Drafting employment contracts: Inside the fine print that protects employers

OVERVIEW

Employment Agreements – also called job offer letters or contracts – are useful tools that explain what both the employee and employer are agreeing to. They spell out expectations, responsibilities, and limits for each side, and they also help to protect the company from legal issues.

The following report will set out to explore:

1. Why is having a written Employment Agreement important?
2. What should be included in an Employment Agreement?
3. What are restrictive covenants?
4. What is the difference between a fixed-term and an ongoing (indefinite) employment agreement?
5. How are the important clauses of an Employment Agreement written?
6. What makes an Employment Agreement legally valid and enforceable?
7. When is the right time and what is the right way to give the agreement to a job candidate?
8. How often should these agreements be updated?

1. Why is having a written Employment Agreement important?

a. The difference between oral and written Employment Agreements

Many employers make job offers verbally or in short emails that only mention basic details like job title and salary. These informal offers are legally binding, but they do not protect employers the way a full written contract can.

For example, if there is no written clause explaining how an employee can be let go, the company might have to pay up to 24 months of salary under “common law” rules. A proper termination clause in writing can avoid that.

Other important clauses - such as conflict of interest, social media, and non-solicitation clauses – also need to be written to be enforceable.

By including the necessary written clauses, employers can protect their companies and organizations from legal liability by setting out clear expectations for the employee, including their conduct such as on social media platforms.

Important: If you already made a verbal offer, it could override a later written contract unless you offer something extra, like a signing bonus, when asking them to sign the written version.

b. Are online templates good enough?

The short answer is no. Most online templates do not meet legal standards, especially for complex clauses like termination. Ontario courts often side with employees and throw out unclear or outdated clauses. In fact, about 90 percent of termination clauses in contracts are invalid.

Laws also change often. Major court decisions in 2020 and 2024 changed how termination clauses are judged, making many older ones useless. This report will delve into the enforceability of termination clauses.

The same goes for other clauses, like temporary layoffs or restrictions on working for competitors. If they are too broad or do not match the role, they could be ruled invalid.

So, using a template could leave you open to expensive legal claims. It is safer to have a lawyer draft or review the agreement.

2. What should be included in an Employment Agreement?

A well-drafted Employment Agreement should contain the following clauses:

1. Terms of employment such as:
   1. job title and duties,
   2. start date,
   3. type of contract (temporary or ongoing),
   4. Probation period,
   5. pay and benefits.
2. Critical clauses outlining restrictions imposed on the employee:
   1. Termination clauses
   2. Whether the employee can be temporarily laid off
   3. Whether the employee can work from home or in a hybrid arrangement
   4. Dress code (e.g., slogans and uniforms)
   5. Whether the employee can take another job at the same time
   6. Conflict of interest rules
   7. Confidentiality expectations
   8. Non-solicitation and non-compete rules (if allowed);
   9. Social media policy.

This report will explore each of the above critical clauses, with tips on how to draft each one so that it is legally valid and enforceable.

a. Additional considerations

In addition to the above, the Employment Agreement must also include the employer’s rules, policies, procedures, and the company’s handbook, so employees cannot claim they were not made aware of the rules.

It should also include a clause on whether employees will receive performance reviews, the frequency of such performance reviews, and whether any salary/benefit increase will flow from the performance reviews.

Depending on the needs of the employer, an Employment Agreement may also include a clause on the ownership of intellectual property, to prevent the employee from departing with work they created that actually belongs to the employer.

Prerequisites to hiring employees must also be included. These may include background checks or requests for references, as well as an acknowledgment from the employee that they are permitted to work in Canada and have no prior obligations that could prevent them from starting work.

Finally, a statement must be included in the Employment Agreement that any changes to the employee’s role, duties, location of work, or compensation will not amount to a breach of the agreement or a constructive dismissal of the employment.

This is not an exhaustive list of all the clauses that must be included in Employment Agreements to provide protection to employers. As each business is different, speak to an employment lawyer to tailor your agreement to your needs.

