The new year is a good time to review employment contracts

By Tony Poland, LegalMatters Staff • January is not only the start of another new year but it’s also the perfect time to review and update employment contracts and workplace policies, says Toronto employment lawyer Ellen Low.

Low, principal of Ellen Low & Co., says new employment legislation coming into effect in 2025 is reason enough for a re-examination but an annual review is a practice that all employers should embrace.

“The new year is always a good time to re-evaluate your policies and contracts. I recommend doing it once a year,” she tells LegalMattersCanada.ca. “It makes sense to do it now. Many employers calculate their bonuses before RRSP season. After squaring away the fiscal year and paying out bonuses employers should assess where they stand with the policies they have in place.

“An employer may need to update their contracts and policies to make them compliant with changes in the law. For example, we have another iteration of the Working for Workers Act,” Low adds. “Of course, any update should be followed with a conversation with the employee to review the changes.”

Working for Workers Six Act

She says the Working for Workers Six Act, 2024, which was introduced in November and received Royal Assent a short time later, will impact many Ontario workplaces.

“For example, there is an amendment to the Occupational Health and Safety Act (OHSA), a portion of which is either going to be governed by an employer’s contract or in their policy and procedures manuals,” Low says. “Corporate fines for subsequent workplace injuries will be increased.”

Under the change, there will be mandatory minimum fines of $500,000 for corporations convicted of repeat OHSA offences which result in the death or serious injury of workers within a two-year period.

Low says the pandemic has resulted in more legislation aimed at improving workplace safety.

“During COVID and post COVID almost all levels of government were interested in working conditions and trying to protect employees,” she says. “We are still seeing a sort of the fallout of that increased interest with the frequent introduction of new legislation. Employers need to keep on their toes.”

Legislative changes do not necessarily mean employers will have to draw up new employment agreements, Low explains.

“Most employment contracts will include a kind of a catch-all, stating that the employer intends to comply with the Ontario Employment Standards Act (ESA) and all subsequent amendments at all times,” she says.

Protective leave for adoptive parents

For instance, the provincial government introduced an addition to the ESA offering a 16-week job protected leave for adoptive parents and parents through surrogacy “to ensure they have adequate time to meet the demands of the adoption or surrogacy process, attach and welcome their child into their new home.”

The change will align with upcoming federal changes to create employment insurance (EI) benefits for adoption.

The province also added a 27-week long-term illness leave “for employees unable to work due to a serious medical condition as defined by a medical practitioner, such as cancer, multiple sclerosis or Crohn’s … [that] would ensure workers with a serious medical condition have the time away from work they need to get treatment and recover, without risking their jobs.”

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Low says she will be interested to see how the new illness-leave provision works in practice.

“An employee can go on leave with the full expectation that they would be able to return to work in their existing position,” she says. “However, people are under the false impression that they are totally safe from any kind of termination. As long as the reason for the termination is entirely unrelated to their leave, then that would be considered a permissible business reorganizational decision.”

Employers not only have to keep current on new legislation but it is in their best interests to pay attention to the latest court rulings, Low says.

“The employment law bar itself has grown exponentially,” she says. “We have a larger number of practitioners who are taking a run at the applicability of legislation as well as all kinds of different pieces of the employment law puzzle in terms of the verbiage that is included in a contract.

‘We are seeing a bit of a perfect storm’

“We are seeing a bit of a perfect storm since courts are now back in full swing after gearing back up following the pandemic,” Low adds. “More of the novel arguments are finally seeing the light of day.”

As an employment lawyer, she says she is “really dialled in” to new developments and she is not alone.

“Even those outside the legal profession are asking what is going on in employment law,” Low says. “They say every time that they turn around there is a new court case or there is a new piece of legislation, or there’s something else they have to do as a business owner.”

She says in light of two recent court decisions, those who haven’t updated their employment contracts run the risk of litigation.

In Dufault v. The Corporation of the Township of Ignace, the court held that the termination provisions of a fixed-term employment contract were illegal and unenforceable because they did not comply with ESA.

Waksdale v. Swegon North America Inc. is an Ontario Court of Appeal decision that found if any part of a termination provision in an employment agreement was in breach of the ESA, the entire provision is unenforceable.

Ruling caused a stir

At that time Low noted the ruling “caused a stir in the employment world since the words that were found to invalidate the termination provision – ‘its sole discretion’ and ‘at any time’– are commonly used in employment contracts.”

“As employment lawyers, we do our best at any given point in time to craft enforceable termination provisions and enforceable like non-competition provisions and enforceable non-solicitation provisions,” she says. “But then either the legislation changes or there is a court ruling that changes what was once acceptable.

“I am finding an increasing number of people are paying more and more attention not only to the legislation and cases but the penalties for getting it wrong either in the contract or for not having the appropriate policy or having an out-of-date policy,” Low adds. “And the practical monetary day-to-day consequences seem to be increasing exponentially.”

With all the changes employers have had to face in recent years she says it is not unexpected that a kind of fatigue would occur. However, business owners must stay vigilant for their own sake, Low warns.

“That includes annual employment contract and policy reviews,” she says. “There have even been some substantive changes in the Working for Workers Act that may have flown under the radar for example.

“Regular reviews have been my advice from day one, year one. If you haven’t done it in a while, now would be a good opportunity to look carefully at your employment agreements.”