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The essentials of an employment contract.

Every employment relationship is governed gov·ern  
v. gov·erned, gov·ern·ing, gov·erns
1. To make and administer the public policy and affairs of; exercise sovereign authority in.

 by an employment contract. Many employees believe that because a written employment contract was never signed, no employment contract exists. On the contrary, employment contracts can take the form of a verbal understanding or a lengthy written document between the employer and the employee. In either case, every employment contract covers or should cover certain basic and essential elements.

Every employment contract should deal with the issue of compensation. Compensation can take many forms, such as salary and wages, bonuses, benefits, vacation entitlement An individual's right to receive a value or benefit provided by law.

Commonly recognized entitlements are benefits, such as those provided by Social Security or Workers' Compensation.
, profit-sharing, and vehicle allowances. It is important that when individuals commence employment they fully understand what compensation they will be entitled en·ti·tle  
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.

2. To furnish with a right or claim to something:
 to and the basis for such entitlement. As there sometimes can be confusion in regard to entitlement to compensation, a written employment contract setting out exactly what compensation will be provided is preferable. However, at a minimum, employees should ensure that they get as much information as possible in regard to their compensation entitlement, including any relevant employee handbooks An employee handbook (or employee manual) details guidelines, expectations and procedures of a business or company to its employees.

Employee handbooks are given to employees on one of the first days of his/her job, in order to acquaint them with their new company and
 or brochures that deal with compensation. It is important, for example, that employees understand when they will be entitled to receive bonuses or participate in profit-sharing, particularly in case their employment is terminated.

Another essential element of any employment contract is in relation to termination of the employment relationship. While most employees do not think about termination when they first start a new job, the rights and obligations with respect to the termination of the employment relationship end up being extremely important.

As a general rule, the employer has the right to terminate the employment

of any non-unionized employee provided the employer either

* has just cause, or

* provides reasonable notice or wages in lieu of Instead of; in place of; in substitution of. It does not mean in addition to.  reasonable notice to the employee.

The courts have said that the principle reason an employer must give reasonable notice is to enable an employee to find new employment.

The general factors that the courts will consider in assessing the reasonable period of termination notice are the type of employment, the age of the employee, the length of service, and the availability of other work. There are also a number of special circumstances special circumstances n. in criminal cases, particularly homicides, actions of the accused or the situation under which the crime was committed for which state statutes allow or require imposition of a more severe punishment.  which can result in significantly longer notice periods:

* The fact that an employer induced induced /in·duced/ (in-dldbomacst´)
1. produced artificially.

2. produced by induction.

adj artificially caused to occur.


 an employee to leave a secure, well paid position to join that employer (and the previous position is no longer available) will increase the notice period.

* The fact that an employee relocated re·lo·cate  
v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates
To move to or establish in a new place: relocated the business.

 to a new community to accept a job and gave up employment or contacts in his former community will sometimes increase the notice period to which he is entitled.

* The promise of secure career employment made at the time of hiring will increase the notice period as will promises of substantial remuneration REMUNERATION. Reward; recompense; salary. Dig. 17, 1, 7. .

* If the employer terminates the employee in a manner which makes it more difficult for that employee to obtain alternative employment, then the notice period may be increased.

The above principles will apply if the employer and employee have failed to address the issue of termination upon hiring because the courts have said that it is an implied term of every employment contract that the employee be provided with reasonable notice of termination unless the employer has just cause to terminate the employment. However, the parties can expressly agree at the time of hiring about what will be the notice period or severance The act of dividing, or the state of being divided.

The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when
 payment in lieu of notice. As long as the notice period meets the minimum requirements under the Alberta Employment Standards Code (or similar codes or statutes in other provinces), then the agreement between the parties will be enforced and the courts will not apply the above principles. Often times, employers seek to reach agreement in advance about the notice period because it creates certainty regarding the obligations on termination as opposed to trying to determine what the reasonable period of notice should be in the event of termination.

It is also important when starting employment that new employees become familiar with employer policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental , because often the employer will try to take the position that such policies and procedures form part of the contract. While the extent to which such policies and procedures become part of the contract depend upon the particular circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact.
     2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or
 of each case, employees would be well served by becoming knowledgeable in regard to those policies and procedures. If there are any issues in regard to such policies and procedures, employees would be wise to raise them with their employer as soon as possible, particularly if they have a different understanding of how the relationship is to be governed.