3. What are restrictive covenants?

These are rules in a contract that limit what an employee can do during or after their job,  mainly to protect your business.The most common examples include:

• Non-solicitation: Stops them from taking your clients or coworkers when they leave.
• Non-competition: Stops them from joining or starting a competing business (Note: such businesses are mostly banned under the ESA except in very specific cases, like for executives or in the sale of a business).
• Confidentiality: Prevents them from sharing sensitive company information.
• Social media rules: Stops harmful posts that could damage your reputation.

a. Restraint of trade

Courts usually see non-solicitation and non-compete agreements as restrictions on fair competition and on a person’s right to work and use their skills. Because of this, the law assumes these agreements are not valid unless they are clearly written, reasonable in scope, and shown to be necessary.

If a clause is vague or poorly written, it could be rejected entirely. That is why it is important to have an employment lawyer draft these agreements to make sure they are legal and enforceable.

b. Implied restrictions

Just because a contract does not include non-compete or non-solicitation clauses does not automatically mean an employee is free to compete or reach out to clients. In some cases, these restrictions can still be implied, especially if the employee is in a position to use sensitive information in a way that could harm the employer’s business.

4. What is the difference between a fixed-term and an ongoing (indefinite) employment agreement?

Indefinite term agreements are the norm. The employee keeps working until either side decides to end the relationship. This type of contract is accompanied by a number of rights and obligations, most notably the employee’s right to reasonable notice upon termination of employment.

In fixed-term agreements, the employment relationship is intended to last for only a specific length of time or until a certain project is completed. Once the term or project is finished, the employment ends automatically. At the end of a fixed-term contract, an employer is not required to provide the employee with reasonable notice.

The actual type of contract that an employment relationship falls under is not just determined by the terminology used in the contract itself. The overall character of the employment relationship is the determining factor for whether a contract is considered fixed-term or one of indefinite duration.

a. Concerns with the repeated use of fixed-term agreements

Using fixed-term contracts repeatedly instead of offering permanent (indefinite) employment can cause legal issues for employers.

For example, if an employee is hired on a one-year contract just to “test” their performance, and then gets another one-year contract after doing well, a court might not accept that the arrangement is truly fixed-term. Instead, the court could treat the job as permanent. This would mean the employee is entitled to protections like proper notice of termination or pay instead of notice (potentially up to 24 months or more) if the employer ends the relationship.

How can employers avoid this risk?

1. Be clear about the purpose of the contract. If you only need someone temporarily, a fixed-term agreement might be appropriate. But if you are using it as a trial period, that is not the right approach. Use a regular, indefinite-term agreement with a probation period instead.
2. Switch to an indefinite contract if the employee stays. If you decide to keep the employee after their fixed-term contract ends, move them to a permanent contract that includes a clear and enforceable termination clause.

Employers should contact an employment lawyer prior to entering into an Employment Agreement to determine whether a fixed-term or indefinite term agreement is needed.

5. How to write important clauses in an Employment Agreement

The most important clauses to include in an Employment Agreement are:

• Termination clause – limits what the employer has to pay if they end the employment. It caps payments at the minimum notice required by the ESA.
• Temporary lay-off clause – allows the employer to temporarily lay off employees without it being considered a dismissal under the law. It also helps the employer avoid paying extra notice or severance based on court decisions (known as “common law” notice).
• Remote/hybrid workplace clause – outlines the rules for working from home or in a hybrid setup. It covers things like the employer’s right to ask the employee to return to the workplace, expectations for remote work (e.g., wearing appropriate clothing on video calls), and clarifies that only local employment laws apply (not laws from other provinces or countries).
• Dress code clause – sets clear expectations for how employees should present themselves at work.
• Exclusivity clause – says the employee cannot work for other employers while working for you. It helps prevent burnout and avoids potential conflicts of interest.
• Conflict of interest clause – protects the company if an employee acts inappropriately, such as by misusing company property, taking bribes, or making decisions that benefit themselves or someone they know instead of the company.
• Confidentiality clause – keeps sensitive company information private. It prevents employees from sharing trade secrets or salary details both during and after their time at the company.
• Non-solicitation clause – prevents employees from trying to take clients, customers, or coworkers with them when they leave the company. It applies both while they are employed and after they leave.
• Non-competition clause – stops employees from working for or helping a competing company, either while employed or after they leave*

*Note: These clauses are generally not allowed under the ESA unless the employee is an executive (like a CEO or a president), or they are selling a business and staying on to help the buyer.

