Employment Contracts vs. Workplace Policies

Employment Contracts vs. Workplace Policies - What's the difference?As employment lawyers, we know that our employer clients can sometimes feel overwhelmed with the volume of documentation they have to prepare and review to sustain a healthy workplace and minimize potential employment-related liabilities. Employment contracts and workplace policies are two of the most common employment-related documents that employers of all sizes often have to deal with in the course of an employment relationship. Many employers, especially newer and smaller ones, often wonder what the differences are between the two, what types of content go into each, and whether they hold the same weight. In this blog, we attempt to provide some insight into this topic.

What Goes in What?

The legal rights and entitlements of an employee, such as the employee’s entitlements to notice on termination or vacation entitlements, should be included in an employment contract. An employer will want to avoid including language about employees’ legal entitlements within the workplace policy; having the policy be found to be unenforceable later on could create problems for the employer. Though an employer may have a general right to make some types of amendments to their policies, altering significant components of a policy may demonstrate the employer’s intention not to be bound by the original agreement.

Information about employee conduct, such as respect in the workplace, codes of conduct, and even disciplinary steps, should be included in a workplace policy. It may be preferable, however, in some circumstances, to include a policy that contains a rigid disciplinary procedure, such as one in which the employee’s employment contract will be terminated by the employer after four customer complaints, within the employment contract instead. 

An employer should also consider including details about more complex compensation structures, such as a stock option plan, as an addendum to the employment contract, while referring to it in the employment contract.

How to Structure Employment Contracts and Workplace Policies Together

As a best practice, an employer should incorporate a workplace policy into an employee’s employment contract by reference. An employer may consider, for example, including a provision in the employment contract which indicates that the employee agrees to comply with the employee handbook (containing all workplace policies), then appending a copy of the handbook to the contract, so that the employee receives both documents concurrently. Surprisingly, very few employers who include this request for compliance in their contracts opt to provide both documents simultaneously. We do not recommend this. After all, how can an employee agree to an employment contract that requires them to comply with the workplace policies if the employee does not have access to said policies in the first place? If the employer has a significant workplace policy, for instance, the employer would be well-advised to attach the policy to the employment contract, in the event things go south and the employer is required to provide evidence that the employee agreed to the policy.

If you need one-on-one advice from a lawyer to assist you with your employment contracts or workplace policies (we draft and review both!), please get in touch for a consultation. 

Prefer to handle your contracts and policies without a lawyer? We have a great DIY toolkit – The Workplace Law Bundle, which includes general templates and guides for employment contracts, termination letters and releases. 

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