Ontario, Canada Hospitality Employment Law Update – Why Employment Agreements and Workplace Policies Matter

Our previous article explored several employment law issues affecting Ontario hospitality employers, including gratuities, scheduling obligations, hiring requirements, compliance considerations, and recent legislative developments.

Understanding those obligations is an important first step. The next is ensuring that the business has the systems necessary to manage its workforce. 

Many restaurant operators invest heavily in food safety programs, inventory management, reservation systems, training, and customer service standards. Comparatively little attention may be paid to the employment systems that govern the workforce itself.

That approach is understandable. Many successful hospitality businesses began as small owner-operated establishments where employment matters could be addressed informally and directly by ownership. Hiring occurs through conversations and referrals. Expectations are communicated verbally. Discipline is casual. Employment documentation is limited or non-existent.

As businesses grow, however, those informal systems often become increasingly difficult to manage. At that point, employment agreements and workplace policies become far more than legal documents. They become operational tools that help establish expectations, guide management decisions, and reduce unnecessary risk.

Employment Agreements: The Most Important Document Many Employers Don’t Have

One of the most common issues facing growing hospitality businesses is the absence of a properly drafted employment agreement.

Many operators assume that offering employment is enough and that a written contract is simply a formality. In reality, a well-drafted and properly implemented employment agreement can be one of the most important risk-management tools available to an employer.

Most notably, employment agreements provide clarity over:

• Compensation;
• Hours of work;
• Duties and reporting relationships;
• Confidentiality obligations; and
• Termination entitlements.

For many employers, the termination provisions are particularly important. This is particularly true given recent developments in employment law relating to termination clauses, which have provided employers with greater certainty about the enforceability of properly drafted termination provisions.

The Cost of Having No Contract

Restaurant owners are often surprised to learn that one of the largest employment-related liabilities they may ever face arises at the end of an employment relationship. In an environment where employment disputes are increasingly common and employees have greater access than ever before to information regarding their legal rights, termination decisions frequently attract heightened scrutiny.

Absent an enforceable employment agreement, terminated employees may be entitled to common law notice, which can significantly exceed minimum entitlements under provincial employment standards legislation. For example, a restaurant manager with several years of service may have dramatically different termination entitlements depending on whether an enforceable employment agreement exists. In some circumstances, common law notice entitlements can exceed statutory minimums many times over, resulting in termination costs that are many thousands of dollars higher than employers anticipate.

New Hires Versus Existing Employees

Implementing agreements for new hires is generally straightforward. The agreement should be provided before employment begins, with the employee receiving a reasonable opportunity to review it and return a signed copy before any work is performed.

Existing employees present a different challenge. Generally, introducing a new employment agreement requires fresh consideration. Continued employment alone is often insufficient. Acceptable consideration will vary depending on the circumstances but generally must include something of value, such as a payment, promotion, or salary increase, that is provided to the employee in exchange for their execution of the agreement.

One mistake an employer may make is implementing a raise or promotion first and obtaining the agreement later. In many cases, that sequencing may undermine the enforceability of the agreement.

Policies Are Not Just About Compliance—They’re About Decision-Making

Many hospitality employers may view workplace policies as administrative paperwork. That perspective overlooks one of their most important functions: policies provide the foundation upon which management decisions are made.

When performance concerns arise, attendance becomes problematic, complaints are received, or discipline becomes necessary, policies often provide the framework that allows an employer to address those issues consistently and fairly. In that sense, policies are not merely compliance tools. They are management tools. Properly drafted policies help support disciplinary decisions, workplace investigations, and terminations by demonstrating that expectations were clearly communicated in advance.

Hospitality Policies Require a Hospitality Approach

Many standard workplace policies are written with traditional office environments in mind and do not always reflect the realities of hospitality operations. Restaurants are different from many traditional workplaces and frequently require tailored policies such as:

• Drug and Alcohol Policies: Unlike many workplaces, restaurants may have legitimate business reasons to permit limited alcohol consumption in carefully controlled circumstances, including tastings, menu development, wine education, and supplier events. Policies allow for an employer to address those realities directly.
• Tips and Gratuities: Employees should clearly understand how gratuities are collected, distributed, and pooled. A written policy may help avoid confusion and reduce disputes among staff. In Ontario, an employer is required to have such tip policy if the employer, or a director or shareholder of the employer, shares in the tip pool.
• Attendance and Scheduling Policies: High-turnover, shift-based workplaces often encounter attendance challenges, late arrivals, and last-minute scheduling issues. Clear expectations help promote consistency and accountability.
• Appearance and Grooming Policies: Hospitality remains a guest-facing industry. Professional standards relating to appearance, hygiene, and presentation can be appropriately documented and communicated through a properly drafted policy.
• Harassment and Respectful Workplace Policies: The hospitality industry often faces heightened scrutiny regarding workplace harassment and inappropriate conduct. Clear reporting procedures, investigation processes, and behavioral expectations remain important.
• Service Animal and Guest Accommodation Policies: Restaurants regularly encounter accessibility-related issues that many other employers never face. Well-drafted policies and training help staff respond appropriately and consistently.

Employment Systems Are Business Infrastructure

Restaurants routinely invest in systems designed to reduce risk and improve consistency and performance. They implement food-safety programs, track inventory carefully, and create financial controls. Employment agreements and policies serve a similar function. They provide consistency, establish expectations, improve decision-making, and reduce legal exposure. Restaurant operators are well-advised not to view these documents as legal paperwork, but instead as operational infrastructure that is necessary to run a successful business.

Key Takeaways

As a restaurant grows, employment issues inevitably become more complex.

Thoughtfully drafted employment agreements and workplace policies cannot eliminate risk entirely. They can, however, significantly improve an employer’s ability to manage employees consistently, make informed decisions, and respond effectively when workplace issues or—in worst case, lawsuits—arise.

Whether your hospitality business is implementing these tools for the first time or reviewing documentation that has evolved over many years, now may be the time to consider whether employment agreements, workplace policies, and related employment systems need to be developed or updated as your organization continues to grow.