewed as acceptance.
What Is a Termination Clause?
A termination clause can limit the amount of notice or severance an employee will receive if dismissed without cause. When properly drafted, an employment contract can restrict entitlements to the minimum amounts required under the ESA.
However, termination clauses are frequently found unenforceable. For example, if a clause attempts to provide less than the statutory minimums, it may be struck down entirely. When this happens, the employee may instead be entitled to significantly greater compensation under common law. Therefore, careful and precise drafting is essential.
Final Thoughts
Employment contracts are not one-size-fits-all. Whether you are an employer seeking to protect your business or an employee reviewing an offer, legal advice can help ensure the agreement reflects your specific needs and is compliant with current law.
A well-drafted contract can help to prevent costly disputes down the road.
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Written by Nataya Smetaniuk, Albert & Co. Law LLP, February 17th, 2026.
© Albert & Co. Law LLP. The contents of this article do not constitute legal advice. Readers should seek legal advice in relation to their own specific circumstances.
