Feb 22, 2017
Emerging companies must navigate through a wide range of complex employment issues as they gain a foothold in the market and position themselves for a growth trajectory. In order to properly manage the associated risks, it’s crucial for emerging companies to be cognizant of several key employment law compliance issues they will be confronted with along the way.
These companies must also understand their obligations and rights when it comes to hiring and terminating employees in order to protect effectively manage potential liabilities and limit issues with respect to financing.
This presentation by Steven Dickie, an Associate in Osler’s Employment and Labour Group, is available in both webinar and PowerPoint format, and will cover five employment law issues consistently encountered by emerging companies in Canada to help them manoeuvre through these matters:
- employees vs. independent contractors
- hiring interns
- the importance of employment agreements
- key employment compliance issues
- termination of employment
This presentation is part of Osler’s Emerging and High Growth Companies 101 series, designed to help emerging ventures navigate through the various issues and legal requirements they will encounter throughout their growth cycle.
SIMON: We'll get started as everyone's enjoying their lunches. I just wanted to welcome everyone to the first of what we hope will become a series of sessions and seminars on different topics that emerging companies are facing, and issues that you need to be thinking about as you're navigating the growth and scaling up of the business.
So this afternoon, we have Steve Dickie, who is an associate in our labor and employment group. He works very closely with many of our emerging company clients. And I'm sure many of you recognize Steve or his name, and probably exchanged emails back and forth when you're hiring employees or are going through terminations. And so Steve is going to talk about some of the issues that you need to be facing and thinking about.
And you're on the ground and dealing with employees on a day-to-day basis, we're here on the sidelines advising you when you need help with things. And so the hope is that from this presentation, you'll be able to go back to your office. And as you're going on with the day-to-day business, being able to spot issues where you think there may be a problem. Because it's a lot easier to fix them at the outset than it is when things blow up.
And so we want to make sure that you guys are understanding the things that you should be looking out for me, because I know many of you aren't lawyers, and maybe don't have specific training in this area. And so we thought doing these types of sessions on different topics today will the employment, we might do one on tax, on stock options, on privacy issues, we'll just help educate some of the founders, and VP finances, and other individuals that are working in the startup space. So without further ado, I'll turn it over to Steve. I told him that everyone would be wearing jeans and t-shirts and that he shouldn't wear his tie today but he didn't listen to me.
STEVEN DICKIE: Thanks, Simon. Well, I know we're being recorded, so I just needed to be careful to make sure-- because I don't know who's going to watch. But thank you very much for the introduction, Simon. It's very nice to be here and be speaking with you today. I look around the room and see many people who have a chance to meet before and to speak on the phone.
So I'm going to attempt to be relatively quick to go through my presentation to give you all a chance to ask questions. Because I know when we're talking about the theoretical aspects of the law, sometimes it's helpful to ground that in some practical examples too. I mean, obviously, be mindful of confidential information on specific cases, but I'll try to be as helpful as possible in the time that we have today.
So the presentation that I was asked to put together was on employment law 101. Some of these concepts you might be familiar with, but I think it's helpful to go through them in sequence, in sort of like hiring to firing, the life cycle of a potential employment relationship, and just bring you back to some of these concepts. Because I've tried to organize them around what I think are the big five, or the basic five things that come across our desks often when it comes to emerging company issues.
And so first of all, we want to talk about employees versus independent contractors. Whenever you want to bring somebody aboard, whenever you need help with your organization, you're essentially going to slot that individual into one of two broad categories. Are they going to be an employee of your company? Or are you going to hire them as an independent contractor? And so just go back and we're going to start by talking about some of the risks involved in that decision. And some of the considerations that you need to make when you're making your business call.
Then I want to talk about interns, because this is something that's coming up, it comes up frequently. And it's also something that you may have seen in the news recently, the Toronto Star has done a few stories on unpaid internships, and risks, employment law risks for interns. And so it's something that also the Ministry of Labor in Ontario is examining more closely, and that might be an area of audit risk for your companies.
