Avoiding the Employment Contract Part 2

Written on behalf of Peter McSherry

As reviewed in most recent post, an employment contract is typically intended to “contract-out” of the employee’s wrongful dismissal rights. There are other issues to be concerned with, apart from the need for the contract to be compliant with the Employment Standards Act.

Value Given

Consideration is the legal term given to an important requirement needed to create a binding contract. In order to create a valid agreement there must be something of value exchanged by each party. If your uncle, for example, said he would give you his car this summer, there is no legal basis for a claim if there was  a default (i.e. if he didn’t give you the car after all, for instance). If, however, you each agreed that a specified sum of money would be paid, then there is an enforceable contract.

In the employment context, this issue usually emerges in a context where the employer unilaterally imposes a new contract term. For example, if a person was hired to start on September 1 without any reference to a written  employment contract, but was then asked to sign an employment contract two months later, with no new value or consideration given in exchange, then the contractual terms will likely be unenforceable.

The employer, in this setting, would be required to show that it promised some additional compensation in exchange for the new written contract. If it, for example, the employee was offered a new more attractive bonus plan, additional vacation time, a raise , or some other benefit, then the new contractual terms would likely be enforceable.

Promotion to Higher Position

Even if a valid contract exists, it may be unenforceable when the employee has been promoted to a more substantial position. The theory is that the prior contractual terms related only to the more junior position, did not contemplate the promoted position, and were not intended to follow the employee to the promoted position. This is referred to as the “substratum” argument.

However, if the contract, for example, clearly stated that its terms applied to the position of Sales Representative and also the more senior position of Sales Manager, then this argument would fail.

Barring this event, the employer would be required to either renegotiate the agreement for the more senior job, or even mutually confirm that the old agreement would apply to the more senior position prior to its acceptance.

Let Advice Guide Your Actions

Employment contracts are usually written by the employer and are generally intended to reduce or minimize employee claims. If you are about to start a new job, or have been presented with a new contract, always obtain advice from a knowledgeable employment lawyer before signing anything.  It may well be that you are advised to sign the agreement, in the expectation that it will not be later enforceable.

If you are provided with an agreement on termination, it does not necessarily follow that the written agreement will be effective in eliminating your rights.

If you have questions about your employment contract, contact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation