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Is it legal for a company to ask an employee to sign an NDA after the employee has started working?

Today’s job market is tough, so when an employment opportunity presents itself, many jump at the chance and take the job. You might notice that the offer letter you accepted in lieu of a full-fledged employment agreement (which, along with other documents, you were promised would be delivered soon) may include terms which are different from those included in the contract itself. Usually that’s not an issue for employees – you have a job now! You can clarify what the contract terms are, and sign it so you can start getting paid!

 

But suppose you have started work and the employer now requires you to sign an additional contract, like a confidentiality agreement or non-disclosure agreement (NDA). You don’t want to lose your job, so you will likely sign. Will you be bound by this NDA? The answer is both yes and no – it depends on whether there has been fresh consideration for the new contract.

 

Offer, acceptance, and consideration

A contract is legally binding if it is composed of three parts: an offer of a contract from one party to the other; an acceptance by the other party of those terms; and consideration, something of value that each party has and will exchange with one another (e.g., money, services, promises).

 

Fresh Consideration  

When an employee is presented with a new set of terms or a new agreement, it is not considered to be enforceable unless consideration is present. But the courts have held that that consideration cannot be the same as previously offered or given—it has to be more, and this is called “fresh consideration.”

 

The Ontario Court of Appeal recently considered the question, in Holland v. Hostopia Inc. (2015) (ONCA). The court stated that simply keeping the job you are entitled to keep is not fresh consideration that will support the signing of another contract (like an NDA). On the other hand, not being dismissed when you could legally be dismissed will be fresh consideration. Whether the employer can require you to sign the new contract as a condition of keeping your employment may depend on whether you could have been legally ‘let go’ even if you did not sign the new contract.

 

What will count as fresh consideration? Continuing in a job when the employer was entitled to let you go is fresh consideration. Offering a bonus can be fresh consideration (even if the bonus is a modest amount). Some other forms of fresh consideration can include “an increase of vacation pay, notice requirements, life insurance, severance pay, or health and dental benefits.” Note that any one of these things by itself could be sufficient to be considered to be fresh consideration. 

Source

No Consideration

Employers are sometimes tempted to avoid the need for fresh consideration by including the following sort of clause: “The party affirms that the terms stated herein are the only consideration for signing this Agreement and that no other representations, promises, or agreements of any kind have been made by any person or entity to cause them to sign this Agreement.

The party affirms that this consideration is sufficient. The party has accepted the terms of this Agreement because they believe them to be fair and reasonable for no other reason.”

 

If you are an employer who wants to have an existing employee sign another contract, be wary of relying on such clauses… the courts will look at whether you actually gave something new to the employee as fresh consideration in exchange for signing the contract.

 

So, is it legal to ask an employee to sign an NDA after the employee has started working? Yes, and no! When drafting the employment agreement, it is wise to include a clause requiring the employee to execute such further documents and agreements as the employer deems reasonably necessary – and then, when they sign those documents, remember to give some fresh consideration with the agreement.

 

To see standard versions of the various agreements and contracts discussed in this article, visit our Small Business Law Library!

 

This blog was co-written by Alina Butt.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Overview of Employment Agreement

Overview of Employment Agreement

 

What is this document?

An Employment Agreement is used to establish the relationship between an employer and an existing or new employee. It includes the obligations of both parties.  

 

When would I use this document?

This document could be used either for a new employee or to change the terms of an existing employer/employee relationship.  

 

Who signs this document?

Employment Agreements are signed by the new or existing employee and an individual with authority to bind the employer to the agreement. The Employment Agreement should be signed after the employee has had a chance to look it over, and before the employee begins work.

 

More details about this document

Employment Agreements can range in length and complexity depending on the context it is drafted for. An employee will sign an Employment Agreement when starting a new position with an employer, and then periodically when the terms of their employment relationship evolve over time (eg. changes in position, compensation, vacation benefits, stock options, etc.).

Employment Agreements often refer to company policies or benefits plans.

 

What are the core elements of this document?

The core elements include: parties, duties and responsibilities, reporting line (who employee reports to), compensation and benefits, reimbursements and allowances, work hours/schedule, annual leave allowed, benefits, performance reviews, settlement of disagreements, termination clause, non-solicitation and non-competition clauses, limitation of employee activities, and intellectual property and confidentiality clauses.

Some examples of additional clauses include ownership of intellectual property, non-disparagement, terms of departure, limitation of liability, employee stock option plan, return of employer property and indemnification of the employee.

