Written Employment Contracts for BC Small Businesses: Termination Clauses and Probation

Many small businesses in BC hire on a handshake or an offer email. That works until someone has to be let go, and the business discovers it owes far more notice than it expected.

A well-drafted written contract can set out what happens on termination in advance. A poorly drafted one can be worse than none, because a clause that breaks the Employment Standards Act may not be enforced at all.

Why put employment terms in writing

The Employment Standards Act sets minimum standards for most employees in BC, whether or not there is a written contract. A written agreement does not replace those minimums. What it does is let you set the terms above the floor: duties, pay, hours, confidentiality, ownership of work product and, most importantly for many employers, what happens when the job ends.

If you are hiring for the first time, our legal checklist for hiring your first employee in BC covers registration, payroll and the other basics. This article looks at the contract itself, and in particular termination and probation.

The statutory floor: compensation for length of service

Under s 63 of the Employment Standards Act, an employer becomes liable to pay compensation for length of service once an employee has worked for 3 consecutive months. The amount grows with service:

• After 3 consecutive months: one week's wages.
• After 12 consecutive months: two weeks' wages.
• After 3 consecutive years: three weeks' wages, plus one more week for each additional year of employment, to a maximum of eight weeks.

The employer can meet this by giving the same amount of written notice, by paying the money, or by a combination of the two (s 63(3)). Nothing is owed under s 63 if the employee quits, retires, or is dismissed for just cause. The weekly amount is based on the employee's average weekly wages over the last 8 weeks of normal or average hours (s 63(4)).

Notice also has rules of its own. Notice has no effect if the notice period coincides with the employee's vacation, leave or temporary layoff, or if the employee keeps working after the notice period ends (s 67).

Why the statutory minimum is not the whole story

The Act sets a minimum, not a maximum. Where a contract does not clearly and validly limit what is owed on termination without cause, courts generally assess "reasonable notice" at common law, looking at factors such as the employee's age, length of service, role and the availability of similar work. For many employees, that figure is well above the s 63 amounts. The Employment Standards Branch enforces only the statutory amounts; a claim for more, whether under a contract or at common law, is a matter for the courts.

This is where a termination clause earns its keep. A clear, lawful clause can tie an employee's entitlement to the statutory minimum or to a set formula above it, which gives both sides certainty.

How termination clauses fail

Section 4 of the Act is short and important: its requirements are minimums, and an agreement to waive any of them has no effect. A termination clause that, in any situation, would give the employee less than the Act requires puts the whole clause at risk. If the clause falls away, the employee may be entitled to common-law reasonable notice instead.

Common problems include:

• A fixed amount of notice that does not grow with service. Two weeks may satisfy the Act in year one but not in year five.
• Unclear wording. Courts tend to read ambiguous language in the employee's favour, so a clause meant to limit entitlement needs to say so plainly.
• A "cause" definition broader than the law. A clause allowing termination without pay for conduct that is not just cause can undermine the termination provisions.
• Clauses copied from another province. Ontario and Alberta have different employment standards, so their clauses may not fit BC.

Probation: what it does and does not do

Many employers assume a "probation period" lets them end employment for any reason and without notice. The Employment Standards Act has no general probation concept. What it has is the 3-month threshold in s 63(1): before an employee has 3 consecutive months of service, no compensation for length of service is owed under the Act.

Two points to keep in mind:

• A probation period longer than 3 months does not stop the statutory clock. Once the employee passes 3 consecutive months, s 63 applies, whatever the contract calls the period.
• A valid probation clause can limit what is owed at common law. It can permit dismissal for unsuitability without common-law reasonable notice, but the employer must assess suitability fairly and in good faith. Statutory termination entitlements still apply once the employee reaches the 3-month service threshold.

In Ly v British Columbia (Interior Health Authority), 2017 BCSC 42, the court held that a plain reference to a six-month probation in an offer letter was enough to make the probation term enforceable. The employee was still awarded pay in lieu of reasonable notice, because the employer had not given a fair opportunity to demonstrate suitability.

Other terms to get right

• Fixed-term and project roles. Section 63 does not apply to employees employed for a definite term or for specific work to be completed in a period of up to 12 months. If the employee keeps working for at least 3 months after the term or work ends, the employment is deemed not to be for a definite term or specific work, and to have started at the beginning (s 65).
• Changing the deal later. If a condition of employment is substantially altered, the Director of Employment Standards may decide the employment has been terminated (s 66). A unilateral change to pay, hours or duties can trigger termination obligations.
• Timing of signature. Have the contract signed before the employee starts. New terms introduced after someone is already working can be harder to enforce, particularly where the employee receives nothing new in return.
• Keeping templates current. Employment standards change. A template that was sound a few years ago may now fall short.

Hiring in BC? Have your contract reviewed before you use it

Our business lawyers can prepare employment agreements and templates for your business, review termination and probation clauses against current BC employment standards, and update your documents when the rules change.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.