Employment Contracts & Leaving an Employer

Written on behalf of Peter McSherry

In our prior post, we reviewed the issues that may arise when leaving your present employer to accept new employment.

That post dealt primarily with a review of the concepts of inducement and misrepresentation. As mentioned in that article, the impact of an employment contract often arises when leaving a job, as it may affect the decision to leave at all, or the requirements around leaving. In this week’s post, we take a closer look at the employment contract in this context.

Is It New or Not?

There is a fundamental concept in contract law that there must be ‘consideration’ in addition to the offer and acceptance of the offer. Consideration is something of value exchanged between both parties to form a binding contract. If, for example, the new employer waits until the employee has resigned from a secure post and is now vulnerable before implementing new (unfavourable) terms of employment, they have given nothing of value in exchange for the employee’s acceptance of the new terms. If this contract was later challenged in court, it would likely not withstand the scrutiny and would be set aside. Even if the employee signed it, it would very likely not be worth the paper on which it was written. In such a case, the employee would have had little choice but to sign it or face economic uncertainty.

If, however, this agreement, although presented and signed after the new employment had started, simply confirmed terms which had been previously set and agreed, then it would likely stand. So long as both parties were in agreement before the employee formally resigned from their previous post, confirming the agreed-upon terms in writing is fine.

What About Inducement?

Presuming that the contract is not shaken by a lack of consideration, it may serve to “contract-out” of any additional notice an employee would be entitled to as a result of inducement. As reviewed in last week’s post, an employer who uses inducement to lure an employee away from a secure position with a previous employer may face additional obligations if the employer later terminates the employee. If the contract sets out an agreed-upon notice period in the event of termination, this could allow the employer to escape any inducement-related payments. This is again subject to a host of other factors as to whether this is legally binding, but let’s presume it is. If the severance term stands, then this will negate the influence of the inducement factor completely.

And Now Misrepresentation?

If the contract directly deals with the issue which was allegedly misrepresented by the employer, then there will likely be no claim. For example, let’s presume that the alleged misrepresentation was that the employee was promised they would be promoted to the position of Senior Project Manager after successfully completing year one as a Project Manager. Should the contract say the exact opposite, that there was no promise of such as a specific promotion or indeed any promotions generally, then this claim will also likely fail.

Indemnity

As discussed in the prior post, the new employer should work with its new hire to agree to the notice period to be given to the new hire’s former employer. Ideally, it should also provide an indemnity to compensate the newly hired employee should their prior company sue them for providing insufficient notice. This may be extended to compensate for potential monetary gains which will be lost as a result of resigning, such as pensions, vested shares, bonuses or any other apparent losses.

Time to Think This Over

This issue of changing employers presents many complex legal issues. This is the time to take preventive action and get solid legal advice, particularly before you take what could be irreparable action like resigning from a secure and well-paying position.

Get advice and be aware of your rights before you act. 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. If you are considering changing employers and have questions about your rights and obligations, or if you have any other employment questions or concerns, contact us online or by phone at 519-821-5465 to schedule a consultation.