Then we want to talk about employment agreements. I know it's in the middle of the presentation, but there's one thing you take away from today, it's about the importance of having employment agreements, or independent contractor agreements. Basically written contracts that you enter into that are very clear about the terms and conditions of employment, especially about termination. Because at the end of the day, if all goes wrong, you need to pull the plug, we want to make sure that your companies are protected to the extent possible.
And then briefly go over some key ongoing compliance issues that come about. And I'm going to talk about there about some potential changes to the law that may be upcoming and very impactful for your businesses. And then termination of employment, talk about some of the basic concepts, what is cause versus determination without cause, and some do's and don'ts in the actual termination process or the mechanics of going through letting someone go.
So starting with employees versus independent contractors, like I said, this is basically the universe of workers of people that you're going to bring on board. To the certain extent, there's temporary help agencies, labor force, that kind of thing, really, we don't really see that in the emerging companies space. And it's an area that I would encourage you to stay away from as well. Because there are a lot of legal trip mines. So generally, you're going to have direct contractual relationship with an individual and you're going to have to make a decision about are you going to bring them on as an employee or an independent contractor.
Sometimes I hear-- this person is going to be on contract, which is-- it really isn't a precise term. It doesn't fit into the legal concepts of an employee versus an independent contractor. Because you can have a fixed term employee, a contract for a defined period of time, but that person is also an employee. An independent contractor will be mostly by definition for a fixed period of time. Because if you agree that somebody will be a consultant or an independent contractor for an indefinite period of time, you're essentially admitting that person really is more like an employee. That's one of the factors that the courts will look at.
But really, I think that-- you see some sort of descriptive terms here on this slide for how we distinguish or how we think of independent contractors versus employees. But really, the last one is the most important for me. Is the individual a part of your business, or is the individual in business for themselves? Such that they have other clients. They have other lines of revenue. They have other opportunities to build upon their own business. And really, they're providing a defined service, sort of a carved out and clear contribution to your company as opposed to being integrated into your business.
And the courts have listed some factors here. Because the question will often come up-- is somebody an independent contractor or an employee? And what the courts will look at are things like exclusivity, control, tools, and equipment, but really, integration, I think, is the number one. That and control are the strongest factors.
If you're hiring somebody to fit into your organizational structure and you give them a business card, and they're managing people, and they have a title, so projecting to the outside world as they're like the director of engineering, or development, or the head of engineering, then that would suggest integration. I'm not saying that that's going to be determinative, but then you have to ask yourself how really is this person interacting with our business, such that are they part of our business.
And basically, it's not going to be determinative what the individual agrees to call himself or herself. So you could have an independent contractor agreement with somebody, but that will not be the end of the analysis, that-- oh, they're an independent contractor. They've agreed to it. And it says in the agreement very clearly, I am an independent contractor. I am not an employee. Really, that, for the most part, is sort of a tie-breaker. That the courts have considered that to be at most a tie-breaker. And really, it's going to be the true nature of the relationship that's analyzed.
And the thing is, with independent contractors, everybody loves being an independent contractor until they don't. And they don't when you let them go. And because at that point, now it's like, well, I took all the advantages of being independent contractor, you know? No EI and CPP deductions, the ability to write-off certain equipment, and that sort of thing with the CRA. That was all great. Thank you.
But now, actually, really, I was an employee all along. So you owe me severance pay on the basis that I was an employee. And that happens all the time. And really, it doesn't get you anywhere on the analysis to say, oh well, you took all those tax deductions. You loved being an independent contractor. Adjudicators and courts have said individuals can be independent contractors for the purposes of the Income Tax Act, but truly employees at-law for the purposes of employment law.