• Social media/off-duty misconduct clause – sets boundaries on what employees can post on social media or say publicly when they are not at work.

a) Termination clause

The termination clause is one of the most important parts of an Employment Agreement. This is because if there is no termination clause in the contract, and an employee is let go without cause, the employer may have to pay them two types of compensation:

1. The minimum required by the ESA – usually up to eight weeks of termination pay, and in some cases, up to 26 weeks of severance.

2. Common law notice – which can be much higher, sometimes up to 24 months or more of pay.

This means the difference between having a proper termination clause and not having one could cost the employer hundreds of thousands of dollars.

There are usually two parts to a termination clause: one for termination without cause, in the case of layoffs or downsizing, or for cause, such as for serious misconduct. Both parts need to be valid and enforceable. If either part is flawed, the entire clause can be thrown out.

This was shown in the Waksdale v Swegon North America Inc., 2020 ONCA 391 legal case, in which the Ontario Court of Appeal said that if the “termination for cause” part of a contract is invalid, it could make the “termination without cause” part invalid also, even if that part was fine on its own.

This means employers need to make sure both parts of the clause follow the law exactly.

More recently, in the 2025 Ontario Court of Appeal decision of De Castro v. Arista Homes Limited, 2025 ONCA 260, the court stated that:

• Employees usually do not have the same bargaining power as employers, and are less likely to be familiar with the ESA standards; and
• Employment laws (like the ESA) are designed to protect employees, meaning courts should adopt an interpretation that favors the employee.

Termination clauses are essential but also one of the hardest parts of an employment contract to get right. Courts look at them closely, and even tiny errors can make them invalid. Employers need to be very careful when drafting them.

i) Termination without cause clause

When courts look at a termination clause, their main question is: Could the clause possibly break the rules of the ESA? If the answer is yes – even just potentially – the clause is considered invalid. That is because Ontario law does not allow companies to give employees less than what the ESA guarantees, even by accident.

In the recent case of Dufault v. Ignace, 2024 ONSC 1029, which was released in February 2024, the employer’s contract said they could terminate employment “at any time” and in “its absolute discretion.” The court found this language risky because it could allow firing someone during a legally protected leave under the ESA or after they file a harassment complaint under the Occupational Health and Safety Act. Even though the employer did not actually do those things, the court still said the clause was invalid – just the possibility of breaking the law was enough to strike it down.

A termination without cause clause can also be invalid and break the law if it says the employee’s notice or severance pay is only based on their “base salary”. According to the law, when employees are let go, their pay instead of notice must include not just their base salary, but also commissions, guaranteed bonuses, and other types of pay.

Also, if an employee is denied their commission or guaranteed bonus payments after they are fired, that breaks the law. Employees have the right to keep getting all parts of their pay during the notice period, including commissions and bonuses.

Besides wording that breaks the law, the termination clause should not be unclear or vague. For example, if it just says the employee will get what the law requires but does not say that is all they will get or that they will not get any extra common law notice, the employee might still be able to claim more notice. A termination clause only limits what the employee can get if it clearly says it replaces the common law notice. If there is any confusion, the law will favor the employee.

Some employers, especially when hiring executives, want to offer better-than-ESA notice, like “one month per year of service, up to 12 months.” That is allowed but is also tricky to write correctly. A single phrase that contradicts the ESA could make the whole clause invalid.

Finally, great caution must be exercised in drafting a without-cause termination clause to ensure that it does not breach the ESA or is not too vague and leaves the door open to common notice. To get it right, consult an employment lawyer when drafting or reviewing these clauses.

ii) Termination with cause clause

In 2020, a major court case in Ontario – Waksdale v. Swegon North America Inc. – changed how employers have to write termination with cause clauses.

In that case, the clause stated that if the employee was fired for cause, they would not get any notice or termination pay – not even what was required by the ESA. However, under the ESA, the only time an employer does not have to pay termination notice is if the employee did something very serious – known as “willful misconduct, disobedience, or willful neglect of duty,” and it must be serious, intentional, and not forgiven by the employer. If the misconduct is not that serious, the employer must still pay the employee the ESA minimums even if the firing is “for cause.”

