Employment contracts are the foundation of workplace relationships, but employers and employees alike can be careless when they enter these agreements. Employees sometimes insist on written contracts without realizing that these documents limit their rights. And employers make mistakes such as downloading one of the many template contracts that circulate on the Internet.
Interpreting employment contracts is a complex area of law. That’s why it’s dangerous to jot the company name, salary and termination notice requirements into blank spaces in a template contract and ask a new hire to sign on the dotted line.
Hiring a lawyer to give employment contracts a once-over before they are signed can avoid expensive lawsuits down the road. Judges have ruled employment contracts void if there are glaring errors, said McCarthy Tétrault associate Christopher McHardy. He pointed to the late 1990s lawsuit between Douglas Shore and the law firm Ladner Downs. Ladner Downs asked Shore to sign an employment contract that stipulated that the company was able to fire him without cause provided it gave him 30 days’
notice.
The B.C. Court of Appeal upheld B.C. Supreme Court Justice Ross Collver’s judgment that 30 days’ termination notice was less than what was required under the Employment Standards Act.
That act decrees that those who work for an employer between three months and one year are entitled to one week notice or pay in lieu of notice. Required notice jumps to two weeks for employees who work for an employer for up to three years. Employees who work for an employer for longer than three years are entitled to an additional week of notice or pay in lieu of notice for each additional year until the employee reaches eight weeks’ notice.
“You must be clear in the wording of the termination provisions and be sure that it exceeds employment standards,” McHardy said.
He suggests employers review employment contracts every five years to ensure that the agreements comply with legislation and that they accurately reflect the work that employees are performing.
Employers who grant employees new perks may find those perks become read in as part of employees’ contracts. Attempting to stop those benefits without employee agreement could then be interpreted as a breach of the contract.
That’s part of the reason why McHardy believes deciding to forego employment contracts altogether and allow custom to dictate workplace entitlements is foolhardy.
“I’m not aware of a situation where you could have an employee who is not subject to a written contract and that this is advantageous for the business,” McHardy said. “If I were an employer, I’d have every employee subject to a written contract.”
McHardy’s faith in contracts stems partly from his belief that contracts can effectively shrink severance provisions that common law precedents would otherwise grant employees.
A stipulation that an employer can fire an employee without cause as long as the employer gives the employee two months’ notice (or pay in lieu of notice) is likely to be upheld in court, he said. An employee who worked without a contract and was fired without cause would likely be entitled to more notice (or pay in lieu of notice), McHardy added.
Another key point for employers to remember is that judges tend to view the employee as being at a disadvantaged position when it comes to negotiating salary, benefits and obligations, McHardy said. That means judges will likely
rule in favour of the employee if there is any ambiguity.
Justice Brian Joyce provided a further lesson for employers in a recent 2005 B.C. Supreme Court judgment. When a CEO or general manager designates authority to a middle manager to renegotiate an underling’s contract, that middle manager’s word carries the weight of the company.
An employee renegotiated the terms of his contract with his manager. He successfully had his manager agree to delete the termination provisions from his contract. The general manager argued during the lawsuit that even though he had signed the renegotiated contract, he did not OK any changes. “It is no answer, in my view, for the General Manager to say that he was careless in not reading the document and that if he had read it he would have objected,” Joyce wrote in his September judgment.
Reprinted with permission. "Nothing Routine About Employment Contracts" by Glen Korstrom. Business in Vancouver. December 6-12, 2005.
