A primer on employment contracts from Melanie Polowin, employment and labour lawyer at Gowling Lafleur Henderson LLP in Ottawa.

1. Presented by:
Melanie Polowin
Start-up Garage:
Employment Contracts 101
February 15, 2012

2. 2
Under common law (everywhere except Quebec), as a general rule,
the employment/worker relationship is normally governed by the
common law of the province where the employee/worker primarily
works. For Quebec-based employment, the Civil Code applies.
Similarly, the applicable health & safety, privacy, human rights,
worker’s compensation, and employment standards legislation will be
that of the province where the employee/worker primarily works.
Whose law is it, anyhow?

3. 3
Employees may be:
• full-time, part-time, or casual (as-asked/as-accepted)
• permanent (no end date) or temporary (fixed end date)
• unintended (unpaid co-ops or so-called volunteers)
• misclassified (consultants/independent contractors who don’t meet
the legal tests for that classification).
Sad truth: what you think may not match what the law says.
So….think workers.
Who is (not) an employee, anyhow?

4. 4
FIRST, PROTECT CONFIDENTIALITY AND IP RIGHTS
Job #1 is to protect confidentiality and IP ownership with every single
worker, every single time, in writing.
No exceptions.
So…you need NDA/IP Agreements with all your workers (paid or not;
family, friend or stranger; founder to janitor).
If you can only afford to do one thing right – do this!!!
Bottom line: what do you need?

5. 5
PROTECT AGAINST/CONTROL EMPLOYER LIABILITIES
Job #2 is to control risks, by protecting the company against avoidable
liabilities, and understanding your unavoidable liabilities.
You can only control risks effectively by doing it in writing.
So…you need some form of written agreement with each of your
workers.
The agreement you need depends on the type of worker.
Bottom line: what do you need?

6. 6
To be enforceable, employment/worker contracts must be:
1. well-written (good content)
2. properly signed up (good process)
3. and even then…..they must be preserved over time if things change.
Employment/Worker Contracts

7. 7
The main enemies of enforceable contracts are:
1. sloppy content
2. gaps in the process
3. lapse (invalidation) over time.
Enemies of Enforceability

8. 8
Paperless (oral) offer by Company + Acceptance by Worker
= The Invisible Contract
An employment/worker contract automatically comes into existence at
the point that the worker is offered, and accepts, a job.
The law automatically implies (“writes in”) certain “invisible” terms into
every employment/worker contract.
To reduce the serious risks associated with “invisible” terms, you need
enforceable contracts.
Problem #1: The Invisible Contract

9. 9
Problem #1: The Invisible Contract
What are employment/worker contracts made of?
1. Bones Mandatory statutory terms (unavoidable liabilities)
• human rights; labour/employment standards (“Employment
Standards”); health and safety; privacy (where legislation exists)
2. Flesh Judge-made (common law) terms, tests and rules
• the legal baseline
• some risks are avoidable if you use proper contracts
• some rules and tests are unavoidable
• tests for post-employment non-competition and non- solicitation
restrictions
• test for independent contractor vs. employee vs. volunteer
• proper process rules for contract sign-up
3. Clothing External contractual terms (used for risk-reduction and liability control)
• offer letters, formal contracts (formality is irrelevant)
• courts often treat handbooks, policies, guidelines and practices as part
of the contract – typically, only if pro-worker

10. 10
Timing is everything:
Bad: Oral Offer ‣ Oral Acceptance ‣ Start Work ‣ Paper
As Bad: Oral Offer ‣ Oral Acceptance ‣ Paper ‣ Start Work
Almost As Bad: Paper Offer ‣ Short Deadline ‣ Start Work
Key terms and key agreements need to be part of an offer
package to be sent out and signed back (after a reasonable
deadline) before the start date.
Problem #2: Proper Process

11. 11
Problem #2: Proper Process
Ideal process is:
CRITICAL: make candidate sign and return an NDA if confidential
info will be disclosed in interview/discussion/negotiation stage
1st
interview/discussion/negotiation stage
2nd
offer package is sent with a reasonable signing deadline
3rd
employee/worker signs all documents and returns them -
especially employee/worker NDA/IP Agreement
4th
any pre-conditions (e.g. valid work visa) are satisfied
LAST employee/worker starts work.

12. 12
Problem #2: Proper Process
Proper process means:
1. you can prove employee/worker received all key documents before
employment/work began; and,
2. you can also prove employee/worker signed and returned NDA/IP
Agreement and contract, before employment work began; and,
3. you can also prove that you gave employee/worker a reasonable
signing deadline (at least 2 clear business days).

13. 13
Problem #3: What Kind of Worker?
Calling somebody a consultant or volunteer
does not necessarily make it so.
The correct classification makes a huge difference to both sides, in terms
of:
• obligations and entitlements owed to/by each other
• obligations owed to “third parties” (including the dreaded Taxman).
Classification tests are unavoidable.
No single test/list of questions determines if an arrangement will always
qualify as a true consulting or true volunteer relationship.
Different laws/government agencies have different mandates…so test
results can differ too!