The court ruled that the contract clause in Waksdale was invalid because it could allow an employer to fire someone without any pay, even if their behaviour did not meet the strict ESA definition of “wilful misconduct.” Even though the clause did not specifically say the employer would break the law, the possibility that it could be used to do so made it unenforceable.

To be legally valid, a termination with cause clause must clearly say that the employer will still follow the ESA, and promise to pay any ESA entitlements, even if the employee is fired for cause, unless the misconduct meets the strict “wilful misconduct” standard.

iii) Use of “savings” clauses

Sometimes, employers try to protect themselves by adding a phrase like “subject to the ESA” in a termination clause. They may also list examples of what counts as “cause” for dismissal even if those examples do not actually meet the ESA’s strict definition of cause. Does that still breach the ESA? The answer is yes.

In the case of Perretta v. Rand A Technology Corporation, 2021 ONSC 2111, the employer’s contract said that no notice would be given for “just cause” termination and that the clause was “subject to the ESA.” The contract listed 11 reasons an employee could be fired for cause.

The court held that some of those 11 reasons did not meet the ESA’s legal test for cause – called “willful misconduct, disobedience, or willful neglect of duty” that is serious and intentional.

The court said that just including the words “subject to the ESA” was not enough. If the examples listed suggest to the employee that no notice will be given for less serious conduct, the clause still violates the ESA and is therefore unenforceable.

“Saving” language does not save an invalid clause. The best way to avoid legal trouble is to draft the termination clause carefully and correctly, not rely on general disclaimers. When in doubt, get advice from an employment lawyer.

iv) How to draft a termination clause?

Employers often ask: Can a valid and enforceable termination clause even be drafted if the courts constantly look for new and inventive ways to invalidate them? The answer is simple:

1. Use an employment lawyer – Only a qualified employment lawyer should draft or edit your termination clause. They know the legal pitfalls and how to avoid them.
2. Make sure your lawyer knows the latest case law – Laws change, and so do court interpretations. Your lawyer must be familiar with recent court decisions, especially those affecting termination clauses.
3. Get a second opinion – Even good lawyers can miss things. Have a second employment lawyer review the agreement, especially if it is for senior staff or executives.
4. Review contracts every year – Laws evolve. Have your Employment Agreements reviewed by a lawyer at least once a year to keep them up to date.
5. Stay informed – Ask your lawyer for regular updates about legal changes that could affect your contracts.
6. Do not rely on non-lawyers for drafting – If an HR professional or paralegal edits the contract, have an employment lawyer review and approve the changes. These professionals may not have the legal training or insurance needed if something goes wrong.

It is critical to keep in mind that during an employee’s employment, Employment Agreements can and should be updated. However, you must give them “fresh consideration.” This means offering something of new value in return for signing the new agreement, like a raise, promotion, bonus, or new benefit package. Without this, the updated agreement may not be legally binding.

As such, the best time for an update is when an employee is being offered a promotion, salary increase or a new compensation structure, or any additional value that was not agreed to or discussed earlier.

To learn more about how termination clauses work – and how to write one that stands up in court – check out our “Termination Clauses Under Canadian Law: A Primer and an Update” report.

b) Temporary layoff clause

During the uncertainty caused by the COVID-19 pandemic in 2020, many employers began using temporary layoffs allowed under the ESA. These rules let employers lay off employees for up to 13 weeks in a 20-week period, or 35 weeks in a 52-week period without having to provide ESA notice or termination pay, as long as the employee was recalled within those time limits.

For a while, the ESA was changed to allow indefinite temporary layoffs during the pandemic, and employers across all sectors assumed they did not have to recall employees within a set period or provide any termination pay.

What the majority of employers did not realize was that there are different rules for temporarily laying off an employee under common law.

Under common law, a temporary layoff is not allowed unless it is clearly stated in the employee’s contract or is a standard practice in the industry and the employer can prove that it was understood as part of the job, which is difficult to do. If neither of these apply, then laying someone off – even temporarily – can be considered a constructive dismissal. That means the employer might owe the employee common law notice, which can be up to 24 months or more of pay.

A constructive dismissal is where an employee’s terms of employment, such as their location of work, compensation, and duties are unilaterally and fundamentally altered, and to which they do not consent.

