Types of Work Relationships

Given that we are focused on “employment” law, we would expect that our discussion would always involve employees. However, not every person that works is an employee. There are numerous ways to structure a work relationship, including as employees, independent contractors, and dependent contractors.

The distinction between the worker categories is hugely important because it determines the level of protection and benefits that a working individual is entitled to under the law. For instance, employees are entitled to a range of protections and benefits, such as minimum wage, vacation pay, and employment insurance, while independent and dependent contractors, to varying degrees, are not.

Employees

Independent Contractors

An independent contractor refers to a person who is engaged by another party to perform specific tasks or services on a contractual basis. Unlike employees, independent contractors are not considered to be controlled by the employer and therefore, are not entitled to the same rights and benefits as employees. Independent contractors tend to have more flexibility and control over their work, they are responsible for their own taxes, insurance, and other business-related expenses.

A few common occupations that are frequently based on an independent contractor relationship are the following:

• Freelancers – self-employed professionals who offer their skills and services to clients on a project basis. They often work in creative fields such as writing, graphic design, web development, photography, and event planning.

Dependent Contractors

Form of the Employment Contract

It is worth noting that not all employment contracts are required to be in writing. Employment contracts can be formed through verbal agreements or through a combination of written and verbal terms. It is absolutely possible that an employee does not sign a written contract of employment however, they are still entitled to legal protection. When a worker agrees to provide services to an employer and the employer agrees to compensate the worker in return, a contract is formed. That said, having a written employment contract is highly recommended as it provides numerous advantages to both parties.

For employers, the written contract allows them to clearly define the terms of employment, including job duties, work hours, compensation, benefits, and other important provisions. This clarity helps prevent misunderstandings and disputes in the future. Employers can also use employment contracts to protect their business interests by including provisions such as probation, non-disclosure agreements, non-compete/non-solicit clauses, or ownership of intellectual property rights clauses. Lastly, written contracts may provide an employer workforce flexibility by restricting the length of the employment — such as using a fixed-term contract (as opposed to an indefinite one).

Employees also benefit from written employment contracts as they can clearly see their rights and entitlements. This likely includes provisions related to wages, overtime pay, vacation time, termination notice or severance pay, and other benefits. Having these terms in writing gives employees a legal basis to enforce their rights if any disputes arise.

I. Offers

An employment contract begins with an offer typically, made by the employer to the employee. The offer sets out the terms and conditions of employment, such as job responsibilities, compensation, benefits, working hours, and other relevant details. The offer does create binding obligations on the employer and employee (unless accepted). The offer can also be revoked any time by the employer prior to the employee’s acceptance.

II. Acceptance

Once the offer is accepted, it becomes a legally binding agreement that governs the employment relationship. Acceptance signifies the employee’s willingness to enter into an employment agreement and indicates their agreement to the terms and conditions outlined in the offer. Acceptance can be either explicit or implicit — explicit being the overt “yes” and implicit being an acceptance by conduct (such as showing up and beginning the work).

III. Consideration

Consideration refers to something of value exchanged between the parties involved in the employment contract. In the context of employment, consideration is usually the employee’s promise to provide the work and the employer’s promise to provide compensation.

IV. Intention to Create Legal Relations

For a contract to be enforceable, there must be an intention on both parties’ to create a legal relationship. For employment, it is presumed that both the employer and the employee intend to create a legally binding relationship unless evidence suggests otherwise.

V. Capacity

Capacity may be an issue for employment contracts though the situations are limited. A contract with a minor cannot be enforced against the minor though, it can be enforced against the adult party (Infants Act, section 19). For example, imagine a 16-year-old high school student signs a written contract of employment to work as a server in a local restaurant. Because the student is a minor, the restaurant cannot enforce the contract against the student but, the student could choose to enforce the terms against the restaurant. Additionally, individuals with mental incapacity may have limited capacity to enter into contracts, depending on the circumstances.

VI. Legality

The purpose of the employment contract must be a legal one. A contract that involves illegal activities or violates public policy will not be enforceable. For example, imagine a corporation hires an individual specifically to forge documents for clients. Since the terms of the employment contract involve illegal activities (forgery), the contract is void and unenforceable.

Sources of Contractual Terms

The terms of an employment contract can come from various sources, including statutory laws, common law principles, collective agreements, and the contract itself. The full spread of the employment terms, in many cases, contains a mix of each.

