Employment agreements, also known as employment contracts, are agreements between the employer and employee that outline the terms of their relationship. For several reasons, it is strongly recommended that employers have a written employment agreement with their employees.
First of all, having an employment agreement in place provides certainty to both the employer and the employee. It ensures that both parties have put their minds to issues such as job responsibilities, work location, work schedule, or even vacations and benefits, to make sure those items haven’t been overlooked.
From the employer’s perspective, one of the most important reasons to have a written employment agreement is to limit their liability for severance. In B.C., employees are entitled to notice or pay in lieu of notice under the Employment Standards Act when they have been dismissed without cause. It’s important for employers to have a strong agreement that limits their severance to those statutory minimums. If an employer does not have a strong agreement, employees can claim common-law damages, which are much higher than the statutory minimums. The difference between how much an employee can claim between the two is quite substantial. The maximum an employee can claim for severance under the Employment Standards Act is eight weeks, whereas at common-law they can claim up to 24 months in severance. This gap underlines the significant difference a written agreement can make to the employer’s bottom line when dismissing an employee.
A well-drafted employment agreement is essential to set clear standards for both parties involved and avoid any confusion or future complications.
