Employment Contracts Explained
A contract of employment is a legally binding agreement between an employer and an employee that establishes the terms and conditions of employment. The contract will detail the employee’s responsibilities, the employer’s obligations, the duration of employment, and compensation details.
Employment contracts can be written, verbal or implied. The best practice is to have a written contract that details the terms and conditions of your employment, not only because it protects you from bad faith employers, but because it makes it clear exactly what you are entitled to under the terms of your contract.
The importance of having a written contract cannot be overemphasized because all employees have the right to know what their entitlement under the contract is before they start work . It will protect you if any disputes arise and details like when you will receive a raise or a bonus, when holidays are scheduled, working hours and duties reflecting the job that they applied and interviewed for.
As well, having a properly executed and detailed contract can protect you from unfair dismissal or wrongful resignation, both of which can cost you a lot in compensation. It also protects you if the company goes bankrupt and you have to file a claim with the Ontario Workplace Safety and Insurance Board.
If you sign a poorly drafted contract, or do not have a contract at all, you may not be privy to the information that is so fundamental for your success and security, and may wind up signing away some of your rights without even knowing it.
What Happens When You Breach a Work Contract
The legal consequences of breaking a job contract can vary greatly depending on the terms of the contract, the severity of the breach, and whether the violation is reparable. A minor deviation from terms may not draw major repercussions, but a serious infraction could result in a significant legal battle. Breaking a job contract can lead to a breach of contract lawsuit, in which the employer (or, in some cases, the employee) must prove there was a legal and actionable violation. Possible penalties for breaking a contract can include financial consequences, such as loss of bonuses, withheld pay, or other monetary estimates of losses, as well as non-monetary penalties such as employment separation, forced compliance with the contract terms, or other disciplinary measures.
Some common clauses worked into job contracts that might be enforced legally include:
Termination clauses
Confidentiality agreements
Non-compete agreements
Anti-competitive agreements
Anti-solicitation agreements
Non-disparagement clauses
Intellectual property clauses
Anti-kick back provisions
Financial Costs of Contract Violations
There are financial consequences for breaking a job contract. If you received a signing bonus to take the job, you will be required to repay it. Stop and consider whether you are willing to give up the bonus before breaking the contract, or whether it is worth it. Remember also that if you used a recruiter, there might be a fee owed to them if you leave before your agreement with them is up. You can expect that the employer will pursue you in small claims court to recover any costs that they can document, such as lost production costs.
There may be other costs associated with breaking a job contract as well but there is no reason to guess what they might be. Your employment contract should list the consequences to you of violating it (breaking it). If it doesn’t, that’s a sign that it is not a good contract. A good contract is a clear one that lays out your employer’s rights and yours.
Impact on Your Career and Reputation
Beyond the immediate financial implications, breaking a contract can have long-term impacts on your career. Depending on your age, the seniority of your position or your profession, this could range from a minor inconvenience to the end of an otherwise promising career. For anyone other than entry level positions, it is not a stretch to think of professional contacts as a major source of finding a new job. But if you break a contract, the potential future employer could ask the former employer about the circumstances of your unfortunate departure . In this situation, it is highly unlikely that your employer will be singing your praises; in fact, they are almost certainly going to tell their side of the story. If it was a serious breach of your contract-one that required legal action-a potential employer may feel that they cannot trust you to follow through, even in the terms most favorably to yourself. The potential for this sort of increased skepticism by future employers should be weighed into your consideration of whether or not to break a contract.
How to Minimize Negative Consequences
How to Mitigate Negative Outcomes When Breaking a Job Contract
If you do opt to break your job contract, there are several concrete steps you can take to help mitigate any negative outcomes. While your original job contract may state that breaking it will result in legal consequences such as the forfeiture of your retainer or a lawsuit from your new employer, most employers are in the long-term business and want to avoid the PR nightmare of pursuing a defector. If they are angry, they may not care about some money but will care about their reputations and the reputations of the people who work for them. By speaking to your employer about negotiating an amicable exit, you could potentially avoid costly legal expenses.
Additionally, you should seek the advice of a competent lawyer who is sufficiently experienced in this area and is skilled. This is important. You may be tempted to get legal advice from a friend who you think knows a lot about employment law, or you may be tempted to go the "do-it-yourself" route, but "amateur hour" in an area of law as technical and nuanced as employment law is not advisable. Experienced lawyers know how to be strategic in how they terminate your employment. The right lawyer will be able to help you terminate your old contract so you can move on with your career. A poor lawyer may just make things worse.
Alternatives to Contract Breaching
Employers generally include a written contract to protect important work-related expectations, such as work hours or responsibilities. While you may want to break an agreement, consider these alternatives to breaking a job contract:
Ask For a Modification Depending on your situation, you may be able to ask your employer to revise a provision of the contract. Perhaps, you want to work more flexible hours. You may be able to make the case that allowing for flexible hours will boost productivity in the office, as it will allow employees to work during peak energy times. Perhaps you need more work-from-home days to balance your work with other commitments. If you provide a convincing rationale, your company may agree to modify your contract’s provisions. It is wise to ensure your modification request is put in writing, so it is clear what your employer has agreed to, in the event of a future dispute.
Negotiate Temporary Leave If a temporary leave would solve your problem, it may be worthwhile to discuss how a leave would be beneficial for your employer. For instance, if a family member has become ill, your temporary absence may be best for your employer if it means you will not be distracted and will be able to put all your focus on work when you resume . Your employer may suggest an unpaid leave to avoid paying out benefits or losing an employee who is already paid. Consider consequences of being unpaid or of losing employment altogether and be prepared to bargain for your future if your employer does not grant you paid leave.
Discuss a Flexible Schedule A temporary schedule change may be the solution to your issue and it can be mutually beneficial. If you need a flexible start time for a certain period, explain how it will benefit your employer and emphasize your intention to continue working at the company for the foreseeable future. Your employer may be willing to reorganize certain employee schedules so that your flexible schedule does not cause any disruptions. Restructuring the schedules of several employees may seem like a burden to your employer, so be aware that there may be consequences if your change is not suitable. For instance, your employer may not be willing to accommodate you in the future.
If none of these alternatives are possible for your situation, or if you still want to terminate your contract despite these alternatives, consult a contract employment lawyer about your rights and obligations before you take any further action.