What is an Employment Contract?
An employment contract is a type of agreement between an employee and their employer that spells out the conditions of employment and the rights and responsibilities for both parties. This type of contract could also be used when hiring independent contractors. It is not a contract that is used with consultants or vendors. Understanding this agreement and how it can legally protect the employer is extremely important.
A contract for employment can be a written contract, a verbal contract, or even an implied contract. When entering into a work agreement, it is essential for both the employee and employer to have a clear understanding of the terms of employment. Otherwise , misunderstandings can occur.
Job offer letters are not considered contracts. Offer letters are typically a document that an employer provides to a new hire that includes general job information such as job description, salary, and benefits. Without any other written agreements or documentation, this offer letter does not serve as a binding agreement.
The employment contract serves as a written record of the terms and conditions of the employment. It should cover things that are unique to the employment arrangement that would ordinarily not be included in the offer letter. For independent contractors, the contractor agreement is an essential legal element of outsourcing goods or services.
The Elements of an Employment Contract
When entering into an employment contract agreement, there are a number of provision that must appear in the document. Among these is the full disclosure of requirements attached to the job, salary information, information on benefits, and information on the confidentiality and optional non-competition clauses. Both the employer and the employee must be protected by termination clauses in the contract.
Job purposes, responsibilities, duties and obligations outline the tasks that the employee will undertake during their duration at the company. For example, an insurance agent may be responsible for location and purchasing leads, making phone calls to assess the potential client’s interest, documenting the contact’s personal and financial information, assessing the client’s needs, and then matching them with the appropriate policy or program.
Salary information will provide details on the salary figure as well as when the employee will receive it. In most cases, the salary will be delivered monthly but if a commission is included, this amount will be specified as well. Bonus and non-salary incentives are also included in the contract, as well as any incremental salary increases or annually scheduled adjustments. Certain benefits may be offered by the company, including disability, health or dental care. Other perks can be detailed, such as the company paying for the employee’s continuing education courses, payment of 100% of the components of the employee’s Canada Pension Plan (CPP) or Employment Insurance (EI) payments, and the maximum amount that will be paid into their pension plan together with the enrollment terms. Other perks will include the number of vacation days that the employee is entitled to, sabbatical provisions and parental leave. Other compensation options will be included, such as the reimbursement of 50% of the cost of the employee’s business suits, 100% reimbursement on post-secondary and postgraduate educational endeavors, and subsidizing the employee’s transportation costs to and from work.
A confidentiality clause specifies information that cannot be disclosed to anyone outside of the company. This covers both written documentation and verbal communication. The clause can be included for the duration of the contract, terminated immediately upon the dissolution of the contract, or a fixed period of time.
A non-competition clause will prohibit the employee from working at any other company in the industry for a period of time after the employment term has finished. This is to protect the confidential trade secrets that the employee has learned while working at the company against being used at a competitor’s place of business.
Termination clauses detail how the contract is terminated, either the specific conditions or the minimum amount of termination notice that must be provided prior to dissolving the contract.
The Importance of Using a PDF
The use of a PDF format provides a variety of advantages. One of the primary benefits of a PDF contract is its accessibility. PDF files are universally compatible, so they can be opened, read, and signed securely on any modern device, from computers to smartphones. Sharing a PDF is simple; many services offer free document sharing features that allow for easy distribution through email or even directly from one file management system to another, such as Dropbox. It is worth checking the sharing provisions within the selected service provider prior to your finalizing your PDF format. For example, some providers automatically publish the documents you send, which may result in a public display of confidential information. This could become problematic in an employment context.
Another benefit of a PDF contract is that it is universally known that the style used for its formatting will not be changed. While most word processing programs offer protection against the modification of a document, the format they provide is not universally known. To put this in a more relevant context, how many different Word Processing formats are used on computers throughout the world? Two primary formats are known as "Word Perfect" and "MS Word". While these formats look remarkably similar to each other, they are not always interchangeable for every use case. When emails are stored, Word perfect style files may require a complicated download of map drive procedures to view Word Perfect document styles.