Employees also need to understand that whether the employment contract is verbal or in writing, no term or condition of employment can provide for less than the minimum standards set out in the Alberta Employment Standards Code (or similar codes or statutes in other provinces). For example, the Employment Standards Code provides that when an employee has been employed for more than three months but less than two years, that employee is entitled to either one week notice, or severance in lieu of notice, upon termination of his or her employment. Where the employment contract suggests that the employee is entitled to something less than one week, then that part of the contract which deals with termination would not be enforced and the implied term of reasonable notice would apply. Thus, it is important that employees be familiar with the rights that they have under the Employment Standards Code which include overtime, vacation, and statutory holidays. Employees can do so by either contacting the Alberta Employment Standards Branch or checking its website at

Employees should also be aware that whether or not the employment contract is verbal or in writing, employees have a duty of confidentiality In common law jurisdictions, the duty of confidentiality obliges a solicitor to respect the confidentiality of his or her client's affairs. Information that a solicitor obtains about his or her clients' affairs may be confidential, and must not be used for the benefit of persons  which requires they not disclose trade secrets and confidential information Noun 1. confidential information - an indication of potential opportunity; "he got a tip on the stock market"; "a good lead for a job"
steer, tip, wind, hint, lead
. In addition, they are prohibited pro·hib·it  
tr.v. pro·hib·it·ed, pro·hib·it·ing, pro·hib·its
1. To forbid by authority: Smoking is prohibited in most theaters. See Synonyms at forbid.

 from using such information after termination of employment "Fired" and "Firing" redirect here. For other uses, see Fired (disambiguation) and Firing (disambiguation).

“Gross misconduct” redirects here. For the ice hockey term, see Penalty (ice hockey).
. All employees also owe their employers a general duty of good faith and fidelity. This means, for example, that employees are not entitled to compete against their employer during the employment relationship.

After leaving employment, former employees may seek employment elsewhere, take to the new position those skills and general knowledge acquired in the course of their former employment, and solicit those customers who they can remember. The only exceptions would be where the employee is found to be in a fiduciary relationship fiduciary relationship n. where one person places complete confidence in another in regard to a particular transaction or one's general affairs or business. The relationship is not necessarily formally or legally established as in a declaration of trust, but can be , for example, where the employee is in a senior management position or where the employee has agreed to a restrictive covenant restrictive covenant

In property law, an agreement acknowledged in a deed or lease that restricts the free use or occupancy of property, such as by forbidding commercial use or certain types of structures.
 as part of the terms and conditions of employment conditions of employment

that part of an employment that sets out the duties, responsibilities, hours of work, salary, leave and other privileges to be enjoyed by persons employed, for example a veterinary nurse, in private practice.

Employers similarly have an implied obligation of good faith and fair dealing toward their employees that is of particular relevance when the employment relationship is terminated. Specifically, the manner of dismissal is now very relevant in determining the length of notice or amount of severance for which the employer is liable. Examples of where an employer is found to have breached its implied obligation of good faith and fair dealing are

* an employer has failed to provide a letter of reference,

* an employer has refused to provide the minimum notice provided under the Employment Standards Code, or

* an employer has made completely unsubstantiated allegations of just cause.

In such cases, the courts will likely increase the period of reasonable notice for termination.

An employment contract is probably one of the most important legal relationships that an individual will enter into. Accordingly, it is important that employees have a clear understanding as to what the terms of that relationship are so that their interests are best protected.

Anna Maria Moscardelli is a lawyer with the firm of Neuman Thompson Thompson, city, Canada
Thompson, city (1991 pop. 14,977), central Man., Canada, on the Burntwood River. A mining town, it developed after large nickel deposits were discovered in the area in 1956.
 in Edmonton, Alberta.
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Title Annotation:Feature on Contracts
Author:Moscardelli, Anna Maria
Geographic Code:1CANA
Date:Dec 1, 2004
Previous Article:Uncertainty: a business contract breaker.
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