Informal Work Should Still be Governed by “Formal” Employment Contracts
Recently, Bloomberg reported that more than 40 per cent of Canada’s millennials have participated in "the gig economy" over the past five years, according to a study released on November 26th by the Angus Reid Institute (ARI).
The study found that participation in piecemeal employment was most prevalent for Canadians earning less than $50,000 annually and 36 per cent of those who participated in the study described their primary work as “office work,” including computer programming, graphic design and editing documents. Other popular types of work among respondents included personal assistant services, maintenance or handiwork, and babysitting or house-sitting.
As I read the Bloomberg article, I found myself wondering….How many of those millennials have entered into written agreements for those “gig economy” jobs? How many of those companies have made sure that the terms of employment were crystal clear?
While I would not usually consider having my casual babysitter sign an employment offer letter or contract, opting instead for an oral agreement where the key elements of work is to be performed and for how many hours, duties, and hourly rate of pay were discussed, I would not consider putting such arrangement in writing. However, if I were hiring a part-time nanny, or a graphic designer for my business, I would most definitely want the terms of my arrangement to be memorialized in writing. My thinking on this is fundamentally driven by level of risk – if my babysitter doesn’t show up for one night of duties, or demonstrates less than desirable babysitting skills, it would be relatively simple to pay him and terminate the employment relationship. However, if I hire someone as a part-time nanny or a part-time graphic designer, for my business the risks associated with such employment are much higher. For example: I could be responsible for overtime pay if they’ve worked over 44 hours per week; I could be responsible for providing them with vacation time and vacation pay on the wages they earn, I could be liable to provide them with termination notice or payment in lieu of notice in the event the relationship needs to end. If I’m hiring them for one specific task, or a defined and set period of time, I would want to make sure that the terms of their engagement are very clear, not only to me, but to them. How would I do that? Put it in writing.
PH Balance Points:
Elements of a Written Agreement - Written employment agreements are not just for “traditional” jobs. And there is certainly no “one size fits all” model when it comes to a written employment contract. The agreement doesn’t need to be long or complicated… or “formal”, but it is perhaps naïve in today’s work environment, including in the “gig economy”, to believe that the good natured feelings present at the beginning of the work relationship will always be there, or that you’ll part ways with a temporary or short-term employee on good terms in every instance; or to believe that everyone is in agreement as to just how “independent” the employee is. For that reason, I would recommend that the written agreement include the following at a minimum:
Start date (and end date if they are hired for a fixed term);
Compensation terms – hourly rate, salary, bonus, and other payment terms;
Duties to be performed;
Termination clause that clearly spells out how and when the contract can be terminated and what the employee is, and is not, entitled to at the end of the working relationship. This is such a hotly-debated area of a contract and employment law that it would be a good idea to have your lawyer take a look at it to make sure it complies with legislative entitlements and the current common law views on enforceable language;
Restrictive covenants (like confidentiality and/or non-solicitation language); and
Intellectual property retention rights if applicable in the circumstances.
Short Letter Agreements Work - Is a long-form or multiple page agreement necessary? Certainly not in every case. On one recent radio call-in show it was discussed that employees generally see multiple-page employment agreements as evidence of a “pro-employer” relationship. Instead, I like to do the above agreement in a letter format so it’s not so formal but includes the key elements set out above and gets the job done.
Have the Contract Signed Before the Employee Starts - In order for a contract to be binding upon the parties, there needs to be “give and take” – otherwise known as “consideration” . That is, an employee gives their agreement to be bound by the terms of the employment contract in exchange for getting the job/ work. Therefore, make sure to give the contract to the employee before they start so they can get legal advice if they choose and have them sign off before their start date so that it is clear they got the job in exchange for signing the agreement.
Create a Solid Foundation - There’s nothing wrong with a written acknowledgment of the foundation of your relationship with your employee. And like any good foundation, creating a solid one will help to avoid problems (and difficult conversations) later.
