Ontario: 10 Mistakes Startups Should Avoid When Employing Their First Workers


By Lisa Stam © Spring Law May 17, 2019

Ontario startups hiring their first employees often make mistakes. Avoiding common missteps will help new businesses start off on the right foot. Here is a list of the top 10 mistakes commonly made by startups when employing their first workers.

1. Misclassifying Workers—Independent Contractor, Employee or Freelancer?

Businesses often have a blend of workers. Make sure to know which classification workers fall under. Employees can be hired for either a fixed or indefinite term while independent contractors are hired for services on a specific project and generally service their multiple clients/businesses.

It is helpful to decide ahead of time what the right hiring path is for a startup's business and what type of worker best suits its business needs and to make sure the hiring contract reflects that classification of worker. Is the project short-term or is this a permanent role the startup is trying to fill? What is the type of service and industry the startup is in? These answers will help with the decision-making process.

2. Missing CRA and Statutory Requirements

The following is a helpful checklist to ensure a startup completes the Canada Revenue Agency (CRA) and statutory requirements for a business with employees:

  • Open an account with CRA for payroll source deductions.
  • Have employee(s) complete a TD-1 and a TD1ON Form.
  • Meet year-end T4A and CRA requirements.
  • Determine if the business is required to open a Workplace Safety and Insurance Board account.
  • Display a health and safety at work poster, as required by Ontario's Occupational Health and Safety Act (OHSA), have a copy of the OHSA available, as well as the names and locations of the employer's workplace joint health and safety committee members.
  • Provide health and safety awareness training for every worker and supervisor, as required by OHSA.

3. Making Mistakes with the Employment Contract

When hiring new employees, remember that the employment contract is very important. A startup should make sure that it includes at least the minimum standards for notice, benefits and vacation. It should focus on the termination clause, and specify employment and post-employment rights and obligations. The startup should ensure that its new employees agree to the terms of employment and sign before their first day or all of its hard work in creating a great employment agreement means nothing.

4. Messing Up Recruitment

When hiring, remember that all stages of the employment relationship are covered by "employment" in the human rights legislation, including the recruitment stage. The hiring process cannot be discriminatory (i.e., differential treatment based on disability, race or gender, etc.). Always include an equal employment opportunity statement in the job post and offer accessibility to those who need it.

5. Imprecise Remote Work Rules

For those employees that work remotely, ensure that you have a good policy in place that includes eligibility to work remotely, requirements around responsiveness and communications, digital security, productivity, unauthorized overtime and confidentiality. Protect the business' digital assets during employment to make sure they are safeguarded upon termination.

6. Being Cynical About Disability Issues

Disability issues are the busiest area of employment law for lawyers. Always give employees the benefit of the doubt, even if something about their doctors' notes and communications to you smells bad. Workplace stress and its medical symptoms are real and can be expensive for an employer if the business get it wrong. Employers are not without rights and recourse, but it's tricky and a do-it-yourself approach is inadvisable.

7. Failing to Manage Performance Before Blow-Ups

Communication is key with employees. Always provide constructive criticism along the way and make sure to document it. This helps keep emotions in check along the way and ensures that both the employer and the employee are on the same page. It is very hard to fire for cause and you can't do so without written records of sharing performance concerns. Mere incompetence is not enough.

8. Giving Away a Startup's Ideas

Business owners are generally very passionate about what they do. Don't let all of a startup's hard work leave with its terminated employee. Have employees sign confidentiality, noncompete and nonsolicitation agreements that will limit their ability to solicit the startup's clients and/or compete for those same clients in the same area.

9. Not Protecting Its Ideas

A startup should identify what its intellectual property is and pay a lawyer to protect it.

10. Mishandling the Termination of Friends and Family

Hiring friends and family can be great for a business. They generally have an employer's best interests in mind and the employer already knows that it likes them. When the relationship ends, however, things can go badly. Make sure you protect the business upfront when the relationship is still good. Always have an employment contract in place. Prepare a termination letter and release ahead of time and do not conduct the termination meeting alone. It is also good to always provide the discharged employee with time to consider the termination package received.


The above list of mistakes to avoid should help lessen startups' stress with the hiring of their first employees as their businesses grow.

Startups should document their employment actions, set expectations upfront and hope for the best but plan for the worst. Employment contracts and policies are key to avoiding mishaps down the road.

Lisa Stam is an attorney with Spring Law in Toronto. © 2019 Spring Law. All rights reserved. Reposted with permission of Lexology.


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