Therefore, when employers across Canada began laying people off, employees began claiming constructive dismissal, as the vast majority of employment contracts did not contain a temporary layoff clause nor was there an implied term that employers could do so.

A number of court decisions, including Fogelman v IFG, 2021 ONSC 4042, confirmed that even if the ESA allows a temporary layoff, without a proper clause in the employment contract, it still counts as constructive dismissal under common law.

i) What should a temporary layoff clause say?

First, the clause must clearly state that any layoff will follow the rules and timelines set out in the ESA.

Second, the clause must state that the employee agrees the temporary layoff does not count as a constructive dismissal or termination of their employment.

Finally, the clause must state that in the event that the temporary layoff amounts to a termination, then the termination clauses in the Employment Agreement should apply.

Ultimately, every word matters. Leaving out just one of these parts can make the clause useless. For example, if you say the layoff follows the ESA but do not mention that it is not a constructive dismissal, the clause likely will not protect you.

c) Remote work/hybrid workplace clause

When COVID-19 hit in 2020, remote work quickly became the norm. Businesses adapted, and many employees discovered the benefits of working from home. Now, five years later, remote or hybrid work is something many job seekers expect, even demand.

Offering flexibility can help attract talent, but employers need to protect themselves with the right contract language. Without a proper remote work/hybrid workplace clause in the employment agreement, asking an employee to return to the office – even part-time – could be seen as a constructive dismissal.

For example, if someone has been working fully remotely, and the employer suddenly requires them to return in person – even on a hybrid schedule – that could be viewed as a fundamental change to their employment. If there is no clause saying the employer has the right to make this change, the employee might be entitled to leave with compensation.

What about an instance where an employee is working remotely from home, and joins a video conference with an important client, shabbily dressed or with their camera off? If there is no policy or clause that sets expectations for remote conduct – like dress code or work hours – it is difficult to discipline them.

How do employers avoid these scenarios? A valid and enforceable remote work/hybrid workplace clause is the answer.

i) What should a remote work/hybrid workplace clause include?

A strong clause should cover the following points:

1. Right to recall employees to the office – Make it clear that remote or hybrid work is not guaranteed. Employees can be called back to the office at any time, and they are expected to comply immediately.
2. No constructive dismissal – Say that any change to work location (remote or in-person) will not be considered a constructive dismissal.
3. Location restrictions – Employees must not relocate to another province or country to work remotely without approval. This prevents the employer from being exposed to foreign laws around taxes, health and safety, or employment rights.
4. Follow company rules at home - Employees must continue to follow all workplace policies while working remotely, including dress code, hours of work, and professional behavior (especially in meetings).

d) Dress code clause

Some employers avoid including a dress code clause in their employment agreements. They may feel it is unnecessary – especially if formal attire is not required – or they may worry about seeming too controlling.

But a dress code is not just about telling employees what to wear; it is also about setting boundaries for what not to wear, especially to prevent offending others or causing workplace issues.

Without a clear dress code clause, employees might not realize that wearing certain types of clothing – like shirts with profanity, hate speech, political slogans, or personal messages – could be inappropriate or even harmful to coworkers.

If your agreement does not specifically restrict this kind of clothing, an employee could claim they have the right to wear it. Worse, you might face complaints from other employees who feel uncomfortable or offended, and you could be held responsible for not setting clear rules.

The solution to the above problem is to include a simple clause in the employment agreement that says the employee must follow the organization’s dress code.

i) What should a dress code clause include?

A good dress code clause should:

• State that employees must follow the organization’s dress code; this makes it a formal condition of employment.
• Explain the general dress standards; for example, business casual, uniform required, or industry-specific standards.
• List what is not acceptable; specifically prohibit clothing with personal or political messages, profanity, and racist, sexist, or offensive content.
• Apply the same rules to remote work. Make it clear that the dress code still applies when employees are on video calls or representing the company remotely.

e) Exclusivity clause

The earlier clauses focused on avoiding legal issues around termination and constructive dismissal. But employment agreements also need to protect employers from conflicts of interest, and that is where an exclusivity clause comes in.

These days, it is not unusual for someone to have more than one job. But that can cause serious issues for an employer.

