The Benefit of an Employment Contract

A well-written, one-page standard form employment contract can save an employer tens of thousands of dollars on a single employee’s termination, yet they are surprisingly rare.  I would estimate that less than one-third of employers in B.C. have written employment agreements with their employees.  Such agreements are very useful because they can define circumstances where the employer may fire the employee without having to prove they had the just cause discussed below, and can limit the employee’s entitlement to severance to the minimum required by the B.C. Employment Standards Act (which ranges from one week of notice after three months of service, up to 8 weeks of notice after 8 years of service), and limit the employer’s exposure to having to pay the more generous compensation awarded by some courts (which can average about one month for every year of service, up to approximately 24 months).  In many cases, it is less stressful and expensive for an employer not to try to prove they had just cause to fire an employee and simply pay the employee the limited entitlement of severance under the employment agreement, but of course, this benefit only exists if there is an appropriately worded and signed employment contract.  If no agreement exists, the employer must determine whether they have just cause to terminate in order to avoid paying potentially significant severance damages.

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