I. Statutory Law

Employment relationships in Canada are governed by a variety of federal and provincial/territorial laws. These laws set out minimum standards for the employment. For example, the Employment Standards Act (to be discussed later in this chapter) establishes rules regarding minimum wage, hours of work, overtime pay, vacation entitlements, and termination notice or pay. These laws imply these protections into the employment relationship and typically, cannot be waived.

II. Common Law

Common law principles also play a significant role in shaping the terms of an employment contract. Courts have recognized certain implied terms that are considered to be part of every employment contract, even if they are not explicitly stated in a written contract. These implied terms will be discussed more at length in the following section.

III. Collective Agreements

In unionized workplaces, the terms of employment are determined through collective bargaining between the employer and the union representing the employees. The resulting collective agreement outlines the rights, responsibilities, and conditions of employment for the unionized employees. Collective agreements have the force of law and supersede individual employment contracts for employees within the bargaining unit.

As noted at the start of the chapter, the law relating to unionized workplaces will not be canvassed however, it is worth noting how the collective agreement is the source of employment terms for unionized workers.

IV. Individual Contracts

The negotiated terms of the employment contract form the essence of the relationship between the employer and the employee. It makes sense that the written or verbal contract can expand on the terms of that relationship.

Express, Ancillary, and Implied Contract Terms

As noted above, the terms of employment can come from a cross-section of different sources. This mix can result in some terms being expressly defined in the agreements versus other terms which are implied.

Express terms are explicitly agreed upon by the employer and employee and are typically set out in writing. Express terms can cover a wide range of issues, such as compensation, working hours, job duties, benefits, termination procedures, and any other specific terms agreed upon by the parties.

What is clear about express terms, regardless of scope, is that they are clearly expressed and agreed to by the parties.

In addition to express terms, company policies or handbooks can also play a significant role in determining the terms and conditions of employment. These ancillary policies may cover areas such as a code of conduct, disciplinary procedures, leave policies, confidentiality agreements, social media use, and other rules and regulations that employees are expected to follow. While these policies may not be individually negotiated with each employee, they can have legal enforceability if they are communicated to the employee and included in the contract. For example, if an employment policy prohibits discrimination or harassment, this policy would be enforceable if the employee is aware of the policy and the policy is properly incorporated or referenced in the employment contract.

Implied terms, on the other hand, are not explicitly stated but are assumed to be part of the employment relationship. These terms are typically required because statutes passed by the various levels of government demand them into the employment contract, or they are implied because of common law. Examples of implied terms may include the duty of an employer to provide a safe working environment, the duty of an employee to perform their job competently, and the duty of both parties to act in good faith during the employment relationship. Implied terms are not specifically negotiated but do legally exist in the employment contract.

Common Contract Terms

The following discussion highlights some of the major or most common express terms in an employment contract, including probationary clauses, ownership of intellectual property clauses, restrictive covenants, and termination clauses.

Probationary Clauses

Probationary clauses refer to a period of time during which an employee’s job performance is evaluated to determine if they are suitable for long-term employment with the company. Probation provides employers with a degree of flexibility in managing their workforce, as they can terminate an employee if they are not meeting the employer’s expectations during the probationary period. In order for an employee to be placed under a probationary period, there must be a probation clause in the contract.

While the probationary period is typically understood as three months, there is actually no standard length of time for probation. Employers can use a time period which they feel is required to suitably assess the employee – perhaps that is a few weeks or several months.

During the probationary period, an employer can monitor the employee’s performance. If the employee meets the company’s expectations, they will be confirmed as a permanent employee. If not, the company may choose to terminate the employee’s employment.

Even if a probationary period is set in the contract, a probationary clause may not be enforceable unless it meets a specific legal test.

While probation may be used to dismiss an employee, the employer still has to follow the requirements set out in the Employment Standards Act (again, to be discussed later) and the common law, such as providing notice or pay in lieu of notice.

Ownership of Intellectual Property Clauses

In many employment settings, the employee is not only a service provider or a technician, but can also be a creator. Who then owns the intellectual property (IP) rights in employee creations?

Generally, the law of intellectual property (which will be discussed in a later chapter), states that the owner of intellectual property is the creator. As a starting point then, any works created by an employee should be the sole right of that employee. However, it is often the case that employers want to override that presumption through the written employment contract.

