Employment Contracts in the COVID-19 World

by | Jul 14, 2020 | For Employers

It’s been four months since COVID-19 changed our world. I thought Ontario would be shut down for two weeks, but I was so wrong. There is no end in sight. Many large non-manufacturers have already decided that employees will not return to the office until at least next year.

Remote working will become part of the new normal for many employees. This will create all kinds of human resources challenges. 

For example, I was speaking to a friend of mine who is an experienced executive pay consultant. He can and has been doing his job remotely. Video conferencing has been a necessary and effective substitute for face-to-face meetings. He says it’s effective because he has developed long-term relationships with his clients. They know him and trust him. His junior colleagues need mentoring and need to establish relationships with clients. In the short-term, mentoring can be done remotely, and some relationship building is possible. However, he is concerned that if the pandemic continues for much longer, then these employees’ development will be stunted.

The pandemic has also provided legal challenges. As a result of these challenges, it is time for most employers to update their employment contracts. These contracts need to reflect the new normal.

Here are a few issues to consider addressing:

  1. Location: I do not generally recommend including a physical location of work in my contracts, but if you do, then consider amending it to include a home office if the person will be working remotely.
  2. Home offices: If an employee is working at home, consider detailing what office equipment and furniture the employer will provide. If you plan to install software on the employee’s phone or computer to track the employee’s activities, consider whether it needs to be included in the contract. Other issues that should be considered are whether you need to develop or update your remote working policy, or a health & safety protocol for remote workers.
  3. Hours of work: I do not generally recommend setting out specific hours of work (i.e. 9 am to 5 pm from Monday to Friday) in my contracts, but if you do and the person works from home unless you have some way of tracking hours, then consider amending this clause. I have seen some “morning” people starting much earlier than usual from home during the pandemic, and for people with children at home, the workday is much more stop and start. For example, they work for 2 or 3 hours in the morning, get the kids organized for a couple of hours, then work a couple more hours, spend a couple more hours with the kids, and then finish the workday after dinner. For people who typically have a long commute, there may be an opportunity to get more productivity out of employees. In this regard, in my experience, some people are more productive in the early morning or at night when there are no personal or work distractions.
  4. Temporary layoffs: I raise this issue with my clients when drafting an employment contract, and accordingly, many of my clients have a temporary layoff clause. This has saved them a lot of grief when deciding whether to lay off employees when the state of emergency was declared. This clause allowed them to temporarily lay off employees within the meaning of the Employment Standards Act (the “ESA”) without any notice of termination (or any pay in lieu of notice). Given the recent amendment to the ESA, these clients can continue these layoffs until six weeks after the state of emergency has been lifted.
  5. Termination clause: this is usually the most critical clause in an employment contract because it limits the amount of notice of employment (or pay in lieu of notice) an employee is entitled to receive. This clause is beneficial in limiting termination costs when an unforeseen scenario like COVID-19 occurs. As a result of a recent case, I recommend that employers review their termination clauses, especially the termination with cause provision; otherwise, they may no longer be legally enforceable.

The employment contracts I draft are generally extremely one-sided in favour of the employer. For new clients, I sometimes get push back because they seem harsh and unfair. I tell these clients that the contract is one-sided; that’s the point. However, I also tell them that if all goes well, the contract will be filed away and never read again. 

The contract is for when things don’t go well. Like when COVID-19 hit. My clients who were required to shut down called me in a panic. Revenues were $ 0, and payroll costs were significant. This was before the government introduced the wage subsidy or offered the $40,000 loans. When clients approached me regarding what to do, I recommended that they temporarily lay off their employees, pursuant to the temporary lay off provision in the employee’s employment contract. The first question was always regarding termination costs resulting from the layoffs, and I assured them that the cost would be nothing. This is the kind of peace of mind a properly drafted employment contract can provide you. 

For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416-317-9894 or at [email protected]


The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.



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