You do not need to sign an employment contract in order to work in Ontario. However, it is also not possible to be working in Ontario without a contract. This is because it is impossible to be in an employment relationship without also being in a contractual relationship. In Ontario, a contractual relationship exists the moment an employment relationship exists. All employment relationships are contractual, regardless of whether or not you have signed a contract. The following will explain how this works.
What Happens When You Do Not Sign a Contract?
If you have not signed a contract specifically setting out the terms and conditions of your employment, then those terms and conditions will by default be defined by law. In Ontario, this means that the terms and conditions of your employment will be governed by the Employment Standards Act, the Human Rights Code, and the common law.
For example, even where there is no signed employment contract, you cannot be paid less than the applicable minimum wage. You cannot be required to work longer than 48 hours in a week. You cannot be fired on a without cause basis without your employer providing you with proper notice or adequate termination pay. This all remains true regardless of whether or not you have signed an employment contract.
Benefits of Signing an Employment Contract
It is not necessary to have signed an employment contract to work in Ontario. However, there are many reasons why it might be a good idea to have one anyway. The terms and conditions provided by Ontario legislation such as the Employment Standards Act are minimum terms and conditions, not maximums. For instance, the Employment Standards Act sets out the minimum wage, not the maximum wage. Employment agreements enable employees to negotiate for terms and conditions that are greater than their minimum entitlements. Significantly, written employment contracts reduce uncertainty in employment relationships. The duties and obligations of the employee and employer are often plainly set out.
For employers, employment agreements are particularly useful. The common law often provides employees with rights that employers would rather they not have. Employment agreements offer the solution. A properly drafted employment agreement can remove many of those common law entitlements. Perhaps most significantly are the entitlements employees have under common law to reasonable notice or termination pay. These can be quite high and therefore quite expensive for employers. A properly drafted termination clause could limit termination pay from what might be 24 months’ pay under common law to just 8 weeks’ pay, thereby saving the employer a lot of money. Employers might also find it useful to include non-competition, non-solicitation, and non-disclosure provisions.
Employment Contracts are Not Always Enforceable
An employee who has entered into a contract that limits their entitlements might nevertheless walk away with their common law entitlements if they can show that, for whatever reason, the contract they signed is not enforceable. This might be the case where, for instance, the contract was entered into without proper consideration (i.e., a contract might be unenforceable if it was given to the employee after they had already started working). A contract that does not comply with the minimum standards set out by Ontario legislation will also be unenforceable.
Where a contract or contractual provision is shown to be unenforceable, it will be replaced by the relevant common law entitlement.
Whether you are an employee or an employer, the terms of any employment contract must be carefully scrutinized. That contract, including any errors contained within, will inevitably alter the very terms and conditions of the employment relationship.