 

Related Documents

Nondisclosure/Confidentiality Agreement – an agreement that protects confidential information

Contractor/Consulting/Services Agreement – this type of agreement can have various names, and is used when a person is paid to provide services but is not hired as an employee. Payment can be flexible eg. money, shares or some other form of compensation.

Intellectual Property Transfer, Assignment and Release – an agreement that transfers the intellectual property from one person to another eg. from a consultant/contractor or employee to the person who ‘hired’ the consultant/contractor or employee

Workplace Harassment Policy – this policy deals with harassment in the workplace

Romantic Relations in the Workplace Policy – this policy deals with romantic relations in the workplace

Drug and Alcohol Policy – this policy deals with drug and alcohol use in the workplace and the procedures to follow if unauthorized use is suspected

Read more...

Are All Arbitration Provisions in an Employment Agreement Enforceable?

Whether a particular arbitration clause will be enforceable depends on the way in which the clause is drafted. Generally speaking, if (i) the clause is clear, (ii) arbitration is made mandatory, and (iii) the contract can otherwise be enforced, the arbitration clause will be enforceable.

 

Source

 

Arbitration Provisions

It’s best to start with a brief rundown of what arbitration provisions should include. A basic arbitration clause will be an agreement between the parties to use arbitration instead of the courts in the event of a dispute. The clause should be broad enough to cover all types of disputes and questions of interpretation of the contract. If the clause is not broadly worded, one of the parties could argue that the particular dispute was not within the scope of the arbitration clause.

 

The clause should either specify the following details, or incorporate a set of arbitration rules that provide for such details as:

  • how many arbitrators will be chosen to decide the matter;
  • how an arbitrator is to be chosen (both parties must agree upon someone, and if they are unable to reach a decision within a specified time frame, a mechanism must be in place for the choice of an arbitrator);
  • the rules of the arbitration process (there are many standard sets that can be referenced—for example, see the ADR Institute of Canada’s Arbitration Rules);
  • the seat or location where the arbitration will take place;
  • the language to be used during the arbitration process; and
  • the applicable governing law and jurisdiction.

 

Check out Clausehound.com for sample arbitration clause language!

 

Unenforceable Arbitration Clauses

There are two main reasons why courts have held arbitration clause to be unenforceable – bad drafting and matters of public policy.

 

 

Bad drafting

If the arbitration clause creates too many ambiguities, or if arbitration is not clearly mandatory, the  bad drafting of provisions may cause the clause to be unenforceable.

There are a few main areas of concern that have been identified by the courts:

  • The arbitration process and procedure should either be written with great detail to avoid the possibility of either party claiming their obligations were unclear, or reference should be made to a recognised set of arbitration rules which themselves contain this detail.
  • To convey obligation and enforceability, mandatory language should be used in the provisions instead of optional language (for example, using “shall” or “must” instead of “may”).
  • Time periods need to be specified (in the contract or in a set of arbitration rules) for when notice of arbitration should be given, how much time is to be given at each step of the arbitration process, and by when the process should be completed and a decision given.

 

 

Public policy

Sometimes an arbitration clause can run afoul of public policy. This has been especially true in the United States, notably in situations where there is a great inequality of bargaining power between the parties to the contract.

 

One concern expressed by American commentators relates to the cost-effectiveness of arbitration. An examination of case law by Wigdor LLP in New York discussed how arbitration provisions can be invalidated if the costs involved are excessive in a way that “could preclude a litigant from effectively vindicating [his or her] federal statutory rights in the arbitral forum.”

 

Another point of growing concern relates to how arbitration can create, as National magazine puts it, “an alternate system of justice” that more often than not rules in the company’s favor and leaves litigants feeling like they have not rightfully received their day in court.

 

To see standard employment agreements and arbitration provisions, visit our Small Business Law Library!

 

This article was co-authored by Alina Butt.

 

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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What legal rights do I have where an employer promised shares but did not deliver?

Trust is a big part of any deal, and  a situation where you’ve been hired and promised shares but never received any is a major breach of that trust. But does that trust translate into something legally binding, that when broken, gives you options for legal action?

 

The answer is in the details. When you say an employer has “promised” an employee shares, that can mean a few different things. If a verbal or oral agreement was made, it can be difficult to prove, even if it would otherwise be legally binding. If the shares were promised in a written agreement but never delivered, it can be much easier to force the employer to make good on the promise.