So you know, that's often a point of contention because somebody's like, well, just hire me as an independent contractor. It'll be better for you. It'll be better for me. And you know, you might make the business call to do that. But you know, it really, at the end of the day, that's not going to move the needle if you ever get in a dispute with the individual. So if it quacks like a duck. If it walks like a duck, it's a duck. It's an employee if, really, all the facts on the ground suggest that the individual is really like an employee. And adjudicators, including the CRA, will generally err on the side of finding somebody to be an employee. Question?
AUDIENCE: Yeah, you mentioned fixed-term employees or fixed-term contractors [INAUDIBLE] our interns or summer students. And it seems like that would actually check a lot of the employment categories, like writing with a laptop, [INAUDIBLE] anybody else. We actually don't want them. [INAUDIBLE]
STEVEN DICKIE: Yeah, as I indicated, there is a category of employment relationships that aren't fixed term employment relationships. And you bring up a really good point-- and that segues into the next topic about interns-- is frequently like intern is not a recognized category of special employment really. There's very limited carve-outs and exceptions under employment standards loss for interns, where you can sort of pay them less or on an unpaid basis.
The most relevant for your businesses may be an official co-op program, like with the University of Waterloo. We would really need to make sure that you have the appropriate documentation to back up that it does fall under that carve-out. But really, it's a narrow exemption. And most of the time, individuals you engage as interns, it's just going to be a job title. It's going to connote an understanding that that individual has a certain role in the organization, a lower role, one that maybe has lower pay. But that that pay needs to at least be commensurate with minimums under minimum wage under the Employment Standards Act.
And really, fixed term employment agreements for interns make a whole lot of sense because you know it's going to be for a defined period. You know, April to August for summer break. But that doesn't obviate the need for us to put in place an employment agreement that's going to protect the company because you're always going to want a early termination clause, the ability to pull the plug in case things aren't working out.
AUDIENCE: So you're suggesting-- because we're letting a lot of people in [INAUDIBLE] program. So you're saying in addition to what we're signing right now, [INAUDIBLE]?
STEVEN DICKIE: Generally speaking, absolutely, for, if no other reason than, to make sure that you have your own IP agreement, protection agreement, layered on top of whatever documents you have there. But, also, we think it really can't hurt for you to also layer on top of an offer letter that may be very similar to your standard offer letter, just with clear a start date, end date, and maybe you're going to take out a few things. Oftentimes, on a practical level, we tell our clients maybe don't need a full non-compete for a summer co-op intern. I mean, you know, it's a bit heavy handed, but you know, that's a business call.
AUDIENCE: Sort of backing up to the previous slide. So what are the risks? And I'll kind of [INAUDIBLE] guilty as charged. So we have a person that performs a role four days a week. He wants to stay that way. We don't [INAUDIBLE] previous companies. But my gut says he's probably heard of the law. He's probably considered an employee. And he's passionate about staying a contractor.
STEVEN DICKIE: Yep.
AUDIENCE: So what are my risks? Is it a function of, hey, if this doesn't end well, and he comes after us that's where this explodes, or is the government and the taxes kind of someone will sniff this out and go, wait a second, you need to make a correction? How does it work with the risks to the company?
STEVEN DICKIE: Two risks, mainly. First, employment law risk that if things blow up, and you know, you have to make your call, and the people that you trust and that you invest with. But if things were to blow up, and you wanted to let somebody go, then you may be on the hook for common-law reasonable notice of termination. Because the courts have been very clear that to draft a properly enforceable employment termination clause, which many of you would have in your standard offer letters, it has to be very technical and very specific.
And in an independent contractor agreement, there really isn't the scope to draft the same type of clause that references the legislation and ensures all the technical compliance requirements that have been outlined by the courts. So you're essentially saying something like, we can terminate on 30 days notice, and you can terminate on 30 days notice, when you're drafting an independent contractor agreement. And really, the courts' thought process would be, OK, this person is really an employee.
