Most employment contracts are "indefinite". That means the employment goes on until the employer decides to let the employee go or the employee decides to quit.
Choose this option if you know the employment will end on a specific date.
Many employment relationships start with a probation period, which is normally around 3 months. Up to 6 months is sometimes seen as well.
During the probation period, the employer has the chance to see if the employee is suitable for the job. If not, the employer is free to end the employment without giving the employee the notice period that is usually needed when letting someone go.
It's common for an employer to do some background checks, and the types will depend on the kind of job you're being hired to do. The background checks should be reasonably connected to the job duties. For example, a credit check is normally only done for employees that will be signing authorities on bank accounts, have access to company funds through a credit card, or will know sensitive financial details.
Without an agreement saying the employer can temporarily layoff its workers when business is slow and recall them later when it picks up again, the employer would have to give notice of termination or pay the employee a severance amount if it wants to temporarily stop using the employees' services. If you choose "yes", the Employment Contract will include language that allows temporary layoffs.
Relocating an employee to another location (for example, to a different city, province, or even country) is a significant change to the employment relationship. If it isn't in your Employment Agreement, that sort of change could be the same as dismissing the employee from their job. That would mean the employer would have to provide notice or even an amount of severance pay. If you choose "yes", your Employment Contract will allow relocation.
If relocation is part of the job, your Employment Agreement should speak to it. Relocating you to another location (for example, to a different city, province, or even country) is a significant change to your employment relationship. If it isn't in your Employment Agreement, that sort of change could be treated the same as dismissing you from your normal, expected job. That would mean the employer would have to provide notice or even an amount of severance pay to you.
If relocation is part of your employment, we'll write in that your employer must pay for your reasonable out of pocket and moving expenses. Your employer will also agree to provide you with enough advance notice to allow you to prepare for the move.
If relocation is not a part of your job, it's best to leave this part out of your Employment Agreement.
A common employer benefit is a registered retirement savings plan (RRSP) matching program. The employee can contribute to their savings plan and the employer will match their contribution up to a certain amount.
Stock options are the right given to an employee to buy shares in the company for a certain price. For example, the option could be given to buy shares in the company for $2 a share. If the value of the shares rise to say $10, the employee makes $8 a share. Stock options can be given whether the employer is a public company with shares listed on a stock exchange, or a private company without publicly traded shares. Stock options are normally given to just senior or executive employees.
Equity compensation plans include a variety of share based compensation that ties the company's performance to the amount of money the employee gets. For example, these plans can include restricted share units (RSUs), performance share units (PSUs), deferred share units (DSUs), or restricted stock. If you've looked into these equity compensation plans for your employees and they may be a part of this job's pay, select this option. Equity compensation plans are normally only given to senior or executive employees, but they are sometimes given to other types of employees as well.
Profit participation plans are when the employee gets a certain amount of money based on the profit the company makes in the year. If the company makes enough in the year, the employee gets a percentage of the profit. Profit participation plans (sometimes also called profit sharing plans) are usually only given to senior or executive employees, but that's not always the case. WestJet, for example, is famously known for having a profit sharing plan for most of its employees.
Bonuses are a common part of employee compensation. Usually at the end of the year, if the employee has done well he or she will get an extra amount of pay known as a bonus. Bonuses are sometimes tied to company performance too.
Employment standards codes and regulations set the minimum rights the employee has. The rights in the codes across the provinces (and federally) are often quite lower than what the marketplace expects. So, it's a good idea to add some details to your Employment Agreement if you plan to give more vacation than the minimum required amounts.
Employment standards codes and regulations set the minimum rights an employee has. The rights in the codes across the provinces (and federally) are often quite lower than what the marketplace expects. So, it's a good idea to add some details to your Employment Agreement if you expect to get more vacation than the minimum required amounts.
Understanding Notice and Severance Pay
When you end a person's employment without cause (meaning, there is no serious reason for firing them), you need to do one of two things. The first option is you can give them advanced notice and the employee works for the notice period.
The second option is to pay the employee an amount equal to what they would have earned in the notice period. There are two types of payments for that amount of money:
Termination Pay is set and can't be changed.
Employment standards codes and regulations set the minimum rights the employee has. So, minimum termination pay is set and can't be changed. For example, employment standards codes may say an employee that has worked for the employer for 2 years would get 2 weeks termination pay. Employers must pay that amount.
But you can limit Severance Pay.
