What is an employment agreement?

An employment agreement is a written contract that sets out the terms and conditions of an employment relationship between an employer and an employee. In Alberta, employment agreements are governed by a combination of contract law, the Employment Standards Code, the Alberta Human Rights Act, and a body of common law that has developed around the employment relationship. A well-drafted employment agreement protects both the employer and the employee by clearly defining compensation, duties, termination rights, confidentiality obligations, and restrictive covenants — while staying within the limits imposed by Alberta legislation.

Why you should consider an employment agreement

Clarity and certainty for both parties. An employment agreement documents the essential terms of the working relationship — position, duties, compensation, hours, vacation, benefits, and reporting structure. Without a written agreement, disputes about what was promised or expected are common, and the parties are left relying on verbal understandings, emails, and inferences from conduct.

Avoiding scope creep. An employment agreement clearly details the scope of the employee’s duties and responsibilities. Without these terms described in writing, the scope of the employment relationship is open to interpretation and could be expanded in ways that are unintended.

Compliance with the Employment Standards Code. Alberta’s Employment Standards Code sets statutory minimums for matters like minimum wage, overtime, vacation, general holidays, hours of work, termination notice, and pay in lieu of notice. An employment agreement cannot lawfully contract out of these minimums, and a properly drafted contract ensures the employer remains compliant while still defining terms above the statutory floor.

Protecting confidential information and intellectual property. For businesses that generate proprietary materials and knowledge, the employment agreement is the primary mechanism for protecting confidential information, customer lists, trade secrets, company documents, and intellectual property created during the course of employment. Without clear contractual language, ownership of work product and the duty of confidentiality may be uncertain.

Altering the legal defaults. In the absence of a written employment agreement, the relationship will be governed entirely by the defaults prescribed by statute and common-law.  An employment agreement can alter these defaults to provide for different or more favorable terms for the employer, provided that the minimums required by the legislation are still met.

Relevant laws and regulations

Employment Standards Code, RSA 2000, c E-9. Alberta’s primary employment legislation. The Employment Standards Code sets minimum standards for most employment relationships in the province, including minimum wage, hours of work, overtime, vacation, general holidays, leaves, termination notice, and pay in lieu of notice. An employment agreement cannot contract out of these minimum standards, and any term that purports to do so is generally unenforceable.

Alberta Human Rights Act, RSA 2000, c A-25.5. Alberta’s human rights legislation. The Alberta Human Rights Act prohibits discrimination in employment on grounds including race, religious beliefs, gender, gender identity, physical and mental disability, age, ancestry, marital status, family status, source of income, and sexual orientation. Employment agreements and workplace policies must not contain terms that discriminate on these protected grounds.

Common legal issues

Termination clauses that violate the Employment Standards Code. One of the most common issues in Alberta employment agreements is a termination clause that provides less than the statutory minimum notice or pay in lieu under the Employment Standards Code. Even an unintentional shortfall can render the entire termination clause unenforceable, exposing the employer to common law reasonable notice damages.

Overly broad restrictive covenants. Non-competition and non-solicitation clauses that are too broad in scope, duration, or geography are routinely struck down by Alberta courts. A restrictive covenant must protect a legitimate proprietary interest of the employer and must be no broader than reasonably necessary. Courts generally do not rewrite unreasonable covenants — they simply refuse to enforce them.

Modifying an employment agreement without fresh consideration. Once an employment agreement is in place, an employer cannot unilaterally change material terms — such as compensation, duties, or termination provisions — without providing the employee with fresh consideration. Asking an existing employee to sign a new contract on the same terms of employment, without something new in exchange, often results in the new contract being unenforceable.

Misclassifying employees as independent contractors. Calling someone an independent contractor in a written agreement does not make them one. Alberta courts and the Canada Revenue Agency apply a substantive test that looks at factors including control, ownership of tools, chance of profit, risk of loss, and integration into the business. Misclassification can result in liability for unpaid wages, vacation pay, source deductions, and termination notice.

Failing to address ownership of work product and confidential information. In the absence of clear contractual language, disputes can arise over who owns the intellectual property an employee creates during their employment, and over whether the employee is bound to keep confidential information confidential after the employment ends.

Frequently asked questions

Do I legally need a written employment agreement in Alberta? No statute requires that an employment relationship be documented in writing — an employment relationship can be created verbally or through conduct. However, a written employment agreement is strongly recommended because it provides clarity and certainty, and because it allows the parties to displace common law defaults that may otherwise apply.

Can an employment agreement waive the minimum standards in the Employment Standards Code? No. The Employment Standards Code sets statutory minimums that cannot be contracted out of. Any term in an employment agreement that purports to provide less than the statutory minimum — for example, less notice on termination or less vacation than required — is generally unenforceable.

What is the difference between an employee and an independent contractor? The distinction is determined by the substance of the relationship, not the label used in the contract. Courts and tax authorities examine factors such as the degree of control over the worker, who owns the tools, who bears the risk of loss, and how integrated the worker is into the business. Misclassification can have significant legal and tax consequences.

Are non-compete clauses enforceable in Alberta? Non-compete clauses are enforceable in Alberta only in narrow circumstances. Alberta courts apply a reasonableness test that considers the scope of the prohibited activity, the duration of the restriction, and the geographic area covered. Non-solicitation clauses, which prevent a former employee from soliciting clients or staff, are generally easier to enforce than outright non-competes.

Can I change an employee’s contract after they have been hired? Material changes to an employment agreement generally require fresh consideration — something of value provided to the employee in exchange for accepting the change. A signing bonus, a raise, a promotion, or another genuine benefit can serve as consideration. Without it, the modification may be unenforceable.