So now, I look to the determination clause. It says 30 days notice. That doesn't work from an employment law perspective for a whole host of reasons I won't bore you with. But the courts go through a tortured technical analysis of the clause and say this. So we throw it out. And what do you do when you throw out a termination clause and you have an employee? The common law. And the common law we measure in months of notice, full compensation. Very difficult to give any assurances that a common law notice period, even in the most favorable circumstances for employers, would be anything less than three months.
So you're looking at significant costs. So it's a missed opportunity to control the termination entitlements. And it's also you could get audited by the CRA. And then there'd be failure to withhold and deduct.
AUDIENCE: [INAUDIBLE] CRE just randomly decided to [INAUDIBLE].
STEVEN DICKIE: Yeah. Or if they feel maybe the person you hire has been audited before, because with their last company they tried the same scheme. CRA blew the whistle on it because maybe the other employer does that all the time. So it's sort of random. You can't really control or predict the likelihood. But the consequence would be, OK, wait a minute, were you actually treating this person properly as an employee or not? And if not, then you owe us.
AUDIENCE: Sorry, so if you don't have a valid contract in place, and you're under the common law, you only have three months' notice?
STEVEN DICKIE: Well, there's two problems with the common law. One, you don't know what it is. It's an art, not a science. There's no formula. You have to look to case law. So I have to go look up what were software developers aged 30 to 35 making x amount of money in reported case law in Canada. What were they awarded by a judge? And we talk about in ranges, so it could be reasonable to say three months. It could be reasonable to say six months. So all we can tell you is it's somewhere between three and six months.
And you know, when it comes to even short service employees, the case law is very idiosyncratic. So difficult to give you any assurance that it would be less than something like a two to three months. You know? You're talking about much more than if you had an employment agreement with a properly drafted termination clause that limited the entitlements to statutory minimums, because then you're talking about weeks. Depending. And it goes up. There's a formula under the Employment Standards Act. But it's always going to be materially less than the common law. And also, certain. Whereas the common law, uncertain. So you're in a negotiation.
AUDIENCE: [INAUDIBLE] statutory [INAUDIBLE]? I guess that's [INAUDIBLE].
STEVEN DICKIE: Yeah.
AUDIENCE: In the event that they don't exist, [INAUDIBLE].
STEVEN DICKIE: Yeah, I think you summarized it. So importance of employment agreements. That goes directly to that point. Not mere paperwork, not week one paperwork, or we'll get around to it paperwork.
From our perspective, to ensure you have an enforceable employment agreement that's going to protect your company, key component needs to be signed prior to the start date. Sets out a clear and mutual understanding of the obligations. And really, we just talked about it, the common law, you don't want to be there in the common law.
So really, they're key to managing your costs. And it's like the eraser on the end of the pencil. It just gives you more flexibility to undo bad hiring decisions. You're all going to make them. Like, it happens. No one bats a 1,000 in terms of hiring people. And even people who are great performers, things change in their lives. And the business changes, whatever, you restructure. And you need the ability to control those costs because they can be significant. Arlene?
AUDIENCE: I think you already addressed it. I was going to say, just based on my experience working [INAUDIBLE].
STEVEN DICKIE: Yeah, so the courts have said the agreement is unenforceable if you sign it after the person already has the job for lack of consideration. So it's really important. Avoid the start date signing as well. Ideally, in a perfect world, you would sort of like give somebody the offer a week before they start. Give them time to think about it. Take it to a lawyer if they want. And then they sign the agreement up before their start date. And they show up, and Bob's your uncle.
This can be fixed, though. So it happens all the time. It's probably happened to many of you. We can fix it. You can sign an agreement after the start date. We just need to ensure that it's clear that the employee gets something new that they didn't already have before, an exchange of consideration, am addition to the bargain.
It's sort of crude, but the most effective way to do that is through a signing bonus. And that doesn't have to be like a huge mind-blowing amount either. Hundred bucks, couple hundred bucks.
