Why you need to read over your employment contract

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While the jury is still out on whether or not the COVID-19 crisis is over, one thing is certain – people are working again. Unemployment is finally dipping below pre-pandemic levels, and with new jobs come new contracts.

A lot of people’s eyes gloss over when it comes to contracts, but they’re the most important part of the hiring process as they represent your relationship with your employer. They can also be confusing, so be sure to read them as carefully as you can.

“A lot of people have questions about written employment agreements when there are terms and legalese that they don’t understand,” notes Matthew A. Fisher, a partner and employment lawyer at Toronto-based law firm Lecker & Associates, adding that most employee rights can be found in these contracts. That’s why it’s so important to understand them.

BEWARE OF NEW CONTRACTS

If you’re about to start a new job, be sure to pay attention to the words used in the contract, especially around bonuses. While it may be exciting to see that you’re eligible for a large bonus, there are often loopholes in the language that could prevent you from earning it.

“I’m eligible to be the Prime Minister of Canada, but I’m not necessarily going to hold that job,” Fisher explains. “What you really need to examine is how achievable that bonus is.”

Some things to look for in an employment agreement: is the bonus discretionary? Is it based on your performance, or on the company’s performance? Can the company decide they don’t want to give it one year versus being based on a certain formula?

“Do your due diligence, ask the right questions, you know your industry well,” he adds, “but understand and ask those questions so you know what you’re getting into and you can make an informed decision.”

CONSIDER CONTRACT CHANGES

Due diligence extends to your current job, as well. Sometimes, a company will rework an existing employment contract and ask their employees to sign the new version, even offering a signing bonus. If this happens, it’s crucial that you read the new contract thoroughly or consult an employment lawyer to understand what has changed.

“Not every gift is what it appears,” Fisher notes. “Employers will sometimes realize over the years that they have employees who have been with the company for a long time and either just started with a handshake or they have an old employment contract. If they let that employee go, it can be very expensive, because that employee can be eligible to a large severance package.”

So a new contract could be a bait and switch, where the employer offers an extra week of vacation or $1,000, but it results in the employee losing far more money than the bonus.

LOOK BEFORE YOU LEAVE

When an employee leaves the company, whether it’s on their own terms, because of a dismissal or due to downsizing, they may be confused as to what they are owed. In addition, some clauses in a contract may not be enforceable.

In highly driven sectors like sales, a contract may include a non-competition clause, however the scope of that clause should be reasonable.

“It’s important when someone is terminated that they’re able to go out and find another job,” explains Kimberley Sebag, an employment advocacy lawyer at Lecker & Associates. “Courts typically look for a non-competition clause that’s very narrow, with regard to time frame and distance, so the employee doesn’t feel that they’re out of options when they’re looking for a new job.”

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