What You Need to Know About Your Employment Contract

Written on behalf of Peter McSherry
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When you start a new job, usually you and your employer sign an employment contract. The employment contract sets out the terms of the employment, including the requirements for the job, any entitlements for the employee, and ongoing obligations between employer and employee. 

The employment contract does not always have to be written down. If a printed copy does not exist, not to worry! A verbal agreement is implied. This verbal agreement includes certain terms specified by law, so it’s important to know what you are eligible for. This article discusses the minimum standards employees are entitled to in their employment contracts.

Who Does the Employment Standards Act Apply To?

The primary source of information about employment contracts in Ontario is the Employment Standards Act. The Act dictates the requirements of employers in the province relating to minimum wage, vacation time, severance pay and the like. 

The terms of the Act only apply to employees in Ontario. A person is considered an employee when some of the following are true:

  1. The work the individual performs is an important part of the business.
  2. The business decides what the individual is to do, how much the individual will be paid, and where and when the work is performed.
  3. The business provides the individual with tools, equipment, or materials to perform the work.
  4. The individual cannot subcontract their work to someone else.
  5. The business has the right to suspend, dismiss, or otherwise discipline the individual.

What is the Minimum Wage for Employees in Ontario?

The Employment Standards Act sets out a minimum wage that employers can pay employees in the province. There are some jobs that are notably exempt from this requirement. The industries and jobs that are exempt from the general law in Ontario include:

  • Hospitality industry employees
  • EMS, healthcare, and health professionals
  • Government employees and professionals
  • Transportation
  • Manufacturing, construction, and mining
  • Agriculture, growing, breeding, keeping, and fishing
  • Household, landscaping, and residential building services

At the time of publishing, the minimum wage in Ontario is set at $15.00 per hour. This rate will change on October 1, 2022, when the minimum wage will increase by 50 cents to $15.50 per hour. The minimum wage changes every year on October 1, starting in 2022. New rates are published on April 1.

Certain Jobs Have Exceptions Above and Below the Standard Minimum Wage

The minimum wage is not the same all across the board, however. For instance, students are paid at least $14.10 per hour (to go up to $14.60 come October). Student minimum wage applies to students working 28 hours a week or less who are under the age of 18. 

Homeworkers’ minimum wage is $16.50 per hour ($17.05 in October). For guides in hunting, fishing and wilderness, the current minimum wage is $75.00 and will go up to $77.60 later this year. Finally, if an employee’s pay is based in whole or in part on commission, it must be equal to at least the minimum wage per hour the employee has worked. If an employer is supplying room and board, that can be accounted for up to a certain amount set by the Act.

Employees Are Entitled to At Least Three Hours’ of Wages and Overtime

If employees are sent home in less than three hours, they must receive pay that is the higher of: 

(i) three hours at their regular rate of pay, or 

(ii) the amount they earned for the time worked plus wages equal to their regular wage for the remaining portion of the three hours. 

This is called the three-hour rule.

Employees work overtime if they work in excess of 44 hours per week. Overtime pay is 1 ½ times the employee’s regular rate of pay, which is why it is often referred to as “time and a half.” Generally, employees cannot be expected to work overtime on a daily basis unless the employment contract states otherwise. There are exceptions to which employees can receive overtime pay in the Act. For example, employees working in a managerial or supervisory role are not entitled to overtime pay.

Vacation Time vs. Vacation Pay in your Employment Contract

The main difference between vacation time and vacation pay is the timeframe within which they are earned. Vacation time is something the employee earns yearly, whereas vacation pay is earned each paycheck.

Employees who have been with an employer for less than five years are entitled to two weeks of vacation time in each calendar year. Those with five or more years of experience are entitled to three weeks of vacation time per calendar year.

Contrasted to vacation time, vacation pay must be four percent of the employee’s gross wages earned in a calendar year for employees who have less than five years of employment with the employer. Those with five or more years’ employment are entitled to six percent.

Unless Your Employment Contract States Otherwise, You Are Entitled to Three Days’ Paid Sick Leave

Additionally, employees have the right to take up to three days of unpaid sick leave. If an employee chooses to take this leave, they cannot face reprisal. This right is realized after the employee has worked for the employer for at least two weeks consecutively.  

Sick leave can be taken for personal illness, injury or medical emergency. If the employee must take leave for other reasons, the time limits vary depending on those reasons. Family caregiver leave, for instance, is unpaid leave for up to eight weeks with job protection.

The Difference Between Severance and Termination Pay in Employment Contracts

If an employer fires the employee, the employee may be entitled to severance pay. Severance pay is meant to cover any losses that may happen when a long-term employee loses their job. Employees are able to resign after receiving notice for termination and maintain severance pay if they provide two weeks’ notice. Severance pay is the employee’s regular wage and work week hours multiplied by: the number of years employed plus the number of completed months of employment divided by 12.

By contrast, termination pay is available to employees who have been working for three months consecutively and who are not given notice of their termination. This payment is made in a lump sum equal to the employee’s regular wages for a work week plus vacation pay.

Not all employees are entitled to receive termination pay, however. Exemptions include those who were fired by reason of disobedience, wilful negligence or misconduct not authorized by the employer. 

Infectious Disease Emergency Leave is a New Regulation in Ontario

The province created new regulations on Infectious Disease Emergency Leave for employees temporarily laid off during the COVID-19 pandemic. Be sure to read last week’s article on the latest developments on how this regulation may impact you.

Contact Guelph Employment Lawyer Peter A. McSherry For Advice on Your employment Contract

At Peter A. McSherry Employment Lawyer, we provide each of our clients with a personalized assessment of their case. We represent employees in employment law matters and provide each of my clients with compassionate care, attentive service and the efficient resolution of legal issues. We also regularly assist employers in managing difficult employment situations by providing strategic advice on compliance with employment laws and risk management. Contact employment lawyer Peter A. McSherry at 519-821-5465 or by e-mail to schedule a consultation.