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There is much good that can come from a written employment
agreement. But there is also a considerable amount of trouble
lurking if it is not well drafted.
Both sides of this coin were evident in the case of Ernst v. Destiny Software. In a previous post
we noted how the written agreement helped the employer win its
argument that there was cause for dismissal. The decision also
reviewed how written employment agreements are properly interpreted
and made a couple of findings against the employer based on what
was not in the agreement.
The most important point is that the words of the agreement as
written will govern. It is only if the words, considered
objectively, can be interpreted in more than one way that a court
will look at other evidence. The context of the surrounding
circumstances is important, but that is not a broad inquiry and
"the words of the contract must not be overwhelmed by a
contextual analysis." In Ernst, the known facts of
where the employee lived and where the employer was headquartered
were part of the "factual matrix" to be considered, but
the correspondence leading up to the completion of the agreement
was not.
As the court said, it "must determine the intention of the
parties from the words of the contract and not interpret the words
of the contract based on the intentions of the parties." When
the words are clear, evidence of the negotiations is unhelpful and
"it is only the final document which records a
consensus."
It was on a plain reading of the employment agreement that the
court determined Ernst had been entitled to work from home in
Alberta, but not to unilaterally move and work from his new home in
Mexico.
On the other hand, the employer was not able to recover for
vacation taken by Ernst beyond the amount of vacation accorded by
the contract. The court noted that there was no provision in the
employment agreement to make Ernst liable to the employer for such
amount. Similarly, the employer's claim to be reimbursed for
office equipment paid for by the employer but retained by Ernst
after termination was denied. Again, the employment agreement was
silent on the matter.
In summary there are two simple lessons for employers:
make sure the agreement plainly says what you mean to say,
and
make sure the agreement covers everything that is important to
you.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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