One thing I say be mindful of substratum doctrine. That's the court's fancy way of saying things change over time. You sign an agreement as an intern. The intern gets promoted. Gets promoted again. Gets promoted again.
Courts have said, you can't really rely on the original agreement. So much has changed over time. And not following the terms of an agreement, changing agreements on the fly, you know, I've seen, not from necessarily anybody in this room, but I've seen many times where people just say, well, we'll stop paying you the salary because our cash flow isn't good. But we'll just promise to bump up your options.
Look, I mean, we can talk about the options available to the company in a situation to manage cash flow issues. But just having a handshake deal with the employee really it doesn't manage your risk. And wages and vacation pay, which might be accruing under an employment agreement that you've just sort of had a handshake deal to set aside, those are directors' personal liabilities. So the individual can go after the directors in their personal capacity. So something to definitely be mindful of.
Problems, it's like I said. Any problems with employment agreements, you're not following them. You never signed one to begin with. They can be fixed, but we need to do that when the relationship is still good. I mean, if things are breaking down, it's going to be a lot more practically difficult to get an employee to sign on the dotted line to help manage the company's risks and to waive any claims they might have up until the date of signature if they know that you're sort of in an adversarial standoff.
Keep it simple. Some of the most complex compensation schemes I've drafted have been for startup companies. Like, I work for very large multinational corporations, but yet, still some of the commissions and bonus arrangements and stuff, because I think there's a tendency to really go down the garden path because you're really knowledgeable and passion about your business. And there's going to be this little marginal incentive opportunity if you sign up people and this and this and this. They're going to cost you more money.
I would encourage you to keep it simple when you're coming up with compensation terms. There's going to be situations where it's unavoidable because you want to ensure that there's the proper incentives. But really, I'd urge you to at least step back and say, is it really necessary, or we make it more simple? And hold the line. Generally, you want to avoid cutting special deals for people because cut a special deal for one person, got to cut a special deal for everyone.
So it's especially on things like termination clauses, it can be very effective to just say, look, these are our standard terms, this market for this space, and we're not going to adjust this. Now, of course, every rule has an exception. If you need to make a key hire that's going to bring your company to the next level, that's a business call. But generally, you know, you don't want to, for routine hires, be negotiating your offers. Try to keep it as standard as possible.
So I'm just mindful of the time. So I'm going to try to fly through this. Employment standards, human rights, occupational health and safety. These are sort of ongoing matters that may come up in your businesses in terms of compliance. But I want to key in on something under employment standards.
Many of you have workers that you treat as overtime exempt-- developers, software engineers, and designers. A lot of these individuals, if they're not also managers and supervisors, fall under a current exemption-- likely fall under a current exemption. There's not a lot of case law analysis. But likely fall under current exemption for IT professionals that's written into the regulations of the Employment Standards Act.
Currently, the government of Ontario is looking to overhaul the Employment Standards Act and is engaging in sort of a comprehensive review process. There was an interim report prepared called "The Changing Workplaces Review". And the commissioners, the authors of that report that are making recommendations to the government, cast major shade on the IT professional exemption, such that there is some risk that that exemption may be removed from the legislation. Meaning that you may need to revisit your compensation arrangements wholesale with some of your employees because you'll have to take into account overtime and hours of work, which means tracking hours and paying 1.5 times an hourly rate for any hours worked over 44. You might also need to get special exemptions to allow individuals to work more than 48 hours in a week.
So all this to say is we're going to keep you apprised, but you should be mindful of the fact that for employees that don't fall into a clear exemption-- so in your businesses maybe social media coordinators, any admin people that you have-- you need to be mindful of ensuring that their hours are manageable and are monitored. And then for your other employees, like developers and engineers, there may be some change on that front. It may be significant. We'll see. But something to be thinking about how you would implement those sort of controls if you needed to. There was a question here? Yeah?
AUDIENCE: Is there a difference between a [INAUDIBLE] and a [INAUDIBLE]?
