Promotions and Revisiting the Employment Contract

Written on behalf of Peter McSherry

Employment agreements must be revisited and re-negotiated when an employee has been promoted to a more senior position. This issue is often overlooked by employers.

Failure to Revisit Can be Costly

This is exactly what happened in a recent decision out of Saskatchewan. The plaintiff had been hired as a staff architect and had signed a valid, enforceable contract which limited his claim upon termination to three months’ pay.

However, after working for the employer for eleven years and being promoted a number of times, he was terminated. At the time of dismissal, he held the more senior position of Business Centre Sector Leader. The employee sought summary judgment for damages stemming from the dismissal.

The court stated that there was an obligation upon the company to revisit the contract on each promotion. The judge stated these words:

In my view, it necessarily follows that where an employer wishes to rely on a comparatively short notice limit in the original employment contract, it must take reasonably consistent and meaningful efforts to protect the limit’s enforceability. This means that where an employee advances to higher levels of compensation and responsibility, it is incumbent on the employer to reassert its reliance on the contractual notice limit and to ensure that the employee both understands and accepts the employer’s position.

The contract was ruled unenforceable and the common law claim was allowed at 12 months’ pay. This was an expensive lesson for the company.

What Could Have, Should Have, Been Done

The employer could have avoided this problem by including a clause in the contract which stated that the low severance sum would apply to all future promotions. It also could have insisted that the original severance sum be re-affirmed for each and every promotion.

These are fairly simple steps to take, but remarkably many employers fail to take the effort to do so.

Lessons to be Learned

The law is full of situations like this where the written contract does not define the real-world claim. It is often very difficult for the layperson to know their rights. This is understandable. Legal advice can often open avenues of relief well beyond the expectations of the average person.

Get Advice and Know Your Rights

It is important to take advice and know your rights.  Get advice. Learn your rights. Then decide. 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.