An Employment Agreement serves as a foundation of the relationship between employers and employees. The landscape of the workplace is constantly evolving due to various factors. Furthermore, the spirit of the Employment Agreement may not match the language used as time goes on. Reviewing Employment Agreements on an annual basis helps to ensure that they remain fair, compliant, and reflective of current needs for a number of reasons:
Legal Compliance and Changing Laws
Employment law is not static – employment standards, human rights laws, and occupational health and safety regulations are frequently updated. For example, minimum wage rates, vacation entitlements, or overtime rules can change from year to year and differ in each jurisdiction. An annual review helps to ensure that Employment Agreements remain compliant with current laws and prevent potential legal disputes.
Reflecting Role and Responsibility Changes
Whenever an employee’s role changes due to promotion or a shift in duties, these changes should be reflected in the Employment Agreement. An outdated contract can cause confusion, especially when it comes to compensation, benefits, or performance expectations. By reviewing Employment Agreements annually, employers and employees can ensure that the contract aligns with current roles and responsibilities. This can also help to prevent claims of constructive dismissal.
Updating Terms Related to Remote and Hybrid Work
The rise of remote and hybrid work arrangements has introduced new complexities into Employment Agreements. Many employees are now working in environments much different from when they were originally hired. Issues such as remote work policies, technology use, reimbursement for home office expenses, and work-life balance expectations should be addressed regularly. Any time there is a change to work location, it is an opportunity to incorporate new policies, ensure clarity, and avoid disputes.
Addressing Restrictive Covenants
Confidentiality, non-compete, and non-solicitation agreements are crucial for protecting an employer’s business interests. However, the enforceability of these clauses can evolve with legal precedent and changes in legislation. Should Canadian courts find any aspect of a restrictive covenants unreasonable, the entire clause would be deemed unenforceable. As a result, employers must examine closely what is essential and defensible to include in the restrictive covenants of their Employment Agreements.
Termination and Severance Provisions
In recent years, case law has emerged regarding the enforceability of termination and severance clauses, as more employees have begun to challenge these provisions. Canadian courts increasingly recognize the power imbalance in employment relationships and often favour employees. As a result, employers should regularly review their termination and severance clauses to ensure clarity for both parties in case the employment relationship were to end. Although discussing these terms may feel awkward, it’s crucial for both sides to understand them ahead of time. Recent court rulings highlight the importance for employers to align their employment agreements with applicable employment standards legislation and to stay informed about updates regarding the enforceability of termination clauses. By regularly reviewing employment agreements, employers can lessen the chances of facing wrongful dismissal claims and issues related to enforceability.
Risk Mitigation and Strengthening the Employee-Employer Relationship
An annual review of Employment Agreements provides a proactive approach to risk mitigation. By regularly reviewing and updating these contracts, employers can identify and address potential issues before they become legal liabilities. Well drafted Employment Agreements are essential to protecting both employers and employees. For employees, this process ensures transparency and fairness, which can lead to increased job satisfaction and stronger working relationships. In many cases, simply revisiting the agreement allows for open dialogue promoting a culture of trust and collaboration.
Employment Agreements are living documents which should evolve alongside the work and legal environment. Conducting an annual review ensures that these contracts remain compliant, clear, and mutually beneficial. By staying ahead of legal changes, reflecting the realities of the work arrangement, and addressing the compensation and benefits, both parties can avoid future disputes and maintain a productive and harmonious working relationship.
PEO Canada’s HR Services allow you to outsource the creation of offer letters and employment agreements. Our HR professionals will partner with you to draft documents that meet your business’ needs, while ensuring awareness and consideration of Canadian employment requirements.
For more information on the HR solutions offered by PEO, visit our website here: Outsource Human Resource Services from PEO Canada.