STEVEN DICKIE: Yeah, there is a separate exemption under the Employment Standards Act for licensed professional engineers, so persons who fall under the auspices of the PEO. People who have their license under that self-governing profession. So that's really not going to apply to a lot of your businesses unless persons happen to be professional engineers. But even then, in order for the exemption to apply, they would need to be employed in the capacity as a professional engineer. And I haven't come across a situation like that yet for an emerging company. It just wouldn't necessarily seem to fit.
AUDIENCE: Scientists and chemists are not exempt at all?
STEVEN DICKIE: Scientists and chemists, there's nothing written into the legislation. Now, if they're managers and supervisors as well, that's an exemption that you could potentially rely on.
AUDIENCE: They have to manage a person?
STEVEN DICKIE: Well, that's a good question. Do they perform a managerial function?
STEVEN DICKIE: So there might be some wiggle room, but it's definitely uphill sledding if they're not managing people. Because the front-line decision makers at the Ministry of Labor, not super sophisticated. I've had mixed success pushing the managerial function. It just doesn't register for them how you could be a manager without managing people. So it's just like a blank look when I'm making the pitch. But there is some hope in the case law for that, but I wouldn't take that to the bank. We would need to talk about that in a higher situation.
So termination of employment, basics for cause without cause. Terminating somebody for cause is an extremely high threshold. Some judges have described it as industrial capital punishment. If somebody sucks, they're not a good employee, it's not cause. So that's probably the most relevant takeaway for you. It's still without cause.
Now, if you wanted to spend months working with the employee, writing them formal warnings, putting them on a performance improvement plan, evaluating after the end of the performance approval plan, giving them a final warning, telling them their job is in serious jeopardy, and then firing them, maybe we could get there on cause for performance. But hardly anybody in this space has time for that. So really, it's about cutting your losses. Making sure you have a proper employment agreement in place and going on without cause basis.
You know, obtaining a release is key. So usually, you're going to need to put together an offer that's above employment standards' minimums, maybe a couple of weeks, maybe four weeks, something like that, additional that you get in exchange for the release. The release is key because you have a list of departed employees in the diligence process whenever you're looking for financing. And the investors council can say boom, boom, boom, I see a release for all these employees. No worries about anybody coming back after us at the company. So the release gives you certainty because it's the legal enforceable promise not to bring proceedings against the company in any forum for any matter related to their employment or engagement.
Firing, do's and don'ts. So you're going to get the slides after this. So this might be a helpful checklist to keep in mind. But really, there's a lot of common sense stuff. But it's important, I think, sometimes if you've never done it before, or you don't have experience in the space, to kind of have guidelines and things to think about. It's about treating people humanely, being upfront with them. Not being deceptive. Telling them what the real reason is. But talk to us if it's a sensitive reason so we can work on the messaging.
And really, sort of it's not a debate. It's not going into the performance. A decision has been made. A decision is being communicated. But really, there are risks for doing it in an insensitive way. Obviously, to the employee, it's not a very fun experience. It can hurt the morale of the rest of your team because people are still going to talk to their former co-workers. Hurts your reputation in the market space. And if you really don't follow sort of best practices could end up meaning that you're exposing the company to an aggravator or punitive damages award for high-handed or cruel conduct during the termination.
And the last thing practically, you should have your letter and separation package offer, if you are making one, ready in that meeting. A lot of the time I get a call, Steve, we let somebody go like last week or this morning. That's not ideal. We want to talk about these issues up front. Discuss any risks. Put together the offer. And have it for the employee right away.
Because you want them to be focused on their offer, what their options are. And negotiating if they're going to negotiate off that offer rather than in the abstract with no paper going potentially to a lawyer or a friend who knows a lawyer. And all of a sudden now you're not working off of the paperwork or the idea or the offer that you wanted to present, but some other adversarial lawyer's idea of where the negotiations should start.