The "common law" is the rules that courts make when they make a decision on a legal case. Very often, the court awarded severance pay will be much higher than the minimum termination pay in employment standards codes. For example, employment standards codes may set termination pay at just 2 weeks. But a court might award the employee 3 months or more of severance pay on top of that.
Severance pay can be limited in the Employment Agreement. So employers have a choice to put limits on the amount of severance pay they will have to give when they end someone's employment without cause.
Okay sounds good, let's figure out the limits.
For example, the employee is entitled to 6 weeks' notice or severance pay.
Notice or severance pay generally go up with each year of the employee's service. However, this is an optional feature of your Employment Agreement.
You would include a modest increase to the severance pay amount with each year of service to make it more likely that your limit would be enforced by a court. For example, if the limit were low and the employee has worked for the company for a very long time or has been promoted to a more senior position, a court may say the low limit is no longer applicable. So, having an increase formula in your Employment Agreement helps to make sure the limits stay enforceable.
Employment law says that an employee must give the employer advanced notice when they decide to quit. The amount of time has to be reasonable, but it's generally not a lot of time - something like 2 to 4 weeks is usually normal. But it can be higher for executives, for example.
If you wish, you can include a minimum amount of time the employee has to give you when they quit. You may want to do this if the person is a key or very senior employee and it would leave you in a bind if they left suddenly.
For example, the employee would not be allowed to offer a job to your other employees and contractors. The employee would also not be allowed to ask your customers for their business. This protects you from losing valuable team members and customers.
Non-solicitation promises are more likely to be upheld by a court than a non-competition promise.
For example, your employee would not be allowed to start a business that competes with you. Also, the employee would not be allowed to take a job with your competitor or provide the competitor with services.
Non-competition promises are more difficult to enforce and courts may overturn them if they restrict the employee too much. They are also often only applied to key or more senior employees that can actually have a meaningful impact on the employer if they unfairly compete. If you choose this option, we'll help you to decide on some points that will make the promise more likely to be enforced.
Courts will often limit or overturn a non-competition or non-solicitation promise that goes too far. Including a description of your business limits the restrictions on the employee to things related to your business, which makes it all more likely to be enforceable.
Courts will often limit or overturn a non-competition or non-solicitation promise that goes too far. Including a description of where your business operates limits the restrictions to areas where you are actually likely to be threatened by unfair competition from your former employee. This is the kind of reasonable limit that the courts look for when deciding to uphold or overturn these sorts of promises.
For example, for 2 years after they quit, the employee is not allowed to offer a job to other employees or contractors. The employee is also not allowed to go after the business of your customers or potential customers for 2 years.
We include a pre-departure time in your non-solicitation promise to protect you. For example, if we didn't include a pre-departure time we could give the employee an argument to say that since their co-worker quit a little while before the employee did, they're free to go offer the co-worker a job. Having a pre-departure time period helps to protect you from pre-planned or group departures of your employees.
The employee is also not allowed to go after the business of anyone who was your actual customer at the time the employee left, or a potential customer during the pre-departure period. This helps to protect your potential customers from being taken unfairly by a departing employee. For example, any lead that you've been trying to get on as a customer during the 6 months before the employee left would be off limits to your former employee.
A non-competition promise that goes on for too long will likely be seen as too restrictive by a court, which means the promise will likely be unenforceable. That's because a person's employment is so important to them that as a matter of principle, the courts don't want to restrict the person for longer than is needed. Choose a time period here that is reasonably needed to protect you from unfair competition.
Under employment law, all employees are expected to keep their employer's sensitive information confidential. So, that promise is already a part of your employment obligations. But sometimes employers want to add strict confidentiality promises into the Employment Agreement. If that's the case for you, to protect you we'll add in some employee friendly terms and put a limit on how long your confidentiality obligation goes on.
For example, you would not be allowed to offer a job to your other co-workers. You would also not be allowed to ask your employer's customers for their business.
If you're asked to give a non-solicitation promise and agree to it, we'll add some employee friendly terms to protect you from the obligations going too far.
For example, you would not be allowed to start a business that competes with your employer. Also, you would not be allowed to take a job with a competitor of your employer or provide the competitor with services.
If you're asked to give a non-competition promise and agree to it, we'll add some employee friendly terms to protect you from the obligations going too far.
Non-competition promises are more difficult to enforce and courts may overturn them if they restrict the employee too much. They are also often only applied to key or more senior employees that can actually have a meaningful impact on the employer if they unfairly compete.
