What Happens When There is No Employment Contract?

Woman hides face in frustration while using laptop.

In our last blog, we took a look at the importance of a clear and concise employment contract for both the employer and the employee. Let’s now take a look at what happens when there is no employment contract in effect, especially when issues arise. 

There have been so many instances where our clients have had to deal with very challenging terminations that could have been mitigated by having a proper employment contract in place. Having written employment contracts that have been reviewed by an employment lawyer and that clearly define the nature of the employment relationship is so very valuable to all parties involved. Not having a solid written employment agreement in place can be very risky for both parties, especially when issues arise or termination is necessary. While having a legal contract will not eliminate risk or liability, it can significantly mitigate the need for litigation. 

Employee terminations in Ontario are dictated by legislation as set out in the Ontario Employment Standards Act, 2000. As outlined in the Employment Standards Act, both employers and employees are required to provide “statutory notice” when terminating the employment contract. Statutory notice is the minimum amount of notice as laid out in the employment agreement. The amount of notice may change based on the length of the employment period but cannot fall below the statutory minimum. The written agreement can be terminated by giving the required notice, termination pay or a combination of both. 

But what happens when termination is necessary and there is no signed employment contract in effect? This is where “common law” and the courts come in. In the absence of a written employment contract, the court will imply “reasonable notice” into the working relationship between employer and employee. Reasonable notice requires the employer to provide the employee with reasonable grounds and notice for termination, or payment in lieu of notice when terminating without cause. If an employer fails to give reasonable notice, the employee has grounds for wrongful dismissal. 

If the case does proceed to litigation, the courts will use a number of factors to determine reasonable notice as defined in the Code. Some of these factors include:

  • Length of employment
  • Position and responsibilities of the employee
  • Employee compensation
  • Age of employee
  • Available of replacement employment

If the employment arrangement is ended by the employee, notice must be given in writing. The amount of notice required is dependent upon the amount of time that the employee has been working for the employer. In some circumstances, such as seasonal employment, notice may not be required. 

True North HR Consulting is here to help with complete HR services customized to your needs. From small businesses to large organizations, our goal is to assist, advise and implement strategies and policies to make your business thrive and keep your people happy. With over 20  years of experience and expertise, we can help you generate new ideas and solve big problems. Reach out today and let’s get started … [email protected]