First, there is a potential for the employee to experience burnout, especially if they are working full-time hours for the employer and then spending the majority of their free time working for someone else. This leaves little to no room for the employee to get the rest they need to show up to work to give their employer their 100 percent.

Second, there is a risk of the employee engaging in a conflict of interest. For example, the employee may unknowingly be working for a competitor. Alternatively, they may be sharing confidential information or promoting their own business during work hours. Any of these actions could cost your company time, money, or its reputation.

The solution to the above concerns is to have an exclusivity clause in the Employment Agreement that clearly sets boundaries on outside work and activities. It helps protect your business and sets expectations from day one.

i) What should an exclusivity clause include?

A solid exclusivity clause should say:

• No other work without permission – The employee cannot work for another employer, volunteer, or sit on a board of directors unless they have written approval.
• No promoting other businesses – The employee cannot promote their own side business (or someone else’s) during work hours, again, unless you give written permission.
• Consequences for breaking the rules – Make it clear that not following this clause could lead to disciplinary action, including possible termination for cause.

f) Conflict of interest clause

A conflict of interest happens when an employee’s personal interests interfere with their job responsibilities or loyalty to the employer. These situations can damage trust and harm the employer’s reputation, and may even lead to legal or financial trouble.

Take, for example, an employee who owns a business that is bidding on a contract with their employer. If that employee helps choose the winning bid and selects their own company, that is a clear conflict.

Other examples could be if an employee accepts a gift or bribe from a vendor to influence their decision on who wins a contract, or if the employee uses confidential information they learned on the job to their own advantage, such as profiting off a new deal the employer has entered into.

Each of these examples involves misconduct that can seriously damage the employer's credibility and relationships with clients, partners, or regulators. To help prevent these issues, it is essential to include a well-drafted conflict of interest clause in every employment agreement.

i) What should be included in the conflict-of-interest clause?

A good conflict of interest clause should contain the following:

1. A clear expectation to avoid conflicts – State that employees must avoid actual, potential, or even perceived conflicts of interest while performing their duties.
2. Examples of conflicts – Spell out what counts as a conflict, such as accepting gifts or benefits that could influence their decisions or using confidential information for personal (or someone else’s) gain.
3. Employee declaration – Have the employee confirm that they are not currently involved in any actual, potential, or perceived conflicts of interest.
4. Disclosure requirements – Require employees to immediately tell the employer if they become aware of a conflict. This includes having a personal interest in a deal, contract, or transaction the employer is involved in, or holding a position in another company that might interfere with their duties.
5. Consequences for non-compliance – Make it clear that failing to follow this clause could lead to disciplinary action, including possible termination for cause.

g) Confidentiality clause

A confidentiality clause is a key part of any Employment Agreement. It helps protect the employer’s private and sensitive information from being shared – intentionally or accidentally – by employees.

This could include the employee disclosing the employer’s confidential information to a competitor, which could have serious consequences for the employer.

i) What should a confidentiality clause include?

To be effective, the clause should clearly spell out the following:

• What counts as confidential information – Define it clearly. This can include client or customer lists, business contracts, internal processes and strategies, or employee compensation or health information.
• No sharing during or after employment – State that the employee is not allowed to share, use, or profit from confidential information while they work for you and after they leave.
• How long confidentiality applies – You can state that confidentiality lasts indefinitely or set a specific time limit (e.g., two years post-employment).
• Consequences for breaking the rules – Make it clear that disclosing confidential information could lead to disciplinary action, including termination for cause.

h) Non-solicitation clause

A non-solicitation clause is used to stop employees from trying to take clients, customers, or coworkers with them when they leave a company or while they are still employed. It is designed to protect the business from losing valuable relationships or team members.

However, courts consider these clauses to be a restraint of trade – meaning they limit a person’s ability to work and earn a living – so they will only enforce them if the clause is reasonable, clear, and not overly broad.  Clauses that are tightly focused – for example, only covering clients the employee actually worked with recently – are more likely to be upheld in court.

However, unlike the previous clauses discussed, a non-solicitation clause should not be included in every Employment Agreement. Generally, you should only include it if the employee has direct access to your clients, customers, or prospects, and could realistically take those relationships with them.

