British Columbia Law
Employment Contracts for Key Hires in BC: What to Include and Why It Matters
Why a Written Employment Contract Is Your Most Important Business Document
When a key employee joins your business, the relationship is usually new, optimistic, and built on goodwill. That is precisely the right time to document the terms clearly — because the time when it matters most is when the relationship ends.
A well-drafted employment contract defines what happens at every stage of the employment relationship: what the employee is expected to do, what they are paid, what protections apply to your business information, and — critically — what both parties are entitled to if the relationship ends. Without it, BC's common law fills in the gaps, and it usually does so in ways that surprise employers.
---
The Foundation: What Every BC Employment Contract Should Address
1. Job Title and Duties
Be descriptive but not overly rigid. A contract that defines duties too narrowly can make future changes to the role — without the employee's consent — a potential constructive dismissal trigger.
Best practice: Describe core responsibilities and include a phrase acknowledging that duties may evolve with the business's needs.
2. Compensation and Benefits
Specify salary or wage, pay frequency, bonus structure (including any discretionary nature of bonuses), benefits entitlements, and how compensation reviews work. If a bonus is tied to targets, define them — vague bonus provisions are frequently litigated.
3. Hours of Work
For most salaried employees, this addresses overtime entitlements (or appropriate *Employment Standards Act* exemptions), expectations around availability, and whether the role is eligible for flexible arrangements.
4. Probationary Period
BC's *Employment Standards Act* permits an employer to dismiss an employee within the first three months without notice if the dismissal is genuinely for determining suitability. But common law begins from day one — so a clearly drafted probationary clause that specifies the period and its terms provides greater certainty. Note that the three-month ESA window does not override human rights protections.
5. Vacation
State the vacation entitlement clearly. The ESA sets minimums (two weeks after one year, three weeks after five years), but many employers provide more. If the contract states "vacation in accordance with company policy," make sure the policy exists and is accessible.
---
The Clauses That Protect Your Business
Confidentiality
A confidentiality clause defines what information the employee is required to protect — trade secrets, client lists, pricing, business strategies — and how long that obligation lasts. For key hires with access to sensitive information, this clause is essential.
The clause should:
- Define confidential information clearly (not so broadly as to be unenforceable)
- Clarify that it applies during and after employment
- Specify what the employee must do with confidential materials on departure
Intellectual Property Assignment
Without an explicit IP clause, questions about who owns work product created by an employee — particularly in creative, technical, or product-development roles — can become genuinely contested. The contract should clearly state that intellectual property created in the course of employment belongs to the employer.
This matters most for: software developers, designers, consultants who produce work product, and sales employees who develop client databases.
Non-Solicitation
A non-solicitation clause restricts the departing employee from approaching your clients or your other employees for a defined period after leaving. These clauses are generally enforceable in BC when they are:
- Reasonable in duration (six to twelve months is typically defensible; longer is higher risk)
- Limited to clients the employee actually dealt with
- Drafted with precision — vague non-solicitation clauses are more vulnerable to challenge
Non-solicitation clauses are more reliably enforced than non-compete clauses, which courts approach with significant skepticism in BC.
Termination Clause
This is the most important clause in any BC employment contract, and the one most frequently drafted incorrectly.
Without a valid termination clause, a dismissed employee is entitled to common law reasonable notice — a court-determined period that considers age, length of service, character of employment, and availability of similar work. For a senior employee with ten or more years of service, this can easily reach twelve to twenty-four months of compensation.
A properly drafted termination clause can limit this exposure to the statutory minimums under the *Employment Standards Act* — notice and severance based on length of service — which are considerably lower.
Why Termination Clauses Fail
BC courts have struck down many termination clauses for technical deficiencies:
- Clauses that, on their face, could be read to provide less than ESA minimums — even if unintentionally — are often voided entirely, restoring full common law entitlement
- Clauses signed after employment has already started (without fresh consideration) may be unenforceable
- Clauses that do not address benefit continuation during the notice period are frequently challenged
The lesson: termination clauses must be drafted carefully, kept current, and signed at the right time — before the employment relationship begins.
---
Fixed Term Versus Indefinite Employment
Most employment relationships are indefinite — they continue until one party ends them. Fixed-term contracts have a defined end date, after which employment concludes automatically without notice.
Fixed-term contracts carry significant risk when they are used improperly:
- If a fixed-term employee is dismissed before the end date, the employer typically owes compensation for the entire remaining term — this can be substantial
- Courts have found implied indefinite employment when fixed-term contracts are renewed repeatedly, negating the protection of the fixed-term structure
- Fixed-term contracts are appropriate for genuine project-specific or seasonal work, not as a way to avoid notice obligations for ongoing roles
---
Senior and Executive Employment Agreements
For executives, the employment contract typically addresses additional matters:
- Equity participation — share option plans, vesting schedules, what happens to unvested equity on termination
- Expense and benefit structures — vehicle allowances, professional development, extended health
- Change of control provisions — what happens to the executive's entitlements if the business is sold
- Garden leave — a period during which the executive remains employed and paid but does not attend work, often used in conjunction with non-solicitation obligations
These agreements are more complex, and the stakes — for both parties — are higher. Getting independent legal advice before signing an executive agreement is genuinely worthwhile.
---
When to Have Contracts Reviewed or Updated
Employment contracts should be reviewed:
- Before a key hire joins — always
- When an employee is promoted to a significantly different role — a new contract may be appropriate to reflect the changed position and ensure termination provisions remain current
- After a significant change in the law — court decisions affect the enforceability of standard clauses
- Before a business sale — buyers in an asset transaction will want to understand existing employment obligations; contracts with clear, enforceable terms are an asset in due diligence
A template contract downloaded from the internet or borrowed from another business is a liability risk. BC employment law is specific, and the technical requirements for enforceable clauses — particularly termination clauses — demand careful drafting.
---
Summary
An employment contract is not just paperwork. For key hires, it is the document that defines what you owe when things do not work out — and limits that exposure to a manageable level. Confidentiality, IP ownership, non-solicitation, and a properly drafted termination clause are the four provisions that matter most. Getting them right at the start costs far less than litigating them later.
This article is general information, not legal or tax advice. Meetings are by appointment only, by phone or secure video.