Employment Contracts
Know how to negotiate the best terms
When starting a new position or changing positions with the same employer, your employer may ask you to sign an employment contract. Before signing anything, learn more about employment contracts, termination provisions, layoffs (furlough clauses), non-compete agreements and non-solicitation clauses.
contract? What is a termination clause
or provision? What is a layoff (furlough)
provision? What is a non-compete
agreement? What are the rules
regarding non-compete
agreements? What are the exceptions
to the Ontario ESA non-
compete rule? What rules apply if you
signed your contract with
a non-compete clause
prior to October 2021? What is a non-solicitation
agreement or clause(s)? Is a non-solicitation
agreement enforceable?
What is an employment contract?
An employment contract is a legally binding agreement between an employee and their employer that outlines the employment terms of the working relationship and helps define the employer employee relationship. Employment contracts typically include identification of parties with the full legal names and addresses of employers and employees, salary, hours of work, compensation, vacation, benefits, bonus, job responsibilities, job duties, work location such as remote, hybrid or on-site, leave policies covering vacation, sick leave, and parental leave entitlements, shareholder agreements, and any post-employment restrictions like non-compete or non-solicitation agreements under Ontario employment law and Canadian law. A written contract gives both parties a clear reference point for the agreed terms and supports dispute resolution when issues arise.
Some employment contracts contain termination clauses that can greatly impact employee rights like reducing severance pay or limiting the ability to work in the same field, which is why it is recommended to review the full contract with an employment lawyer to protect your legal rights.
What is a termination clause or provision?
A termination clause is a section in an employment contract that typically tries to reduce your fair severance pay entitlement down to just your bare minimums. You may think that the Employment Standards Act (ESA) describes your severance entitlement, but it only sets the legal floor through statutory law, including minimum employment standards. The ESA merely tells you what your bare minimum entitlement is, like minimum wage, vacation pay, overtime pay, and statutory holiday pay. All employment contracts must comply with provincial employment standards legislation.
Employers routinely use termination provisions to deprive employees of a fair severance and reduce it to the bare minimum. Any ambiguous or unclear language in these clauses should be evaluated by an experienced employment lawyer, and termination clauses must be carefully drafted. How the clause is written, including whether it complies with Ontario’s employment laws determines if the termination clause will stand up in court. Even a clear clause may be unenforceable if it violates termination entitlements or notice of termination required by applicable legislation, because contracts cannot provide less than minimum rights required by law. Employees are entitled to notice periods under the law, and those rights cannot fall below the minimum employment standards.
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What is a layoff (furlough) provision?
Many employees do not know this, but it is illegal to place you on a temporary layoff, often called a furlough. The exception to this rule is if you consent to being laid off. One way that employers obtain consent is by having you sign a written employment contract that permits temporary layoffs. There is often no reason to give your employer the right to deprive you of your ability to work and earn a living.
What is a non-compete agreement?
A non-compete agreement is typically a clause found in an employment contract that bans you from working for a competitor or accepting business from a former client/customer. Non-competes are presumptively illegal and are usually unenforceable unless the employee falls within the exception rules for a non-compete clause. Courts are more likely to enforce confidentiality protections aimed at confidential information and trade secrets than broad bans on competition. In most cases, you will be informed that your non-compete is illegal, and that you are free to work wherever you want if you quit or are let go.
What are the rules regarding non-compete agreements?
Changes to Ontario’s Employment Standards Act prohibit non-compete agreements for most employees as of October 2021, with only limited exceptions. The law allows non-competes only for executive-level employees, those selling a business, or if the employment contract was signed before this date. If your employer asks you to sign a non-compete or you are unsure of its legality, seek legal guidance from an employment lawyer, since even where an exception applies, it must still be carefully drafted to comply with the law.
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What are the exceptions to the Ontario ESA non-compete rule?
There are three exceptions to this rule:
- Executives are exempt from this rule. If you are a CEO, President, COO, CFO, CIO, CMO or any other chief executive position, then your employer can include a non-compete clause in your contract.
- If you sell or lease your business or part of your business and become an employee of the business you sold, the new owner has the right to enter into a non-compete agreement with you.
- If you signed your non-compete before October 2021.
What rules apply if you signed your contract with a non-compete clause prior to October 2021?
If you have a non-compete agreement that was entered into before October 2021, your non-compete is most likely still illegal.
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What is a non-solicitation agreement or clause(s)?
A non-solicitation agreement is often found in an employment contract. It attempts to prevent you from contacting or soliciting clients or old colleagues, or working in the industry, after you have left your employer for a certain period of time.
Is a non-solicitation agreement enforceable?
Non-solicitation clauses are far more likely to be legal than non-competes. However, many non-solicitation agreements are poorly drafted, and cannot be relied upon by the employer.
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What should you know before signing a non-solicitation agreement?
Things to consider when signing a non-solicitation agreement:
- Is the agreement part of your employment contract? Given a non-solicitation agreement is a “restrictive covenant,” you must agree to it before you accept the job.
- Were you forced to sign the non-solicitation clause? If you were under any form of duress such as feeling threatened about losing your job, a court will set aside the non-solicitation agreement.