 

Verbal promises

Whether or not a verbal agreement is legally binding and enforceable depends on a number of important facts.

 

First and foremost is an employee’s ability to prove that a verbal agreement took place. This will require trustworthy testimony, and a clear reference to it in emails, messages, documents, journals, and so forth can be especially helpful. In cases like Druet v. Girouard (2012) (NBCA), email strings were accepted as verification of consent even when the electronic signatures themselves were disputed for not being totally accurate reflections of a person’s written signature. Supporting evidence lends weight, so don’t underestimate the importance of sifting through those emails!

 

Once the verbal exchange is proven to have taken place, the question becomes whether the elements of a binding agreement are present: an offer, acceptance, and consideration. That means there should be an identifiable exchange of something for the promise made, like money, or agreeing to accept a job in exchange for the promise of shares, to make the promise legally enforceable.

 

In the case of Fedel v. Tan (2010) (ONCA), Tan and Fedel started a new business together. They verbally agreed that Fedel would retain 60% ownership for organizing and administering the business, while Tan would retain 40% ownership for his financial involvement. Upon incorporation, Fedel received 100% of the shares issued, and Tan received none.Tan sued, and the judge looked at Tan and Fedel’s shared business history to determine that Tan had been entitled to 40% of the company. However, the judge decided against issuing shares to Tan. Because the business relationship between Tan and Fedel had been irreparably harmed by the dispute, ownership of shares in a closely held corporation would no longer have been a satisfactory result. The remedy instead was compensation.

 

So if you are entitled to shares, and can prove it, a court will still look at the particular circumstances to decide what the appropriate remedy will be, and this may not be the promised shares.

 

 

Written promises

If your employment agreement contains a provision entitling you to a particular number of shares at a particular point in time and you do not receive those shares, you may be able to bring an application in court to compel the employer to transfer the shares to you according to the terms of the employment contract.

Of course, this will not enhance the quality of your relationship with your employer! You are better off trying to use friendly channels to obtain the shares.

 

Stock Restriction Agreements

Before doing so however, you will need to look into the details of the contract. Often, employees or contractors will sign a stock restriction agreement. This contract usually provides that you are entitled to a certain number of shares that will vest over a period of time, for example X number of shares on July 20 each year, or X number of shares on the last day of each month. Until the shares have vested they are ‘restricted.’ Restricted shares can usually be redeemed (bought back) by the company at a very low price if your contract with the company is terminated, or if other trigger events take place (e.g., you are convicted of certain types of crimes). Often you are not entitled to vote restricted shares, and you may not be entitled to any dividends that have been declared. If you are terminated, you will not have a right to the promised shares if they have not yet vested.

 

Source

 

Employee Stock Option Plans

Another common way for employees to believe they have been promised shares is under an Employee Stock Option Plan (ESOP). Your contract may entitle you to a certain number of options per year, or you may only be eligible to receive options if the directors use their discretion to grant options to you in any given year. It is important to check the fine print of the plan to determine what you are entitled to.

 

Once you have been granted options you will be able to exercise them to purchase shares at a set price. You will likely only exercise this option if the share value is at or above the purchase price. Note that the options will have an expiry date and many plans will specify that the company has the right, but not the obligation, to buy back any shares purchased under an ESOP if the employee’s contract is terminated for any reason.

 

To see standard versions of the agreements discussed in this article, visit our Small Business Law Library!

This blog was co-written by Alina Butt.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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As a Programmer, Are You Committing Intellectual Property Theft by Abstracting Ideas Learned at Work Into a SaaS Product?

In this day and age, technology is taking over every aspect of our lives. Ideas developed for one area can be modified with ease and adopted in another area. If you are starting your own business, you need to protect your intellectual property to avoid someone else using your hard work in a different market. But what if you come up with an idea while working on a different project?

 

 

What is intellectual property theft?

Intellectual property theft is the stealing of creative ideas. In the area of start-up businesses, intellectual property is a huge concern. After all, you are dealing with new ideas in its early stages with significant progress to be made. As a programmer, you come across new ideas all the time, which may inspire some ideas of your own. The challenge is making sure that you aren’t taking anything that is not yours. The line between committing intellectual property theft and the creation of new ideas is not always clear, but the agreements you have signed as a developer may give you some clues about where to draw the line.

