News Articles

EMPLOYMENT CONTRACTS

In the current economic times it is easier for employees to find new jobs or change employers. With increased change over of employees, there are always questions about employment contracts.

Very few employers take the time to create written employment contracts. When they do it is usually for upper management or employees who will be in possession of confidential information or trade secrets that need to be guarded from the competition. In those situations the employment contracts spell out the obligations of the employee during the term of employment and after. They quite often include non-competition clauses designed to keep a departing employee from using knowledge gained through employment for direct or indirect competition with that employer.

The effectiveness of a non-competition agreement is debatable. For the most part such agreements are upheld based on what is reasonable. Generally speaking the court system will not prevent a person from earning a living by applying their trade or skill set, even if it is for the competition of a former employer. However, the courts will not allow former employees to use customer lists, trade secrets, or other confidential or proprietary information in applying their trade or skill set. For example, if you are an engineer for a car manufacture, the courts will not prevent you from working as an engineer for a new employer, but you would not be allowed to use your previous employer's designs in your new employer's product.

Having said what the courts will enforce in employment contracts, it is important to know that the courts will imply terms to employment situations where there is no written contact. Most of the employment in our society exists without written employment contracts.  The courts will apply the common law to such situations. The common law refers to historical understanding or development of rules. In relation to employment, the courts imply an unwritten contract that is more than a verbal contract, it includes certain standard duties and obligations for both the employer and the employee.

The employee's obligations include: Duty to Work; Obligation to Obey Lawful Orders; Duty to Avoid Misconduct; Obligation to be Competent; Duty of Fidelity. This list is not meant to be exhaustive or detailed but it gives you an idea of what the court would consider. It can be translated to common sense expectations for the most part. Employees are expected to show up and be ready, willing and able to work, follow directions of the employer, and be able to do the job they said they could when hired, etc. The one item listed that is not self-evident is the duty of fidelity. The courts view this as the duty to serve honestly and faithfully, and this extends to the issue of non-competition. The courts will prevent employees from using trade secrets or confidential information in competition with an employer or former employer.

Over and above the implied terms of employment based on common law, we have statutory provisions such as the Employment Standards Code, which provide details for certain minimum standards for employment relationships.

Whether there is a written or verbal employment contract there are certain expectations that our society implements as a part of the employment arrangement. For most people trade secrets or confidential information may not be an issue, however, employees may want to look at what their employer and society expects of them if they are leaving the employer or for that matter if they wish to stay with that employer.

By Glen Cunningham
February 8, 2006