- Is the clause or agreement reasonable? Because restrictive covenants have the potential to do significant harm, the courts have the power to overrule them if the restrictions appear unfair. Courts will assess the length of time the restriction applies, the geographical scope of the restriction, whether it is tied to legitimate business interests, and whether it is even necessary and reasonable for that purpose.
Why is it important to speak to an employment contract lawyer?
Employment contracts are more than just a set of rules for your current job; they define your obligations and responsibilities during employment and following your departure from your employer, however, they must still comply with federal and provincial employment standards. Since most employment contracts are drafted to benefit the employer, it’s essential to know exactly what you’re agreeing to before you commit. Certain clauses can have a lasting effect on your future livelihood. This is why an employment lawyer review is so important.
If your former employer is telling you, following your departure, that you are forbidden from working for competitors, or other companies in the same industry due to a non-compete agreement or a non-solicitation agreement or clause, speaking to an employment contract lawyer will help you understand your options. A thorough review of the full contract will help you identify any unfavourable terms, since even routine clauses can affect enforceability and your future rights. It also provides legal guidance on how to proceed. Whether it’s understanding the obligations outlined in your employment contract or assessing restrictions on future job opportunities, having a contract review can protect your interests and give you confidence to move forward.
Why should you have an employment contract lawyer at Whitten & Lublin review your contract?
The employment contract lawyers at Whitten & Lublin have extensive experience drafting, negotiating, disputing, challenging, interpreting, and successfully litigating thousands of employment contracts, non-compete agreements and non-solicitation clauses. Our employment contract review lawyers can help you negotiate your employment contract before your employment commences. Or we can help you fight the terms and conditions upon your termination. We have helped countless individuals negotiate better deals with their employers.
Our skills, experience and reputation are widely recognized in the industry, leading to our being named one of Canada’s top Employment and Labour Law Firms by Canadian Lawyer Magazine for 6 years, most recently in 2026.
Know what you’re signing and negotiate on your terms with the help of the skilled employment lawyers at Whitten & Lublin. A better tomorrow awaits.
Frequently Asked Questions
An employment contract isn’t just paperwork, it defines the rules of engagement for your working relationship. Before you sign, scrutinize the termination clause. That one paragraph can drastically limit your severance rights, especially if it references “minimum entitlements” under employment standards legislation. You’ll also want to examine any non-compete or non-solicitation clauses, which may restrict your ability to work elsewhere or reconnect with clients. Consider how clearly your role, compensation, and benefits are outlined. Confirm the start date and whether the agreement is fixed-term or ongoing. The job description should also set out your specific position and core responsibilities so expectations are clear. If something feels vague or overly restrictive, it’s worth asking questions or better yet, asking a lawyer to interpret the fine print before you commit.
Absolutely. Employers may offer different types of employment contracts. An indefinite term arrangement has no end date, while a fixed term contract ends on a stated termination date.Fixed term employment contracts automatically expire on a specific date, and if an employee continues working after that date, the role may no longer be treated as fixed term. Other arrangements are project-based and end when the work is complete, and some involve independent contractors rather than employees. For full time employees, the role is usually ongoing and based on full-time hours, while permanent part-time roles are also ongoing but do not include full-time hours.
While employers may present a contract as “standard,” many terms, especially those around pay, bonuses, probation, termination, and intellectual property are negotiable before signing. Once the agreement is in place, however, your ability to modify its terms becomes much more limited. If a clause seems one-sided or overly broad, or if the agreement gives your employer wide discretion to alter your duties or compensation, it may be worth challenging. Negotiation doesn’t have to be confrontational. In fact, when handled strategically, it often demonstrates that you understand your rights and are approaching the opportunity professionally.
You don’t have to but it can make a significant difference. Employment contracts often include language that seems routine but can severely limit your rights down the line. Termination clauses, for example, can restrict your entitlement to severance if you’re let go. Non-solicitation provisions may limit your options after you leave. And “entire agreement” clauses can wipe out verbal promises and other oral representations made during the hiring process. A lawyer can help you understand what’s enforceable, what’s concerning, and what’s worth pushing back on. Reviewing your contract with a lawyer will help you avoid signing something that could work against you when it matters most.
Generally, no, your employer can’t unilaterally change the core terms of a signed employment contract. If your salary is reduced, your responsibilities shift significantly, or you’re moved into a lesser role without consent, it may constitute a constructive dismissal. These situations are rarely black-and-white. Employers may try to frame changes as necessary or temporary, and employees often feel pressured to accept them. But even gradual changes can erode your rights over time. If you’re being asked to accept revised terms, it’s wise to get legal advice before responding. Your silence could be interpreted as agreement.
The consequences of breaching an employment contract depend on the nature and impact of the breach. Breach issues can arise when ending an indefinite term arrangement, regarding notice periods owed upon resignation. If you leave your job without providing the agreed-upon notice, or if you violate a post-employment restriction like a non-solicitation clause, your employer may claim damages. That said, not every contract clause is enforceable. Courts assess whether the term was reasonable and whether any actual harm occurred. Breaches involving confidentiality, client relationships, or competitive activity tend to carry the most risk. If you’re worried about a potential breach or already facing accusations, we can help you understand your exposure and how best to respond.
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