For example, for 2 years after you leave the company you must keep your employer's information strictly confidential. For most employment relationships, 2 to 5 years will be a standard confidentiality period.
We'll make sure your non-solicitation or non-competition promise is limited to the actual business your employer does at the time you leave the company. This will help to keep your obligations as narrow as possible.
We'll make your non-solicitation and non-competition promises only apply in the areas where you actually worked for your employer. So for example, it will not be considered off limits to work for a competitor or seek customer business where your employer did not have an office or in a location where you did not actually work for your employer.
For example, for 1 year after you leave the company you are not allowed to offer a job to other employees or contractors of your former employer. You are also not allowed to go after the business of customers of your former employer for 1 year.
For example, after you leave the company you are not allowed to go after the business of anyone who was a customer of your former employer during the 3 months before you left the company.
We do it this way because we want to limit your promise to not go after your employer's customers to just those customers that still have an active relationship with your employer. For example, if the customer last had a relationship with your employer something like 12 months ago, that would be too long to be considered an active customer and you would be free to try to win their business.
As the employee, you'll want as short a time period as you can get.
A non-solicitation promise means after you leave the company (for example, you quit or your employer ends your job), you promise to not go after business from your former employer's current customers. In other words, the actual customers of your employer on the day you left the job.
Employers sometimes want to include potential customers in the non-solicitation promise as well. That would mean you would also promise to not go after anyone that your employer was trying to get as a customer when you left your job.
Since you're the employee, it's much better for you to exclude potential customers. That's because it can be quite hard to say who, really, is a "potential customer" and that leaves you open to more liability than you may want. Also, it's in your interests to be as free as possible to build your business or career after you leave.
If you have to include potential customers in your non-solicitation promise, we'll help to make the promise as favourable to you as possible.
A non-competition promise that goes on for too long will likely be seen as too restrictive by a court, which means the promise will likely be unenforceable. That's because a person's employment is so important to them that as a matter of principle, the courts don't want to restrict the person for longer than is needed.
If your employer is insisting on a non-competition promise, it should only last as long as is needed to reasonably protect the employer after you leave. So, go as short as you can.
Since you're the employee, you'll want to make the non-competition promise as narrow as possible. One way we do this is to make the promise to not compete apply only to geographic areas where you actually worked for your employer. For example, if you worked in the employer's Vancouver office, you would only be obligated to not compete in the Vancouver area.
We limit it even more by putting a time limit on the area as well. For example, after you leave the company you are not allowed to compete with your former employer in the locations that you were assigned to in the 6 months leading up to you leaving the company. So if you were assigned to say Calgary 2 years ago, Calgary will not be off limits. This way, you're not restricted to every location you ever worked in over the course of your career.
Since you're the employee, the shorter the time period the better for you.
Being a sole proprietor means you haven't incorporated and are doing business in your own personal name.
This should be the date that the employee accepts the offer. It's okay if this date is earlier than the start date. In fact, that's usually the way it is.
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A business partner is someone (a person or another company) that is going to be operating the business with you. They could be a co-founder, another business that compliments yours in some way that's joining you on a project, or a strategic partner that you're starting a completely new business with. They may also be, and many times are, part owners of the business. Whatever their role, like you they are actively working to grow and operate the business.
An investor is someone who contributes money or other resources to your business in exchange for owning a part of your business. Investors can be active by giving advice and voting on major business decisions. Investors can also be passive by just giving money or other resources, but only expecting a return on investment and not playing an active role in the business by giving advice or deciding on major business decisions.
A passive investor is one that wants to leave the business and management decisions to you. So, a passive investor provides funds and expects a return on investment, but lets you run your business. They may want to be updated from time to time of course, and they might vote on things like who gets to be on the Board of Directors or a Management Committee, but otherwise they are mostly quiet and let you go about your business and don't take an active part in your operations.
Most common type of business
A Corporation could work great for you.
A general partnership could be suited to what you need right now.
A Limited Partnership could work for you.
Limited Partnerships are made up of Limited Partners and at least one General Partner. The Limited Partners are called "limited" because they are not fully liable for the debts and obligations of the partnership. In other words, they have limited liability. But that limited liability is not perfect - there is a big exception.
The Limited Partners are only protected from liability if they are not taking an active role in the operations of the partnership. If they do, they become fully liable for the partnership's obligations and debts.
