The days of a one-parcel, 100-acre family farm are long past. As farm operations become larger and more sophisticated, so does the need for properly managing farm operations. And that starts with the workforce.
Proper training, supervision, and safety policies and procedures are paramount when it comes to managing a workforce. Additionally, the importance of proper employment agreements cannot be understated.
There are three main reasons to have employment agreements for all farm workers:
- Reduces termination costs
- Compliance with employment standards
- Protects confidential information and intellectual property
Reducing termination costs
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One of the most important reasons for entering into employment agreements with any employee is the potential for reducing termination costs.
In many Canadian jurisdictions there are actually two levels of potential termination costs: statutory minimum entitlements and common law entitlements.
Depending on several factors (e.g., the type of employee, length of employment, the reason for termination, province) the statutory minimum entitlement for a terminated employee can be equal to a couple of months (or more) of salary plus benefits.
While that is undoubtedly a significant potential liability for an employer, it is minuscule compared to the potential risk posed by common law entitlements. In the right circumstances common law entitlement of a terminated employee can be upwards to two years of salary plus benefits!
The best way to protect yourself from the risk of being required to pay common law notice is to enter into valid, enforceable employment agreements with each and every employee. Each agreement should include termination provisions that contract down from common law entitlements to the statutory minimums.
Properly drafted employment agreements could save your farm hundreds of thousands of dollars in termination costs.
Compliance with employment standards
Most, if not all, farm workers in Canada (including foreign workers) are protected by some form of employment standards legislation. However, the rules do not apply equally between different categories of farm employees (even within the same province).
Generally, there are four types of agricultural workers in Canada: general farm employees, harvesters, “near farmers” and landscape gardeners.
If an employee’s usual work falls into more than one category, the way that they spend the majority of their work time will determine which category, and therefore which rules and standards apply.
This means that different workers on the same farm could fall into different categories and be subject to different employment standards, rules and entitlements.
Even though employment agreements are not required to comply with employment standards, proper employment agreements can be useful for specifying the tasks of each employee, which can help with correctly categorizing your employees and applying the proper employment standards and rules.
Protecting confidential information and intellectual property
The protection of trade secrets, inventions and confidential plans and procedures can be vital to the continued success of any business.
Not all provinces in Canada allow employers to enter into non-competition contracts with all their employees, but employment agreements are useful for protecting confidential information and intellectual property.
Generally speaking, common law provides very little protection from a former employee (even a temporary one) who uses any information and/or procedures learned on the farm of a former employer to compete against that employer.
However, even in jurisdictions that prevent employers from entering into non-competition agreements with their employees, employers can still use properly drafted confidentiality and intellectual property agreements (either as stand-alone documents or as part of an employment agreement) to protect its most valuable information from being exploited against them.
A word of warning
Entering into employment agreements with each of your farm employees should be at the top of every farm’s “to-do” list, but caution should be exercised.
In recent years, Canadian courts have typically taken a very broad and protective stance when interpreting employment standards legislation. Courts are very strict in requiring employment agreements to comply with the technical wording of the relevant employment standards legislation and will (often without hesitation) find an employment agreement to be either completely or partially unenforceable.
In particular, extreme caution is needed with respect to termination clauses as any misstep in one termination provision within an employment agreement can lead to disaster. Failing to comply with the minimum standards for termination entitlements in any one provision of an employment agreement could invalidate every termination provision in that employment agreement, potentially costing your farm tens of thousands of dollars (or more).
An experienced employment lawyer should always be consulted when preparing and entering into employment agreements.
– Todd Devitt is a lawyer with McKenzie Lake Lawyers located in London, Ont., with offices also in Guelph. Devitt is an experienced business law lawyer with a focus on agri-business and succession planning. For more details, please view his biography at mckenzielake.com