So any questions. I'm mindful of the time. Simon, do we have a few minutes? Yeah? OK.
AUDIENCE: About the morale question--
STEVEN DICKIE: Yeah.
AUDIENCE: --point, what best practices do you have for discussions around messaging teams and [INAUDIBLE]?
STEVEN DICKIE: It's context-dependent. In general, I favor making an announcement or sending a notification. So and so is no longer with the company. You shouldn't be getting into details about if it's performance-related, or there was a disagreement about the direction of the company or something like that. You can agree as part of the separation arrangements to characterize it as a mutual separation or something that's face-saving for the employee.
Also, if it's a position elimination, if it's a legitimate position elimination, but it's also for performance reasons, but you're not going to immediately back-fill that position, sometimes practically I'm going to say, let's just go with position elimination, it's face-saving for them. It's better for you because the employer isn't necessarily the bad guy then as much. It's just it's business, as opposed to personal. You know? There was a problem with this individual's performance.
Sometimes it's unavoidable. You're going to let this developer go. You're going to bring on another developer immediately to do the exact same job, in which case you should just be upfront.
AUDIENCE: [INAUDIBLE] is their a proper way to [INAUDIBLE]?
STEVEN DICKIE: If you have tens of thousands of dollars, absolutely there is.
AUDIENCE: [INAUDIBLE] to what extent can you really [INAUDIBLE]?
STEVEN DICKIE: Well, you know, we have a few steps available to us. We can write a letter to the individual and the competitor. Put them on notice and preserve your options. And then if you think that they've actually done measurable harm to your company where you could maybe get to the point of proving damages, we could look at your options. But basically, you have to go to court.
If you want to actually stop the person from competing, you have to ask a judge for an injunction. An injunction, it's a high bar to meet. It happens. We do do that. And it succeeds on the right facts, but it's a costly process. And so in a lot of ways a lot of non-competes can be more moral suasion or symbolism, but if they're there, if in the right circumstances somebody is truly harming your business, then it's a tool in the toolbox. And we could explore that.
Oftentimes, sometimes you come to a negotiated arrangement with the competitor, where, OK, put that employee on the shelf for these three clients for this amount of time. And that can be a practical way of resolving those disputes. But when it comes to non-competes and non-solicits, self-help remedies are your number one response.
You need to be thinking about how you shore-up your customer relationships through non-legal means. Calling your customers, getting the new person that's going to handle them right in front of their face, getting an in-person meeting right away. So-and-so has left, but we're really excited about where our business relationship is going. That should be the number one in your response. Calling us is number two.
And they can be happening in tandem, but really, the most effective responses are going to be business-driven, not legal-driven.
AUDIENCE: OK, so regardless, if you do that, that doesn't restrict the employee from [INAUDIBLE]?
STEVEN DICKIE: I mean, like we can't call the police on them. It's really it becomes a legal term. Are they breaching their contract to you? And if there's a breach of contract, you have to go prove that breach of contract. And if you want a court to say not only company do you get damages for that breach of contract, but I'm going to legally restrain by issuing a court order against that individual to prevent that person from happening at the company. It happens. I'm saying in the startup space, it's pretty rare. I haven't done one yet. I've written angry nasty letters. But really, you're not necessarily going to have the legal war chest depending on the circumstances necessary to bring like an enforcement action.
But we can set the groundwork. There are strategies and degrees of gray. We can set the groundwork in case somebody really goes over the line, or what they do ends up having a significant commercial cost to your business. Then the fact that we put the company on notice, the competitor on notice, can help your court case if you decide to make that decision. So it deserves a response potentially, but you may not run off to court right away.
AUDIENCE: [INAUDIBLE] signed a release can have like options that don't [INAUDIBLE] until a certain date that like--
STEVEN DICKIE: Yeah.
AUDIENCE: --you hold a little bit back?
STEVEN DICKIE: Absolutely.
