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Employment Agreement

Employment Agreements are important both for you as an employer and for your employees. Employment Agreements are used to inform employees about the basic terms of employment, e.g. duties, salary and vacation. Employment Agreements can be oral but as an employer it is in your interests to enter into a formal agreement, otherwise it will be difficult to establish the terms of employment and there may be disputes.

Why are Employment Agreements important?

  • Employers are legally requried to provide a statement to the employee with certain details of their employment (e.g. the name of the employer and the start date of the employment).  These details should be included in the employment agreement and must be given to the prospective employee on or before the start of their employment. 
  • A clear agreement reduces the risk of misunderstandings or disputes with your employees, setting out, for example, what should happen when a person's employment is to be terminated, or other difficult situations.

What needs to be done when hiring?

  • Create an Employment Agreement as soon as you agree to hire a prospective employee.
  • Consider whether you need to limit the employee's ability to start a competitive business after their employment ends. It is common for employees in key positions to have non-compete restrictions in their employment agreements.
  • Where you have a collective labour agreement with a labour organisation, ensure that the Employment Agreement does not contradict the terms of the collective agreement.

Common mistakes with Employment Agreements

  • Information that employers are obliged to provide is unclear or completely omitted from the employment agreement, for example a description of work assignments.
  • The employment agreement lacks conditions that the parties have agreed on, for example a probationary period.
  • The employment agreement contains restrictions that apply longer than necessary. For example, a non-compete restriction that prevents an employee from joining a competitor for longer than is reasonable after they leave the company (generally a restriction that lasts more than 12 months is unlikley to be reasonable). This can result in the provision not being unenforceable.

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