As with termination clauses, it is imperative that the employer seeks legal advice when drafting a non-solicitation clause. If the clause overly restricts an employee’s business interests, the court will consider it to be invalid.

i) What should a non-solicitation clause include?

To improve its chances of being enforceable, your clause should:

• Narrowly define “clients” or “customers” – Limit it to the people the employee had direct contact with or provided services to in the last 6–12 months of their employment.
• Limit the time frame – Apply the restriction only while the employee is working for you and for a short period (usually 6–12 months) after they leave.
• List the consequences – Make it clear that breaking this clause could result in disciplinary action or termination if they are still employed, or legal action if they have left, including an injunction or a claim for damages.

i) Non-competition clause

A non-competition clause is meant to stop an employee from working for a competitor – or starting their own competing business – while employed or for a period after they leave.

As discussed earlier in this report, since October 25, 2021, the ESA has banned most non-competition clauses. The law only allows them when the seller of a business agrees not to compete after the sale and stays on as an employee of the buyer, or for C-suite executives such as CEOs and presidents. For everyone else, these clauses are not enforceable under the ESA.

If you are drafting a non-competition clause for a C-suite executive, be cautious. Courts are often skeptical and may strike down the clause if it is too broad in scope or geography, too long in duration, or not clearly necessary (i.e., if a non-solicitation clause would have been enough).

i) What should a non-competition clause include?

If a non-competition clause is appropriate, it should be written carefully and include:

• A clear, narrow definition of your business – Do not be vague. Define your company’s business based only on its actual operations, and do not provide general or overly broad descriptions.
• A limited time frame – Restrict the employee from competing only during their employment and for a short period afterwards – typically 6–12 months, depending on the role.
• Consequences for non-compliance – Make it clear that breaking the clause could result in discipline or termination if they are still employed, or legal action like an injunction if they have already left the company.

j) Social media/off-duty misconduct clause

A social media/off-duty misconduct clause is a newer but increasingly important part of modern employment agreements.

Today, many people use social media to express opinions about politics, policies, and social issues. But when employees post offensive or controversial content – such as comments on a politician’s posts or their own posts denigrating those politicians – it can damage their employer’s reputation, especially if they are in a public-facing role.

To avoid these kinds of issues, employers should include a social media/off-duty misconduct clause in the employment contract.

i) What should the social media/misconduct clause include?

A well-written clause should:

• Clearly define what is not allowed on social media – This could include offensive or discriminatory posts, political or personal statements that could harm the employer’s reputation, or inappropriate content shared during or outside of work hours.
• Define off-duty misconduct – Explain what kinds of off-duty behaviour could negatively impact the workplace or the employer’s public image (e.g., criminal activity, public harassment, etc.).
• List the consequences – Make it clear that breaking these rules could lead to disciplinary action, up to and including termination for cause.

6. What makes an Employment Agreement legally valid and enforceable?

For an employer to rely on the terms in an Employment Agreement, it has to be legally valid and enforceable. To do this, a few basic things must be in place:

1. Both sides must agree to the terms; there has to be a clear offer and acceptance.
2. The terms must not be unfair, illegal, or against public policy.
3. Both sides need to get something (this is called “consideration”) out of the deal, which usually means the agreement should be signed before the employee starts working.

a) Examples of invalid Employment Agreements

• If an employer tries to change an existing agreement to take away or reduce employee rights (like benefits, vacation, or notice periods), the new agreement might not be valid. Even if the employee signs it, the employer may not be able to enforce those changes later.
• If an employee currently working under a verbal agreement is asked to sign a written one that reduces their notice period below what the law or common practice requires, and the employer does not offer anything extra in return, the new agreement could be invalid.
• Similarly, if an employee with a written agreement that lacks a termination clause is asked to sign a new one that limits their notice period without receiving anything additional, that new agreement might also be invalid.

b) Enforceability

If an Employment Agreement is invalid, it cannot be enforced. Sometimes, only certain parts of an agreement may be invalid while the rest still applies – this depends on how the agreement is written.

Also, the terms cannot break any laws, such as those in the ESA. That is why it is important that whoever writes the agreement knows all the legal rules, so the agreement works as intended. Otherwise, all the time spent creating the agreement could end up wasted.