AUDIENCE: Or if they go work for [INAUDIBLE], so at least you're--
STEVEN DICKIE: That's a good point. So oftentimes, we'll draft a separation package to say you'll get x amount of payments. But if you breach any of your obligations in this agreement, which we'll incorporate the non-compete by reference or set out a new non-compete, then you at least can either stop paying them, or go after them because it says that they'll forfeit any payments that you've already made to them except as required by the Employment Standards Act. So you can get anything above and beyond. You can potentially sue them in small claims court. It might be sort of a middle ground option. Nguyen?
AUDIENCE: So if you're not 100% sure about [INAUDIBLE] is that a better way to go, or is it better to just hire somebody on a full standard contract [INAUDIBLE]?
STEVEN DICKIE: It's context-specific. In general, I have a bias against fixed term agreements. If they go wrong or something happens, or the employee for some reason says that it's not enforceable, and you bring them on for six months, and you let them go after one month, at law they're entitled to five months. I prefer indefinite agreements. Fixed term agreements are a tool in the toolbox. They're appropriate for internships, that sort of thing.
But if somebody is a trial, you know, you're unsure about somebody. You want to bring them on in a trial, I'd say just do an indefinite term agreement with properly draft determination language. We can insert a probationary period, if you want. But really, it then comes down to just your messaging and management of the individual. You know, we're bringing you on, but we're going to be monitoring your performance over the first six months closely. And we're going to meet at three months. We're going to meet at six months. And if this isn't working out, we're going to make the change. And just figuring out the way to communicate that.
I don't think the fixed term agreement gets you anything more at law than a properly drafted indefinite term agreement does. It then comes down to just how you're managing it.
AUDIENCE: So in the hiring phase, you send over the contract with the offer letter. And the employee comes back [INAUDIBLE]?
STEVEN DICKIE: No, if they've countered offered, then at law, it's a rejection of your offer. And there's no contract.
So what if they get an offer, and then you certainly know they won't accept the actual offer, but based off of their counteroffer, you [INAUDIBLE]. I guess what I'm trying to say is, can you come to court before--
STEVEN DICKIE: Yes.
STEVEN DICKIE: Yes. If they've said no to your original offer or said I'll accept if you increase my salary by $10,000, and you say no, that's it. We're done here. We're going another direction. They can't say, oh, I'll take the other one and now you're bound to that. They've taken their chances by rejecting the first offer. So you're in a relatively clear situation, barring any very weird facts. But in general, you're fine.
I think that's it. I'm sorry I've gone over a little bit. I'll be around if anybody wants to just chat and catch up. So happy to answer any more questions. And you should feel free to call or email me if you have any specific questions. So thanks, everybody.
SIMON WORMWELL: Thank you, Steve. And I'm sure most of you found that session very helpful. And I know based on the notes that people are taking, the questions that you're asking, I think this is a valuable forum for that. And I think what we're going to try to do is continue to have different types of sessions.
So on that note, there's a feedback form on each of your desks. If you can fill that out, I think it's helpful for us to know, going forward, what type of sessions you might be interested in hearing about, specific legal topics. Or also, if the time of day, maybe a breakfast session, or doing something in the afternoon works better with your schedules, let us know because that'll help us with planning future events.
The other thing we wanted to do, and I think we'll try to do at these future sessions is maybe do a spotlight on some of our clients. And so we have Michael Carter here who's the founder and CEO of Kahuso. Kahuso's a platform that helps connect companies with executives, advisors, board members, but I guess executives on a short-term contract basis. And this is kind of all fits into this new thing called the gig economy.
Most of you know about the sharing economy and how Uber and companies like Airbnb have disrupted markets. Kahuso is working in that space, in terms of trying to solve what the gig economy is going to look like. And it fits into some of the topics that Steve talked about with employees and independent contractors in that gray area in between. So I'll turn it over to Michael just to say a few words about Kahuso and kind of spread the word about what he's working on.