Employers often reach out to us when a workplace issue has already escalated – frequently when they are considering terminating an employee. At that stage, many discover that not having a written employment agreement, or relying on one that is outdated or poorly drafted, can create significant legal risk and unexpected costs.
For this reason, implementing clear, professionally drafted employment agreements is one of the most important proactive steps an employer can take.
Expensive Consequences of Not Having an Employment Agreement
Most employees in British Columbia are governed by the B.C. Employment Standards Act (“ESA”), which sets minimum entitlements on termination. Under section 63 of the ESA, all B.C.-regulated employees (which includes most employees working in B.C.) are entitled to notice or pay in lieu of notice based solely on their length of service. This ranges from no notice for employees who have worked less than three months, up to a maximum of eight weeks for employees with eight or more years of service. These statutory amounts represent the legal minimum that employers must provide when ending employment without cause.
However, if an employment agreement does not clearly address termination of employment with enforceable contractual terms, an employer may instead be required to provide common law reasonable notice to employees terminated without cause, which is often significantly higher than ESA minimums.
Courts consider the following factors when assessing common law notice, which are called the Bardal factors (named after the case of Bardal v. Globe & Mail Ltd., (1960) CanLII 294 (ON SC):
- the employee’s age;
- the employee’s length of service;
- the nature of the employee’s position; and
- the availability of comparable employment.
Additional factors that impact an employee’s ability to secure similar employment, such as economic conditions at the time of termination, may also increase the notice period.
For long-serving and/or senior employees, common law severance can quickly become expensive. While providing “working notice” is sometimes an option, it often creates practical and operational challenges in the workplace and is not always feasible.
Employment Agreements as a Risk Management Tool
Well-drafted employment agreements are one of the most effective risk management tools available to employers. As employment lawyers, we cannot emphasize this enough! They can help limit severance liability while also clarifying key aspects of the employment relationship, including duties, hours of work, compensation structures, bonuses, benefits, and remote work arrangements. Clear agreements also benefit employees by creating certainty about the terms of employment, workplace expectations (to an extent), and reducing misunderstandings about what will happen if the employment relationship ends.
Courts closely scrutinize employment agreements, particularly termination provisions. If a clause could potentially violate the ESA, even hypothetically, it may be struck down, exposing the employer to common law notice. For that reason, agreements must be carefully drafted to ensure they comply with relevant employment standards legislation, and that they are clear and unambiguous.
Modern Workplaces and Other Important Considerations
Modern workplaces have necessitated additional considerations. For example:
- Remote work: Since the Covid-19 pandemic, many employers now hire remote employees, sometimes located in different jurisdictions, which means agreements should accurately reference the applicable employment standards legislation or be drafted broadly enough to accommodate these arrangements.
- Restrictive covenants: Businesses may require contractual protections such as non-solicitation clauses or, in limited circumstances, non-competition clauses. However, non-competition clauses are rarely advisable in employment relationships and should be used cautiously and only with proper legal advice.
- Savings clauses: Some agreements include “savings clauses,” which affirm an intention to comply with applicable employment standards legislation. Notably, courts may not rely on these clauses to cure termination provisions that are inconsistent with the ESA from the time of drafting. Recent cases across Canada, especially in Ontario, show a trend toward strict scrutiny of termination language, particularly where clauses attempt to contract out of statutory minimums or contain confusing wording.
Additionally, it is important to remember when introducing new employment agreements to existing employees, employers typically must provide fresh/new consideration; this is something of value, other than the ongoing promise of work, in exchange for signing the agreement. Fresh consideration can take the form of a signing bonus, promotion, additional vacation or flex days, or other benefits. Without this additional quid pro quo flowing from the employer to the (existing) employee, the new agreement may not be enforceable.
Key Takeaways
Employers reviewing their employment agreements in 2026 should ensure that:
- termination and layoff provisions clearly comply with minimum standards set out in applicable employment standards legislation;
- termination language is ideally reviewed by a lawyer to ensure its compliance (since the law on such clauses is constantly evolving);
- all contractual terms, including compensation terms regarding bonuses and commissions, are clearly defined and unambiguous;
- remote or hybrid work arrangements are properly addressed;
- agreements account for evolving job duties and include language that may help reduce the risk of constructive dismissal claims as a result of promotions or changes to duties; and
- the agreement is signed before the employee’s employment commences or updated agreements for current employees have some form of new consideration.
Taking the time to implement well-drafted employment agreements can help employers avoid costly surprises later and ensure that both employees and employers clearly understand the terms of the employment relationship.
Have questions on exactly which terms to include in employment agreements for your employees, given your specific business needs? Want to ensure that your company or business is well-protected from claims for wrongful dismissal? Contact Brynna Hambly or any of the other qualified employment lawyers at Ascent Employment Law today!