Source

 

Master Service Agreement

Start with the Master Service Agreement. If you are performing work for someone, your specific tasks, duties, and obligations should be clearly outlined. A well drafted Master Service Agreement will define your intellectual property rights as of before the work begins with the developer, while the work is in progress, and after the work is completed. These definitions are extremely important and often hotly negotiated, as is the ownership of these types of intellectual property. You may wish to make sure that the definition of client confidential information is not so broad that it includes all ideas developed during the term of the agreement.

 

Click here to see Clausehound’s Master Service Agreement!

 

 

Employment Agreement

If you are an employee, the rights you have as a developer may be a bit more limited.

Most employment contracts will contain language which requires you to transfer all rights to intellectual property created during the course of your employment. Some agreements allow employees to develop ideas independently, if they are developed outside of work time and without the use of employer intellectual property or confidential information.

 

Click here to see Clausehound’s Employment Agreement!

 

Under the Copyrights Act, if the work is created in the course of employment under a contract of service, then the employer will be the owner of the copyright in the work created by the employee. What this means is that you cannot retain any rights to work created during the course of your employment if you do not have an agreement that allows you to retain that right. Copyright includes artistic work but may be much broader and can include work related to technology.

 

Under the Patent Act, courts have decided that the employee will retain ownership pursuant to two exceptions. First, if you are “hired to invent”, which means hired for the purpose of creating ideas for your employer, then you would not be able to claim those ideas as your own. Your employer retains those rights and any ideas that you have. The second exception allows the employer to obtain the rights if you transfer those rights to the employer in an agreement.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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How Can I Prevent Employees from Posting Material on Behalf of my Company?

Links from this article:
Source
NDA
Small Business Law Library

During World War II there was an expression designed to keep people from sharing seemingly unimportant information with others, especially in public places: “Loose lips sink ships.” Today that public space is the internet, and the “loose lips” of employees can quickly tarnish a company’s reputation or divulge confidential information. The key is to make it very clear that the company has specific expectations about how employees will (or will not) communicate online about the company.

 

Source

 

The informal approach 

The simplest way to make your expectations clear for your employees is to meet with them face-to-face and let them know their obligations and responsibilities. It makes the imperative personal and serious. There’s nothing more crystal-clear than looking them in the eye and telling them whether they can or cannot talk about certain things outside of work, and if they can, what the parameters are for sharing information approved to be released.

 

 

This is most effective if timed correctly. It makes the most sense to inform employees about such expectations shortly after hiring them. If you wait too long, they won’t realize that their conduct and the habits they have formed are in breach of your expectations. One systematized way of debriefing employees is to send out an informal information letter. You can use this to:

  • Remind employees of their responsibilities to the company relating to confidentiality and what information they can and cannot share, and in what ways
  • Remind employees they can’t share such information with anyone, including friends and family, and especially not the Internet—at least not without prior approval
  • Specify how long this obligation is to survive, be it forever or just until the end of their employment

 

Implement company guidelines

It’s a good idea to more formally write down and disseminate a company-wide policy that describes the company’s policy and guidelines on what constitutes acceptable or unacceptable sharing of information and representation of the company outside of work.

 

Making an electronic copy of the guidebook available on every employee’s computer and drawing it to their attention ensures that an employee can’t say you never told them or they had no way of knowing!

 

Source

 

Set it in (contractual) stone

If you really want to make sure your employees are under a legal obligation to do nothing that could tarnish the reputation of the company, include language in the employment contract requiring employees to adhere to the company policies as revised from time to time.

Include confidentiality and non-disparagement clauses in the contract, or have them sign an NDA. Make sure these clauses include express provisions that forbid discussion of the company or company business on social media or with the press, without express authorization by the company.

 

To see a standard employment agreement, visit our Small Business Law Library!

 

Conclusion

The threat of dismissal for breach of their employment contract is likely the best incentive when it comes to encouraging employees to uphold their employer’s image on the internet. Setting clear expectations early on can save everyone much grief—and keep loose lips from sinking the company ship.

 

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Are volunteers unpaid interns or employees?

Are Volunteers Unpaid Interns or Employees?

(Or…How to “Hire” a Volunteer).

The job market in a number of professions such as marketing, legal and non-profit has become increasingly competitive in recent years. It is not unusual for young professionals entering the job market to enhance their résumés by volunteering or completing internships.

