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Ten Things Every Employer Should Know

1. Why have an employment contract? An employment contract regulates the relationship between you and your employee. A well drafted employment contract will cover all important elements of the employment, including but not limited to wages, holidays, hours of work, trade secrets, solicitation and competition upon departure, and termination. The more aspects of the employment relationship covered by the contract, the less time spent in court. It is important to have an experienced employment lawyer draft or review such agreements.

2. What is Wrongful Dismissal and Just Cause? Wrongful dismissal occurs when an employer terminates an employee’s employment without “just cause” for doing so. Just cause refers to a legitimate reason for an employee’s termination, such as theft, acts of violence, or leaking confidential information. If an employer cannot demonstrate “just cause,” the terminated employee is entitled to termination and severance pay, amongst other things, for “wrongful dismissal.”

3. What are the laws governing termination of employees? The Employment Standards Act, the common law, and in some circumstances the Ontario Human Rights Code and the Workplace Health and Safety Act

4. What is the notice period at common law? If an employee’s employment contract does not provide termination provisions that are in accordance with the Employment Standards Act, a terminated employee may seek pay in lieu of notice at common law. The common law notice period depends on a number of factors including, but not limited to, the length of employment, the employee’s position, the employee’s salary, the age of the employee, and the difficulties the employee will face in finding comparable employment.

5. What is the difference between termination pay and severance pay? Termination pay is pay in lieu of notice. An employer’s obligation to pay severance pay arises only when an employer severs an employment relationship where the employee was not only employed for five years or more, but where other specific conditions are met. One such condition is an employer having a payroll of $2.5 million or more.

6. What is the difference between a layoff and a termination? The Employment Standards Act distinguishes between a temporary layoff and a permanent termination. A layoff not exceeding 13 weeks, or one exceeding 13 weeks if the employer has met certain conditions, is not considered a permanent termination.

7. What is minimum wage? Minimum wage is the lowest wage rate that an employer can pay to employees who are covered by the Employment Standards Act. As of March 31, 2009, the minimum wage in Ontario is $9.50. Employers must remember that minimum wage is not static, and as of March 31, 2010, it will increase to $10.25.

8. Are there laws governing hours of work, overtime, and breaks? Yes, the Employment Standards Act sets maximums and minimums for hours worked, overtime rates, minimum rest periods, and meal and other breaks. For example, the maximum an employee can be asked to work in Ontario is 8 hours in a day, and 48 hours in a week.

9. What is the difference between an Employee and an Independent Contractor? Many of the rights granted by employment legislation apply only to employees, and not independent contractors. In determining whether an individual is an employee or an independent contractor, Canadian courts apply a factual test which considers, amongst other things, whether the individual has control over the work performed, and whether the individual owns the tools used to perform their job. These factors have been used to determine that an individual is an employee, even in cases where a written contract stipulated that that individual was an independent contractor.

10. What is Workplace Privacy? Employers and employees are subject to Canada’s privacy laws, such as the Privacy Act, and the Personal Information Protection and Electronic Documents Act, which protect an employee’s personal information. Employers must balance their needs to know about their employees with their employees’ rights to privacy. This can be achieved so long as an employee’s personal information is only collected, used, and disclosed for appropriate and legal purposes.


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