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Employment agreements / Independent Contractor Agreements

Key internal corporate governance contracts are employment agreements and independent contractor agreements which govern the rights, roles and obligations of a company’s workers.

Employment Agreements

From an employer’s perspective, an employment agreement is strongly recommended and highly beneficial in order to limit the statutory entitlements of your employee. In fact, an employment agreement generally protects the business owner more so than the employee. In other words, failing to have an employment agreement to support your business’s employees will only serve to benefit the employee who will be in a position to access expanded rights and compensation on termination of that employment.  

An employment agreement provides legal protection for the employer by clearly outlining the terms and conditions of employment. This includes specifying job responsibilities, compensation, benefits, confidentiality agreements, and any restrictions on post-employment activities such as non-compete clauses (to the extent these are permissible in Ontario). Having these terms documented helps protect the employer’s interests and minimizes the risk of disputes or litigation. Specifically, the employment agreement will limit the employee’s access to only statutory termination pay (which is generally 1 week of pay or notice of in lieu of pay for each year of service up to 8 years of service), and prevent the employee from accessing common law severance which can amount to enormous sums of money (oftentimes this may amount to one month of compensation for each year of service).

An employment agreement is also essential for protecting intellectual property assets of the business. The agreement can include provisions that require employees to maintain confidentiality regarding sensitive information and intellectual property belonging to the company. The agreement will also assign the ownership of any works or inventions created by the employee during the course of employment to the employer. Speak to one of our business lawyers about our assistance in establishing a custom-templated employment agreement for your business.

Independent Contractors Agreement

An Independent Contractors Agreement (ICA) is similar to an Employment Agreement in that it governs the roles and responsibilities of your workers however this agreement is applicable to contractors as opposed to employees. Once again, the ICA is critical in limiting the liability of your business vis-à-vis its contractors. For example, the agreement will limit the contractor’s entitlement or access to employment benefits such as vacation pay, sick leave or termination pay. The agreement will indicate that the contractor is responsible for remitting his or her own income taxes to the CRA, further noting that the contractor will indemnify the business from these responsibilities and obligations. To the extent applicable, the agreement will indicate that the contractor must charge and remit its own GST/HST to the CRA as well. The agreement will also indicate that the contractor is responsible for his or her own work and the business is not liable for the failures or negligence of the contractor in rendering its duties. Lastly and probably most importantly, the agreement will describe and characterize the relationship as one of an independent contractor as opposed to an employment relationship.

These provisions are important to be set out in writing between your business and its workers.  Speak to one of our business lawyers about our assistance in establishing a custom-templated independent contractors agreement for your business.


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