Employers can include “intellectual property clauses” or “IP clauses” in the contract to alter the presumption of ownership over the works created by the employee. In almost all cases, an employer-required intellectual property clause will seek to establish that the employer is the ultimate owner of the intellectual property rights, even if the creation was done by the employee.

Importantly, courts will not enforce intellectual property clauses which are vague or overly broad. A good reflection of this limit is the Alberta case of Questor Technology Inc v Stagg, 2020 ABQB 3 highlighted below.

Restrictive Covenants

I. Non-Disclosure Agreements and Confidentiality Clauses

Employment Standards Legislation

The British Columbia Employment Standards Act

I. Minimum Wage (Section 16)

The ESA mandates that all employees are entitled to be paid a minimum wage for their work. The actual amount of the minimum wage is set by the Employment Standards Regulation and is periodically reviewed to reflect changes in the cost of living.

II. Hours of Work and Overtime (Sections 31-42)

The ESA regulates the maximum number of hours an employee can be required to work in a day or a week. British Columbia, unlike some other provinces, has a daily overtime entitlement and a weekly overtime entitlement.

• Daily Overtime – if an employee works more than eight hours in a single workday, they are entitled to overtime pay. The daily overtime rate is 1.5 times the employee’s regular wage for each hour worked beyond eight hours in a day up to 12 hours in a day. Following 12 hours of work, the employee is then entitled to 2.0 times the regular wage on subsequent overtime.

III. Statutory Holidays (Sections 44-50)

The ESA outlines the public holidays recognized in British Columbia and the entitlements of employees who work on those days, including paid time off or premium pay. The following are the current British Columbia statutory holidays:

• New Year’s Day (January 1)
• BC Day
• BC Family Day
• Labour Day
• Good Friday
• National Day for Truth and Reconciliation (September 30)
• Victoria Day
• Thanksgiving Day
• Canada Day (July 1)
• Remembrance Day (November 11)
• Christmas Day (December 25)

IV. Vacation Time (s. 57)

After 12 months of employment employees are entitled to two weeks of vacation time per year. After five years of employment, employees are entitled to three weeks of vacation time per year.

V. Vacation Pay (s. 58)

Vacation pay ensures that employees receive compensation for time off during their annual vacation. Employees are entitled to receive 4% of their total employee’s wages as vacation pay following five days of work. Following five years of employment, the vacation pay percentage increases to 6%. When an employee takes their vacation, the employee will used the banked vacation pay to compensate the employee.

VI. Liability for Length of Service(s. 63)

After completing three consecutive months of employment, an employee becomes eligible for compensation based on their length of service if their employment is terminated by the employer. The compensation or written notice required by the employer increases as the employee’s length of service progresses. The employer must adhere to the following payment or notice requirements:

After three consecutive months of employment – One week’s pay or one week’s written notice.
After 12 consecutive months of employment – Two weeks’ pay or two weeks’ written notice.
After three consecutive years of employment – Three weeks’ pay or three weeks’ written notice, along with an additional week’s pay or notice for each subsequent year of employment, up to a maximum of eight weeks.

VII. Leaves of Absence (s. 49.1-56)

The ESA includes provisions for various types of leaves, such as maternity leave, parental leave, compassionate care leave, and family responsibility leave. These leaves provide job protection and, in some cases, wage replacement for eligible employees.

Enforcing the ESA

The Employment Standards Branch (ESB) is the government agency responsible for administering and enforcing the ESA. Its role includes educating employers and employees about their rights and obligations under the legislation, conducting investigations, and resolving complaints related to employment standards.

If an employee is having a workplace right violated, they can file a formal complaint to the ESB by completing an online complaint form. Once the complaint is submitted, the ESB will review it and open an investigation. The ESB will likely contact the employer for a response and gather additional information. If a resolution cannot be reached through mediation or negotiation, the complaint will determined by an ESB adjudicator.

When a party disagrees with a decision made by the ESB, they can file an appeal with the Employment Standards Tribunal (EST). The EST reviews the underlying case, considers the evidence presented by both parties, and makes a decision based on the merits of the appeal. The EST issues a written decision, which may confirm, vary, or overturn the original decision made by the ESB. The decision of the EST is final and binding unless it is appealed to the British Columbia Supreme Court on a question of law.