Conversely, pdf documents are readily available on most email, cell phone and computer platforms. Seamless access to employees is vital to an employer’s business.
Editing Your Employment Contract PDF
A company that uses an employment contract can also have its employment contract templates customized to fit various positions and industries. Customizing these documents is crucial because they are an essential element of any employment agreement. General clauses work for generic roles, but specialized clauses are needed when having specific requirements. After all, a truck driver, for example, will have different obligations than a real estate agent. Having agreed-upon details about the specifics of a certain job is important to avoid litigation.
Making changes to a document is not very complicated as long as the employer has a plan of what changes need to be made before they make it . Before finalizing the design, it is also essential to confirm that there are no legislative amendments that affect the particular agreement.
Once a company reviews its PDF and makes the necessary changes, they can easily download and print the employment contracts to sign. This subscription also allows companies to avoid spending money to pay a lawyer or an HR professional to draft a contract. Moreover, employers can save time by licensing many different employment contracts and use them when needed.
Consequently, this saves a lot of money on drafting costs, and the individual who will be completing the contract does not have to wait long for it to arrive or worry about the employee acting out before they can sign it.
Common Pitfalls When Drafting
With such a detailed document, it’s no surprise that proper drafting of all the various clauses in the employment contract is key to protecting your business. Common mistakes made by employers include:
1. Using a template without deviation or edits
As mentioned above, each business is unique and therefore, a single template will not work for every employer. You should ensure that you tailor the template properly to your business. For example, ensuring the notice periods, amount of vacation and/or statutory holiday entitlement are outlined correctly and relevant to your workplace.
2. Overly restrictive covenants
In an attempt to prevent former employees from competing with the company, employers will often attempt to include overly broad non-compete and non-solicitation clauses in the employment contract. An overly restrictive clause can turn out to be ineffective in a lot of cases. The employer may find themselves facing expensive litigation in an attempt to force an employee into compliance with an unenforceable clause.
3. Not defining business interests
The business interests are what are protected by a non-compete and a non-solicit. However, a basic outline of these business interests will not translate well into a contract. It is best to provide specific and tailored wording to clarify your business interests.
4. Failing to consider constructive dismissal
If you were to unilaterally change the employment terms, you may face a claim for constructive dismissal. Therefore, it is best practice to require your employee to sign an acknowledgement of the changes.
5. Confusion between terminations and resignations
If you expressly state that the employment contract will not end until it is terminated by either party (as a general practice) this needs to be clear in the contract. If you and your employee are not clearly in agreement on the end date of the employer, this may result in an employment standards claim for wrongful dismissal.
6. Less than optimal pay increases
Ambiguity in pay increases can lead to litigation. It is in your best interest to clearly outline the specific pay increases inline with the remuneration package.
7. Failing to adhere to the Employment Standards Act
The Employment Standards Act sets out minimum requirements that must be adhered to. If these are not followed, you risk facing a claim with the Ministry of Labour. Costs arising from a claim with the Ministry can be significant and should be avoided.
Free Employment Contract PDF Samples for Download
Navigating the complexities of employment contracts can be daunting. The terms and conditions outlined in these agreements can significantly impact both employers and employees, making it essential for all parties to understand their rights and obligations. Fortunately, there are numerous resources available online to help you make an informed decision when it comes to signing or drafting an employment contract.
For those who seek reliable and professional templates for employment contract agreements in PDF format, there are several reputable websites that offer free downloads. One such resource is the Society for Human Resource Management (SHRM . org), which features a variety of contract templates tailored to specific job positions. Another valuable resource is Rocket Lawyer (Rocketlawyer.com), which provides customizable contract templates that can be adapted to your particular needs or circumstances.
The American Bar Association also maintains a list of free resources (Americanbar.org), where users can find a selection of general contract templates. Alternatively, employment law firms such as Justia and LawDepot offer additional templates for download through their websites. Regardless of the source, it is always a good idea to consult with a legal expert before using any template to ensure that it complies with applicable laws and adequately addresses your needs.