The General Partner is the one in charge of managing the business and operations of the partnership. Since it takes on that role, the General Partner is also the one liable for the debts and obligations of the partnership.
All of this means that Limited Partnerships are better suited for a passive investment style with investors coming in as Limited Partners and providing money and resources to earn a return on investment, and the General Partner being the one making the business decisions and managing the operations.
Since your other partners/investors will be, or want to be, actively involved in the business, a Limited Partnership doesn't sound like a good match for you.
You could go into business as just you. We call that being a "Sole Proprietor". But, it isn't typically recommended.
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Answer some questions and we'll suggest some contracts and legal docs you should have for your business.
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Starting Up: Corporations and Partnerships
Starting up a business is exciting. There's also a lot of legal terms thrown at you and it's hard to know where to start. We'll explain the difference between Sole Proprietorships (doing business as "just you"), setting up a Corporation, and forming a legal Partnership, and which one may be best for you.
Software Terms of Service
App companies, Software as a Service (SaaS) companies, and other tech companies use Software Terms of Service to set out how people can use their software or app. For example, the Terms of Service include your pricing and payment terms and the services and features you offer. They’ll also cover intellectual property protection and data and privacy. The Terms of Service are your contract with your user and they accept your Terms of Service when they sign up with you for access to your software platform or app.
A Services Agreement (sometimes also called a Consulting Agreement or an Independent Contractor Agreement) is a contract that outlines what services a person or company will do. Service businesses of all kinds use a Services Agreement for their work – website designers, marketers, consultants, and freelancers are just some examples.
You can also use a Master Services Agreement format if you’re working on a project with a few different phases. This format uses a Statement of Work that outlines what you will do for each project phase.
Independent Contractor Agreement
Sometimes it doesn’t make sense to hire a person as an employee just yet, but you still want to work with them. Maybe you’re not ready to hire employees for now or you might want them to keep the risk of what they do in their own business rather than taking that on yourself. Whatever the reason, you still want to work with them. If that’s the case, you can work with them as an Independent Contractor. We’ll walk you through what you need to put into your contract for their work.
Sales and Services Terms and Conditions
A professional business has Sales Terms and Conditions covering things like warranty and product support, product delivery, privacy and data use, any software licensing that goes along with your product. Your Sales Terms and Condition should also cover things you may not have thought about, like keeping your rights to copyrights, patents, and branding and limiting your liability if your customer uses your product in strange ways (the “seriously, please don’t do this at home” kind of stuff).
You can add your Sales and Services Terms and Conditions to an e-commerce order, a sales invoice, or have them signed as a separate document.
Sales Representative Agreement
You have great things to sell and now you need great people to help you sell them. That’s what a Sales Representative Agreement helps you with. We’ll get you set up with commission payments, any geographic territory limits you want to include, inventory management, and the other key things you need to think about when hiring or contracting with someone to sell your products.
Employing quality people means you should have a quality contract. But where do you start? We’ll walk through all the pieces of an employment contract, like how your employee will be paid. For example, salary or hourly wage, bonuses, and commissions. We’ll also go over how much notice you’ll give if you decide to end their employment. We’ll look at some not so obvious things too, like whether your employee should be allowed to compete with you or approach your clients after they stop working for you and if you’ll have a fixed employment end date or not.
Stock Option and Equity Compensation Plan
Termination of Employment and Release of Claims
Things don’t always work out with someone. So if you need to let someone go without cause (e.g. laying off someone because business is slow or because they’re just not the right fit for your company), you’ll have to formally tell them. You should also try to get a release of claims, which means they are giving up any rights to sue you because of the termination.
A Confidentiality Agreement allows you to share your ideas and confidential information and keep it all safe. The person you share your information with promises to keep it confidential and to give it back to you when you ask for it. They also promise not to use your information against you, like using it to compete with you. The other person also agrees to be responsible for any misuse of your information by their employees and representatives.
You can also include a non-solicitation promise, which means the person you share the information with can’t steal current customers or your employees and contractors.
Letter of Intent
You’re hustling and working on landing that new client or business deal. You need to start sharing ideas and sketching out what the deal will look like, but you’re not ready to sign the contract just yet. So what do you do to protect your ideas, deal points, and info in the meantime?