14. 14
Problem #3: What Kind of Worker?
3 possible legal outcomes:
1. independent contractor or true volunteer – no problem!
2. dependent contractor – termination entitlements may be a
problem, but individual is not an employee
3. deemed employee – lots of problems!
Know the risks.
Choose wisely.
Reduce/control risks by using the right documents.

15. 15
Problem #4: Parting Ways
“Reasonable Notice” is the most expensive invisible term.
When an employer terminates without cause, if there is no enforceable
written termination provision in a contract, the employer must provide a
“reasonable” period of advance notice of termination (“reasonable
notice”) or else provide compensation in lieu.
Compensation in lieu includes all of the compensation elements and
benefits employee would have received if he/she had stayed until the
last day of the reasonable notice period.
Reasonable notice is the legal default position, not Employment
Standards.

16. 16
Problem #4: Parting Ways
Just how long is a “reasonable” period?
• it depends - there is no “blue book”
• there is no automatic “free trial” (probation)
• Employment Standards legislation sets an unavoidable “floor” for
statutory notice and statutory severance
• reasonable notice sets a (somewhat avoidable) “ceiling” - and it is
almost always much more expensive than Employment Standards.

17. 17
Problem #4: Parting Ways
Reasonable notice costs employers time, money, and effort.
Reasonable notice gives others control over outcomes.
You can only reduce risks and improve the odds for a better
outcome by using a well written termination provision in a
properly signed-up contract.
That’s why enforceability is so important!

18. 18
Problem #4: Parting Ways
Sad Truths:
1. Even when you use a well-written explicit termination provision -
poor process or lapse problems can render it unenforceable.
2. If you mess with recommended provisions and/or with
recommended process, there will be hidden liabilities/risks.
Start off right. Get help at the beginning, with contracts and
process.
Then stay on track. Don’t deviate from recommended
contract terms or recommended process without conferring
in advance with your advisor. Check before changing.

19. 19
Problem #5: Protecting Confidentiality and IP
More Sad Truths:
1. In the “invisible contract” your confidential information has limited
automatic protection.
2. In the “invisible contract” you have limited automatic ownership
rights to discoveries, inventions, development and creations made
by employees during and in the course of employment.
3. In the “invisible contract” you have no automatic ownership rights to
work produced by consultants and volunteers.
You can only properly protect confidential information and
proprietary property/IP risks by using well written provisions
in a properly signed-up NDA/IP Agreement.
That’s why enforceability is so important!

20. 20
Problem #5: Protecting Confidentiality and IP
Never disclose confidential info at the interview/discussion or
negotiation stages, without a signed NDA.
What you make the candidate sign before negotiations will be
different than what you make the worker sign as part of the offer
package.
Sign-up everyone before they start work.
Don’t use or rely on the same form for all situations. There will have
to be some differences.

21. 21
Problem #5: Protecting Confidentiality and IP
NEWCO CONFIDENTIALITY AND OWNERSHIP OF PROPRIETARY PROPERTY
AGREEMENT (“NDA/IP Agreement”)
Unpaid co-op
or volunteer
version
FirstName LastName (“you”), in consideration of the valuable work
experience that you will gain during your unpaid [co-op placement]
[volunteer placement] (“Placement”) with Newco (the “Company”) (which
you acknowledge is good and sufficient consideration), agree as follows:
1. Accepting the Placement….
2. In the course of your Placement….
Employee or
consultant
version
FirstName LastName (“you”), in consideration of your employment or
engagement with Newco (the “Company”) (which you acknowledge is good
and sufficient consideration), agree as follows:
1. Accepting employment or engagement….
2. In the course of your employment or engagement….

22. 22
Problem #6: Turning Good Things Bad
More Sad Truths:
If you have a well-written, properly signed contract, any of the
following events (alone or in combination) can weaken or invalidate
a specific provision or even the whole contract:
• changes in status (from part-time to full-time, temporary to
permanent, consultant to employee, volunteer to consultant)
• changes in role/responsibilities (promotions, transfers,
new/added responsibilities)
• imposing significant adverse changes (pay cuts, demotions)
• mistreating employees/workers or mishandling their departures.

23. 23
Problem #6: Turning Good Things Bad
To reduce/control change-related risks, you have to use
properly written amending/termination documents and you
have to follow proper change management and termination
processes.
Start off right and stay on track.
Early in any change-planning stage, check with your advisor.
Then, don’t deviate from recommended documents or
recommended process without conferring in advance with
your advisor.

24. 24
The Bottom Line
The Bottom Line:
1. What you don’t see can be as (or more) important than what you do
see. Too many myths and misunderstandings are out there. Get
good advice from knowledgeable experts…not your pals or the
Internet.
2. Bad process at any stage will weaken or kill good contracts.
3. Doing it wrong at any stage costs money and time, reduces
the value of your team/your investment, drives price way down
and/or drives investors/buyers away.
4. Doing it right at every stage makes you look smart and competent,
preserves your investment, increases your value and gives you
better leverage. Start off right and stay on track.

25. Thank You
Montréal | Ottawa | Kanata | Toronto | Hamilton | Waterloo Region | Calgary | Vancouver | Moscow | London
Melanie Polowin
(613) 786-0244
melanie.polowin@gowlings.com