Employment Law Risk: Where Employers can Limit their Exposure
I regularly meet business owners who find themselves years into running and growing their company without having paused to consider the legal risks that come with being an employer, or newly established employers who want to get ahead of issues, but they are not sure where to begin. Commonly, these employers have no standard written employment agreement, and just verbally discus terms of employment each time they hire someone; or they’re concerned that they’re missing a step with their pay practices; or feel that a recent termination felt riskier than it should have.
If any of this sounds familiar, you’re not alone. The biggest challenge for most employers is simply knowing where to start. The good news is that most exposure comes from a few predictable areas and a focused review of these areas can significantly reduce the risk of disputes, complaints, or unexpected financial obligations.
Below I will discuss three common issues I routinely see in my practice and some key areas that employers should consider when beginning to assess their workplace practices.
Employment Contracts
All employment relationships are governed by an employment agreement, whether it is written or not. However, not all agreements are created equal, especially those not on paper. Well-drafted, written employment contracts are one of the simplest and most effective tools for setting expectations clearly and limiting uncertainty.
Even those who believe they have sufficient template employment contracts may be missing key terms, such as:
- A termination clause aligned with the requirements of the Employment Standards Act and that address common law notice; or
- A clear description of job duties and expectations.
For employers looking to introduce new written employment agreements to existing employees, there are additional steps required to ensure that the agreement is enforceable. I often see these steps overlooked by employers, which, in turn, undermines the enforceability of the employment agreement.
Pay Practices and Classification
Payment practices are another common source of risk and small errors in payment can add up quickly, posing unexpected financial burdens to employers.
Key problems that arise include:
- Improper assumptions that a worker is an independent contractor, and practices that reflect that assumption, or being unaware that some individuals or companies can have “dependent contractor” status; and
- Incorrect calculation and payment of overtime, particularly where the employer allows employees to bank time.
Termination Practices
Terminations are one of the most sensitive areas of employment law that even the most well-intentioned employers can find resulting in unexpected challenges. Common pitfalls include:
- Relying on a termination being for “cause”, without adequate documentation and gradual steps taken to address performance concerns;
- Inaccurate calculation of notice periods, or and unfounded assumption that common law notice is limited; and
- Poor timing/documentation of a termination decision that creates the appearance of retaliation or discrimination that then opens the door to complaints in forums like the Human Rights Tribunal or the Employment Standards Branch.
Thoughtful planning, consistently applied policies, and proper documentation are essential to reduce the risk that a termination turns into a costly dispute.
Not sure where to start?
It is understandable that many businesses hesitate to seek early legal advice due to perceived cost. However, many high‑risk areas can be addressed with proactive steps. Employment disputes rarely arise from a single mistake—they usually stem from a pattern of inconsistent or outdated practices.
If you’re unsure where your biggest exposure lies, or if you know there is a risk you need to address, our team can help. Managing employment law risk doesn’t need to be overwhelming. An early investment in clarity and compliance can help you build a functional and predictable workplace.
The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.