Why Every Business Should Use Employment Contracts

A thoughtfully prepared employment contract is one of the most effective tools a business can use to manage its workforce, clarify expectations, and reduce the risk of disputes. While many small and medium-sized businesses operate without formal agreements, assuming they are unnecessary or too formal, the reality is that a well-drafted employment contract provides clarity, legal protection, and long-term value for both parties (but especially for employers).

Building on earlier insights comparing B.C. and Ontario, this article focuses specifically on why employment contracts matter in British Columbia—what they should include and how they help B.C. employers comply with legal obligations and protect their business.

Setting the Foundation for the Employment Relationship

An employment contract formalizes the essential terms of employment, ensuring both parties understand their rights and responsibilities. It clarifies job duties, reporting lines, compensation, vacation entitlements, hours of work, and performance expectations.

For roles with unique arrangements—such as remote or hybrid work—the contract can define those atypical terms. It can also protect the employer’s interests through confidentiality clauses, intellectual property protections, and, where appropriate, non-solicitation or non-competition provisions.

Most importantly, a written contract creates a clear record of what was agreed to at the start of employment, providing a reference point if questions or disputes arise later.

 
Compliance with Legal Standards

Employment contracts must align with the framework of B.C.’s employment laws. Relevant legislation includes:

• Employment Standards Act, setting minimum standards for wages, hours, vacation, and termination;
• B.C. Human Rights Code, prohibiting discrimination and harassment; and
• Workers Compensation Act, establishing workplace health and safety obligations.

For federally regulated employers, the Canada Labour Code has its own unique requirements with respect to many of these issues. A contract that fails to meet minimum employment standards risks being found unenforceable, making legal review critical.

More Than Just Termination Clauses

While termination provisions often attract attention, they are just one part of a well-rounded employment contract. A thoughtful agreement supports the entire employment relationship—not just its potential end.

A properly drafted contract helps reduce disputes and creates transparency on key issues such as:

By addressing these areas clearly, employers promote fairness and alignment, supporting a stable and respectful workplace.

Overcoming Common Misconceptions

Some employers avoid using contracts due to the belief that they are only necessary for large companies or that they make employment relationships rigid. Many employers hold to the severe misapprehension that contracts primarily benefit employees.

In reality, employers are the major beneficiaries of employment contracts and smaller businesses often benefit the most from written agreements, which can help avoid major severance liability and costly litigation with respect to same.

A contract does not need to be lengthy or overly legalistic; what matters is that it reflects the actual employment arrangement and complies with applicable legal standards.

The Importance of Legal Advice

Relying on templates or do-it-yourself contracts can create significant risks.

“Legal review helps ensure that contracts comply with statutory requirements, protect business interests, and reflect the specific needs of the employer.”

Without proper advice, employers may unknowingly include clauses that are unenforceable or miss opportunities to safeguard their operations.

Final Thoughts

Employment contracts are not just administrative paperwork; they are foundational tools for managing expectations, minimizing legal risk, and building productive workplace relationships.

For B.C. employers, investing in carefully drafted agreements helps ensure compliance, protect business interests, and foster clarity and trust from the start. Boughton Law’s Employment Group is here to help businesses prepare, review, and update employment contracts that work—because strong contracts today can prevent costly problems tomorrow.