7. The right time and way to give the agreement to a job candidate

When it comes to making sure an Employment Agreement is legally enforceable, timing is everything.

The written agreement must be given to the candidate as the full offer of employment, not after they have already agreed to start the job. The candidate should be told to review the agreement, ask any questions, and only then decide whether to accept the offer by signing and returning it, with no changes. The job offer should only be considered accepted after this step. Ideally, the agreement should be signed at least a few days before the person’s start date.

Let us say a company is excited about a candidate and calls them after the second interview to offer the job. During the call, the employer says the offer is for $100,000 a year and that a formal agreement will follow. The candidate agrees right away over the phone, which creates a verbal (oral) agreement.

Later, when the employer sends a written Employment Agreement that includes extra terms – like a termination clause – the candidate could argue that they already accepted the job before seeing those new terms. Since the job was already accepted, there is no “new benefit” (or “fresh consideration”) in signing the written agreement. That could make the entire agreement – especially those added terms – unenforceable.

In that situation, the only enforceable terms are what was actually discussed in the phone call. This creates a major issue for the employer, especially when it comes to clauses about notice or termination.

Employers should be careful not to give the impression that a job offer can be accepted before the written agreement is reviewed and signed. In other words, do not say someone is hired until they have signed the agreement.

The best approach is to give the candidate the written Employment Agreement either during the final interview or shortly after by email. Be clear that:

1. They should review the agreement carefully.
2. They can seek legal advice if they would like.
3. They can ask questions about the agreement.
4. If they are happy with it, they should sign and return it. Only then is the offer officially accepted and a start date confirmed.

If the candidate shows up to work on their first day and only then signs the agreement, that is a problem. At that point, an oral agreement is already in place based on earlier discussions. The written agreement becomes invalid because there is no new consideration – nothing extra in exchange for signing. That means the written terms, like those covering termination, may not be enforceable.

To avoid this, always send the written Employment Agreement well in advance of the start date – ideally at least five days before. Let the candidate know they must sign and return it by a specific deadline (a few days before the job starts) or the offer will be withdrawn.

While this may seem strict, it protects the employer by ensuring the agreement is valid and also helps avoid delays if the candidate declines or negotiates terms. Most importantly, it ensures that all the effort put into creating the agreement actually counts.

8. How often these agreements should be updated

Even though an Employment Agreement is signed before someone starts working, it should not stay the same forever. These agreements need to grow and change over time, just like the employee’s role might.

As employees stay with a company, they may be promoted, take on new responsibilities, or receive raises and bonuses. These kinds of changes – whether discussed directly or simply accepted over time – can create new terms in the working relationship. That is why it is important to regularly review and update the Employment Agreement to reflect any changes and make sure it stays compliant with current laws and court rulings.

Therefore, employers should review their employees’ Employment Agreements at least once a year, if not more.

At a minimum, employers should review Employment Agreements once a year. But it is especially important to do so when:

1. giving a raise that is more than just a cost-of-living increase,
2. promoting someone to a new position with greater responsibilities,
3. offering a new compensation package, like a bonus plan.

These are the best times to review Agreements because, as discussed earlier, one of the things that makes an Employment Agreement valid is fresh consideration. Without this, an updated Employment Agreement might not be enforceable, especially the most important clauses like those covering termination or notice.

So, whenever an employer is planning a promotion or new compensation offer, it is a great opportunity to check if the Employment Agreement needs updating. This is the perfect time to get legal advice from an employment lawyer to ensure the agreement aligns with the latest legal standards and actually provides the protection it is meant to.

We are here to help: expert legal advice for challenges specific to my workplace

Minken Employment Lawyers (Est. 1990) is your source for expert advice and advocacy on today’s employment law issues. If you wish to have a valid and enforceable Employment Agreement drafted or know about your obligations as an employer under employment standards, human rights, occupational health and safety, workers’ compensation, and privacy legislation, please contact us today at [email protected] or 905 477 7011. Sign up for our newsletter on our website to receive up-to-date employment law information, including new legislation and Court decisions impacting your workplace.

The content of this Report is intended to provide a general guide to the subject matter and should not be considered legal advice. Specialist advice should always be sought about your specific circumstances.

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