That’s where a Letter of Intent comes in. It’s a “handshake” deal put down on paper, letting you write out your major deal points so you can move ahead. A Letter of Intent includes things like a description of the deal or project, cost and profit sharing, and other key points that will eventually go into a larger, binding agreement (like a Joint Venture Agreement or a Services Agreement). A Letter of Intent can also include confidentiality promises and agreements to not shop the deal (meaning the other person can’t use your offer to shop around for something better). We’ll guide you through it.
Asset Purchase Agreement
Buying or selling assets is a great way to grow your business. Protect your investment and business with an Asset Purchase Agreement. Whether it’s physical things, like equipment, goods, or inventory, or intangibles like intellectual property or rights to a contract, this is where to start. Check all the legal boxes – payment types, consents, brokers or agents, and even seller and buyer protections.
Intellectual Property Purchase Agreement
Businesses often grow by buying important assets from other businesses. With today’s high tech economy, it’s really common for businesses to buy intellectual property from other companies. For example, you could be buying some of another company’s copyrighted materials. Perhaps you’re buying trademarks or patents, too. You could even be buying their tech, like a software platform, code, or an app. If that’s what you’re up to, this agreement is where you should start.
Assumption of Risk and Waiver of Liability
If you’re a business that offers an experience to your customers then you could really use an Assumption of Risk and Waiver of Liability. For example, rock climbing centres, tours, and gyms have some risk of injury to them. So why use an Assumption of Risk and Waiver of Liability? Well, it outlines the risks for your customer and gets them to agree they’re accepting them before they go ahead. It also has them agree they are limiting your liability and giving up their right to sue you.
Release of Claims
When something wrong happens someone could threaten you with a lawsuit. For example, maybe someone got hurt at your location. Or maybe they weren’t happy with your work and are threatening to sue now. Whatever the reason, you’ve settled the dispute and you’re wanting to make sure the matter is final and you can’t be sued. That’s what a Release of Claims is for. It’s what we use when a person agrees to give up a legal claim they have (or think they have) against you.
Unanimous Shareholder Agreement
A Unanimous Shareholder Agreement, also called a “USA”, is an agreement among all the shareholders of a company. Think of it as the rule book for your business relationship. It says who gets to buy new shares in the company and how you’re allowed to sell your shares. It also says how you’ll vote on important business decisions and what happens if you want to sell the company. We’ll even go over things you may not have thought about, like what happens if someone goes bankrupt or goes through a divorce and someone else claims that person’s shares. All that and more is set out in your Unanimous Shareholder Agreement.
Shareholder Loan Agreement
Shareholders often loan money to their business, especially in the early stages of your company when you’re just getting started, and that’s what a Shareholder Loan Agreement is for. When you loan money to your company, the idea is the business will repay the loan at some point in the future. We’ll go over all the typical considerations for a shareholder loan, like whether you will charge interest and if the company has to make periodic payments or not.
Share Subscription (Purchase) Agreement
Found someone that wants to buy into your business? Amazing, it’s a great way to build a team and finance your business. Your legal agreement for selling a piece of your business doesn’t have to be a headache. We’ll go over the key things to put into your agreement when someone buys into your business.
Use a Promissory Note to put your simple loan down on paper. A Promissory Note shows that someone has borrowed money from someone else and promises to repay it. You can include details about interest, due dates, and whether the loan will be secured by any of the borrower’s assets. We’ll also help you decide what kind of Promissory Note you need. For example, you can choose to have regular payments or not. You can also decide if you want it to be a revolving loan, meaning the borrower can repay and re-borrow as needed.
Guarantor Contribution Agreement
You’d think that when several people guarantee a bank loan, lease, or some other obligation, the creditor would have to collect the fair share from each person if the company doesn’t pay the obligation, but that’s not how it works. The creditor can go after one or more of the people as it sees fit, usually going after the ones that actually have the money to pay. A Guarantor Contribution Agreement solves that problem by making an agreement among all the guarantors that they will reimburse anyone who pays more than their fair share.
Joint Venture Agreement
Entrepreneurs and innovators love to work together, and some great business gets done when they do. But, you may not want to create a formal partnership right now like you would with a new company. That’s where a Joint Venture Agreement comes in. It allows you to set up a project and work with another company, much like a partnership, without creating a whole new company or formal legal partnership. We’ll outline your project and what each of you will do and be responsible for. Your Joint Venture Agreement will also say how you will vote on major business decisions and how money will go in and out of the venture. We’ll go over these and other big deal points to keep your project and working relationship on the right track.
This contract recommendation tool is a software tool to suggest legal documents that may be applicable to you. It is not legal advice.
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