The vast majority of employment relationships are not governed by written contracts at all, but rather by the “common-law”. The common law refers to the body of recorded decisions and reasons for judgment given by judges of the courts.
If your employees have not signed a written contract, then the common law guides their rights and remedies.
An issue of considerable concern to employers is that of liability when dismissing an employee. As the common law has evolved, the amount of notice an employer is obligated to provide when dismissing an employee has skyrocketed. In an attempt to address this situation, most employers simply pay the equivalent amount of salary and terminate the employee immediately – we call this severance. It is not uncommon for long term employees to receive a month of notice per year of service, sometimes up to 24 months of severance. Under common law, even short term employees can be entitled to 3-6 months of severance.
An employer can, however, control its liability for severance with the use of relatively simple written employment contracts. Depending on the circumstances, such contracts can range from very basic, one page letter agreements, to multi-page comprehensive contracts covering everything from property rights to corporate policies, and the hundreds of potential issues that can arise in the typical employment relationship. Typically a written contract is entered into prior to the commencement of employment, but there are various ways to introduce written contracts to your current staff and ensure that they are enforceable.
We urge all of our clients to consider employment contracts for their employees. We feel that it is simply a good business decision to reduce the essential terms of the employment relationship to writing and control any potential liability issues surrounding dismissal. Additionally, for employers who operate in specific industries, contracts serve to protect property rights through non-solicitation, non-competition and nondisclosure clauses. We are also able to draft extensive policy manuals that can be incorporated into employment contracts to protect employers from liability with regard to human rights, harassment, workplace safety and other issues.
For more information on employment contracts and other ways to limit your liability as an employer, please contact a member of our employment law team.