Employment Terminations in Canada

In Canada, the termination of employees can occur on two large legal bases: either with cause or without cause. Both forms are seismically different in the financial obligations on employers and the potential impacts on employees.

Terminations for Just Cause

Termination with cause (otherwise known as just cause) refers to situations where an employer terminates an employee’s employment due to serious misconduct or a fundamental breach of the employment agreement. Just cause dismissals are generally considered to be the most serious form of disciplinary action an employer can take, as it severs the employment without any reasonable notice or pay-in-lieu.

When terminating an employee with cause, the employer is not required to provide notice or severance pay. This can be extremely beneficial as it allows the employer to immediately dismiss the employee and avoid any continuing financial or notice obligations. While the employee would still be entitled to any wages or benefits earned up to the date of termination, they would not be entitled to any further severance.

In order for an employer to justify a just cause dismissal, they must be able to demonstrate that the employee’s actions or behaviour were so serious that the employment relationship has been irreparably damaged. The burden of proof lies on the employer and, if the employer cannot prove the misconduct, then the employee could bring a wrongful dismissal action.

Based on the McKinley test, not every misconduct will rise to the threshold of just cause. Instead, the employer needs to prove that misconduct actually occurred and warranted the summary dismissal of the employee.

Just cause disputes occur in a variety of factual scenarios. Among others, employees may be dishonest, insubordinate, incompetent, breach a company policy, or commit some form of off-duty misconduct. Given that each of these are different forms of misconduct, various factors have been established to determine if just cause is meet.

I. Dishonesty

II. Insubordination

Insubordination refers to an employee’s willful refusal to comply with a reasonable and lawful instruction given by their employer. If an employer is failed with an employee who simply will not comply with its instructions, this could permit the employer to rely on cause as the basis for the dismissal.

III. Incompetence

IV. Breach of Company Policy

Employers often have a myriad of company policies which provide clear instructions to employees about company expectations and operations. These policies can include workplace code of conduct’s, conflict of interest policies, workplace harassment policies, confidentiality policies, or a general employee handbook. A breach of one of these company policies could be considered grounds for a just cause dismissal.

A breach of company policy occurs when an employee violates the rules and guidelines established by their employer.

In summary, to establish just cause, the breach of company policy must be sufficiently serious and demonstrate a significant impact on the employment relationship.

V. Off-Duty Misconduct

Off-duty misconduct refers to situations where an employee engages in conduct during their personal time that affects their employer’s interests, reputation, or the employment relationship itself.

Off-duty misconduct can potentially be grounds for dismissal with just cause allowing the employer to terminate the employee without providing notice or severance pay.

As examples, some of the following forms of off-duty misconduct may be sufficient to warrant just cause:

• Criminal Convictions – if an employee is convicted of a serious crime that is incompatible with their employment or has a direct impact on the employer’s reputation, such as fraud, theft, or assault, it may be grounds for dismissal.

These categories are not exclusive and other forms of off-duty misconduct may support just cause.

Condonation

We have already seen a variety of arguments that employers can raise to assert a just cause dismissal. However, the use of just cause may not be available if an employer has condoned the misconduct that they are now using to assert cause.

Condonation is the act of forgiving or overlooking an employee’s wrongdoing. This can occur if an employer chooses not to take disciplinary action against an employee for a particular offense or misconduct.

For example, imagine if an employee is habitually late for work but is never disciplined by the employer. Now, the employer decides to terminate the employee and uses the lateness as the basis for cause. The employee may argue that the termination is wrongful because the employer “condoned” the employee’s habitual late arrival.

To avoid condonation problems, employers are advised to always take steps to discipline an employee for misconduct to limit an employee’s argument of condonation.

Terminations Without Cause

Termination without cause occurs when an employer decides to end the employment relationship without any specific fault or misconduct on the part of the employee. This could be due to various reasons, such as restructuring, downsizing, economic factors, or poor performance that falls short of justifying termination with cause.

There are a variety of ways in which employees can be terminated without cause. These include layoffs, notice of the dismissal, and constructive dismissal. While each of the dismissal forms result in the termination of the employment, they implement that termination in different ways and may lead to potential liabilities for the employer.

I. Lay-Offs

From a business perspective, layoffs occur when an employer needs to reduce its workforce due to reasons such as financial difficulties, restructuring, or technological advancements. Layoffs are usually considered involuntary terminations, and they typically affect multiple employees rather than targeting specific individuals.