Volunteering as an intern is a win-win scenario.  For the individual interning it is an excellent way to gain experience. Many companies value the “try before you buy” approach to hiring.  For the purpose of recruiting a volunteer or intern a company may wish to enter into a formal intern agreement, and to that end we have included a sample volunteer/intern agreement linked to this article.

 

Recruiting volunteers has led to some problems for employees and employees, often in the situation in which such volunteer positions carry with them the types of responsibilities and demands which would normally be expected from an employee. Based on the increase in unpaid positions in various industries, the Ontario Ministry of Labour (the “MOL”) has begun to ask the question: Are unpaid internships or volunteer positions legal?

The answer has proven to be surprisingly complex. Although an employer may call an individual an intern, by itself that is not enough to prevent a court from finding that the intern must actually be considered to be an employee who is protected under the Employment Standards Act (“ESA”).

The MOL has taken action to determine whether interns are being treated properly by employers. In a 2014 Blitz report, out of 56 well-known employers inspected for their internship practices, 13 employers had internship programs with ESA contraventions. These employers were handed compliance orders.

How these rules affect non-profit and charity organizations that engage volunteers is yet to be confirmed by the MOL. However, so long as a volunteer’s responsibilities do not mirror the responsibilities of an employee, a volunteer will not likely be found to be an employee.

To assist you in drafting an intern agreement we have supplied a sample intern agreement here.

In the event an unpaid internship issue is brought forward in a tribunal or court, the judge would consider a number of factors on a case-by-case basis to determine whether the individual was actually functioning as an employee.

This topic is still being hotly debated between proponents and opponents of unpaid internships, so keep an eye out for possible amendments to employment legislation.

The Ontario government has provided strict conditions for having an unpaid intern. Such conditions include:

  • The training received by the intern is similar to training received in a vocational school;
  • The training benefits the intern more than it benefits the organization;
  • The internship is not a prerequisite for an employee position; and
  • The intern is informed and consents to an unpaid internship.

Note that some experts have gone as far as saying that the organization should incur no benefit from the intern.

 

Since the rules on whether an intern is an employee are not crystal clear, it is a good idea for the hiring organization to consult counsel before entering into an intern agreement.

 

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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What legal documents do I need for on-boarding employees and directors to my start-up?

As your startup grows, you will find yourself needing to hire more and more people. If you’re bringing employees onto your team it’s important to have a solid employment agreement ready to go, with clearly outlined expectations in relation to work responsibilities and long-term goals. It is equally important to know how to welcome and train new board members. This will make the process of on-boarding go far more smoothly, saving you a substantial amount of time and money.

Director On-Boarding

Expanding your board of directors requires preparation and careful thought. Directors are often brought in on the basis of being complementary to the company—he or she has a skill set or resources that are useful to and advantageous for the startup. This can be attractive to both parties, but the company should also inform the incoming directors of the duties and legal responsibilities associated with being a board director.

Some general points to cover include:

  • Directors are legally liable for and have a fiduciary duty to the company
  • Directors have a duty of care to the company, and as such are required to supervise and manage its affairs such that, if done wrong or omitted, can leave them liable
  • Directors do have options when it comes to protecting against liability, like obtaining insurance
  • Payment terms, if there are any, including how directors are to be compensated (e.g., cash, options, or a mixture of both)

Perhaps a subtler point, but one that should still be made known to an incoming director, is that in smaller startups, shareholders are often far more involved in the business through the use of a unanimous shareholders’ agreement. This can replace the board of directors to some extent, restricting their powers but at the same time reducing some of their responsibility for liability.

In any event, while welcoming incoming board members, the company should also impress upon them that directing the company is a responsibility that should be treated with great thought and care.

pexels-photo

Employee On-Boarding

On-boarding is popularly discussed in terms of building a friendly and supportive work environment for a new employee to make the transition easier so they can reach peak productivity faster.

That’s definitely something that should be done. However, another side of on-boarding involves making sure employees have the appropriate employment documents to make the terms of their employment very clear.

These documents can include:

  • A comprehensive offer letter that provides details related to payment terms and benefits
  • A non-disclosure agreement, otherwise known as a confidentiality agreement
  • A rundown of federal and provincial employment policies that outline the company’s rights and liabilities in relation to the employee’s
  • An Employment Handbook or Manual, which serves a dual purpose—to inform the employee of further offer terms such as time off, but also to explain work culture and work towards workplace integration

 

To see a standard employment agreement, visit our Small Business Law Library!

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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