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What you need to know about employment contracts before you’re fired

Employment lawyer Peter McSherry says what you’re legally entitled to receive may be a lot higher than your employer’s offer

Employment contracts are among the most important legal documents that an individual may sign.

Despite this, most people don’t have a clue as to what their employment contract provides. It’s a binding understanding between the employer and the employee that can have critical implications, especially if you’re being terminated. Peter McSherry is an employment lawyer who has a practice in Guelph. McSherry says, “If you’re terminated, you might have a contract that says all you’re entitled to are the minimum entitlements stated in Ontario’s Employment Standards Act 2000, but you should question the terms of the contract, because a lot of the clauses may not be valid.”

If your employment contract attempts to limit your rights beyond what is guaranteed by law, this is illegal. Just as your employer cannot pay you less than the minimum wage, they cannot pay you less termination or severance pay than what you are entitled to under the Employment Standards Act.

Does your employment contract comply with the ESA?

The ESA sets the minimum standards for an employment contract, not the maximum. McSherry says, “Employers are not permitted to have any terms in their employment agreement that deny an employee the minimum rights, benefit, or other protection guaranteed by the ESA.” The section of an employment contract that is often overlooked is the termination clause.

McSherry stresses, “Employees being terminated, at a minimum, have entitlements under the Employment Standards act, which typically are one week per year of service to a maximum of eight weeks for notice pay.”

Common law entitlements

The termination clause may also attempt to limit the amount of notice or severance pay that an employer owes the employee if they are fired without cause. If they’re fired, they may be entitled to severance pay which is meant to cover any losses that may occur when a long-term employee loses their job.

The courts do not look favourably on employment contracts that violate the ESA. In 2020, the Ontario Court of Appeal reinforced the trend of protecting employees against contracts that are in breach of minimum employment standards.

For years, it was common for employment contracts to say that if your employment is terminated for “just cause”, you don’t receive a dime. It might say that if you’ve committed an offense anywhere in Canada, including small offenses such as not picking up after your dog, you could be terminated for “cause.” But the courts have determined that is illegal. In those cases, the employees are entitled to common law reasonable notice, which could mean additional money and protection.

Contact an employment lawyer

An employer may attempt to limit liability by providing an employee with the minimum notice period, claiming that it’s their only obligation under the ESA. But those clauses may not be valid. Employees who are paid on commission and who also receive bonuses might be told they will only receive their base pay. McSherry says, “It might violate the

Employment Standards Act in some way, and if that’s the case, then the entire clause is denied.” An employment contract may also be outdated because the law has changed.

The average employee may have no idea their legal entitlements are. These issues can be complex, with many factors to be considered. That’s why, to determine your eligibility for additional compensation, it’s always best to speak to a lawyer. McSherry says, “You should have an employment lawyer review your employment contract and your employer’s termination offer. You could be somebody who’s entitled to 24 months severance, but your employer is only offering ESA minimums.”

Terminated employees who don’t seek legal advice could walk away with much less than what they are legally owed. McSherry says, “Anybody should have their employment and termination documents reviewed by a lawyer, because if you receive common law entitlements, even people with short service may find themselves getting three months severance or more. Just because your employment contract says all you’re entitled to are employment standards minimums, don’t take that as the final answer.”

To have your employment and termination documents reviewed, contact Peter McSherry at (519) 821-5465 or online.