While “layoff” is a common term in the business world, layoffs are restricted in Canadian law. The use of lay-offs may only be permitted when: the right to lay-off is written in the employment contract, the right to lay-off is implied by the industry of the employer, or the employee otherwise consents to the temporary lay-off.

II. Dismissals

Dismissal refers to the termination of an employee’s contract by the employer. As mentioned above, the dismissal could be on a for cause basis or may be on a without cause basis. In a without cause dismissal, the employer will be required to provide reasonable notice or pay-in-lieu of notice.

III. Constructive Dismissal

Constructive dismissal occurs when an employee resigns from their position due to the employer’s behaviour or actions that fundamentally breach the terms of the employment contract. Although the employee initiates the termination by resigning, it is legally treated as a termination by the employer’s conduct.

Examples of actions that may lead to constructive dismissal include significant changes in job responsibilities, demotion without valid reason, or creating a hostile work environment. Employees facing constructive dismissal may be entitled to wrongful dismissal damages.

Implied Term of Reasonable Notice

For without cause dismissals, the employer is generally required to provide notice or pay-in-lieu of notice, or a combination of both. This is because all Canadian employment agreements have an implied term that states employers are required to provide the employee with reasonable notice or pay-in-lieu of that notice period (commonly referred to as severance).

The purpose of reasonable notice is to give the employee a reasonable amount of time to find another job, and to allow them to make necessary arrangements for the loss of their income.

Determining the Notice Period

When it comes to determining the notice period for a without cause dismissal, there are two primary approaches: following the provincial employment standards legislation or following the common law. These approaches provide rough guidelines for determining how much notice must be provided to an employee dismissed without cause.

I. Provincial Employment Standards

As noted earlier in this chapter, each province has its own core employment standards legislation. One of the provisions in such statutes are obligations dealing with how much compensation is owed to an employee on a without cause dismissal.

In most provinces, such as British Columbia and Ontario, the employment standards legislation specifies a minimum notice period based on the employee’s length of service. This approach can require a notice period in the range of one week of notice for every year of service, up to a certain maximum.

Section 63(3) of British Columbia’s ESA establishes clear benchmarks based on an employee’s length of service to their employer:

• 0 – 3 months – none
• After 3 months – up to 12 months 1 week
• After 12 months – up to 3 years 2 weeks
• After 3 years – up to 4 years 3 weeks
• After 4 years – up to 5 years 4 weeks
• After 5 years – up to 6 years 5 weeks
• After 6 years – up to 7 years 6 weeks
• After 7 years – up to 8 years 7 weeks
• After 8 years – 8 weeks

• at least 8 weeks if 50 to 100 employees will be affected;
• at least 12 weeks if 101 to 300 employees will be affected; or
• at least 16 weeks if 301 or more employees will be affected.

II. Common Law

The reasonable notice period may also be determined by reference to the common law (again, the precedent cases). The common law approach to determining the notice period is often more flexible and takes into account various factors beyond just the employee’s length of service. The essence of the common law approach is to establish an amount of time that would be required for the employee to secure alternate employment.

Unlike the one week per year of service codified by some provincial employment standards legislation, the common law establishes a rough starting point of one month of notice for every year of service. However, this is not an absolute rule and can be subject to adjustment based on certain factors that emerged from one of the most important cases in Canadian employment law: Bardal v. Globe and Mail, 1960 CanLII 294 (ONSC) (Bardal)

Bardal involved an employee named Edwin Bardal who sued his former employer, the Globe and Mail newspaper, for wrongful dismissal. In the case, the court re-affirmed the well-established law that when an employer terminates an employee without just cause, the employee is entitled to reasonable notice or payment-in-lieu of notice.

Justice Hall, who presided over the Bardal case, identified several factors that are to be considered in determining the employee’s reasonable notice period. These factors have become known as the Bardal factors and are widely accepted as the basis for calculating reasonable notice in Canadian employment law.

The following are the core Bardal Factors:

• Length of Employment – the court takes into account the length of time the employee has been with the company. Generally, the longer the employee’s service, the longer the reasonable notice period should be.

Failure to Provide Proper Notice Under Provincial Employment Standards Legislation

Failure to Provide Proper Notice Under Common Law

Employee’s Duty to Mitigate