Many employees foolishly decide to save the hour or so in legal
fees to have their contracts reviewed, only to then forfeit vastly
greater amounts. Employers are no better. Close to half the
contracts I encounter are replete with glaring legal errors.
Cobbling together disparate precedents without regard to either
symmetry or changes in the law is a recipe, in any legal area, for
So how can employees have contracts set aside?
Contracts provided after employment is agreed to Once the
parties agree to the terms of employment, it is too late to ask an
employee to sign a contract with any new or different terms.
Too often, employees arrive on their first day of work only to
be required to sign an employment contract with terms they have
never seen before, usually non-compete or termination
You can sign them with abandon because they are entirely
unenforceable, as was determined by the Ontario Court of Appeal as
long ago as 2004 in the case of Allan Hobbs vs. TDI Canada, where I
acted for Hobbs.
Employers are not without recourse. They can add a new term, at
any time during employment. But to do so, they must provide the
employee something new (called "consideration") in return
Changes to the "essential substrata of employment" If
an employee with an employment contract governing severance is
hired as, say, marketing manager with a salary of $45,000 and no
bonus and is terminated 10 years later after being promoted to
vice-president of engineering, with a salary of $300,000 plus a
$150,000 bonus, it is almost certain the original severance
provision will not be enforced.
The court will conclude that the parties never intended that
initial contract to govern the final position and remuneration.
Employers should set a term that the severance is intended to
govern, regardless of any subsequent changes to position,
remuneration or any other term of employment.
Alternatively, and even more prophylactically, albeit more
difficult to accomplish, the employer can have a new contract
signed whenever the employee undertakes a new position or change in
The employee never signed the contract It is surprising how
often an employer fails to produce a copy of the employment
contract agreed to by the employee. Unless the employee finds and
produces it or acknowledges they saw and agreed to it, the contract
is unenforceable. The exception to this is if the employer, in
offering the job, sends a copy of the contract and advises the
employee, in writing, that commencing the position will constitute
the acceptance of the terms of the contract. In that case, the
employee's signature is unnecessary.
A contract that is below the provisions of the Employment
Standards Act The Supreme Court of Canada in the decision of
Marek Machtinger and Gilles Lefebvre vs. HOJ Industries, where I
also acted for the successful employees determined such a contract
to be unenforceable.
The law has evolved to the point, even if the termination clause
in the employment contract meets the minimum provisions of the
ESA at the time of termination, the clause can be struck down
if it prospectively or retroactively fails(ed) to, at any time
during the employee's potential employment.
In other words, if an employee is fired six months after
starting and the contractual amount matches the ESA then but, if
she had worked for 20 years, the ESA amount would have exceeded
that provided for in the contract, the employer will be unable to
rely on the contract.
Similarly, if the termination clause provides for payment for
the employment standards minimum period but makes no allowance for
the benefits also required for that period by the ESA, the contract
will be ruled unenforceable.
Popularly considered defences that are generally illusory
Contrary to popular view, except in rare exceptions in the caselaw,
the following situations seldom permit a court to set aside a
contract: No independent legal advice; requiring an employee to
sign without permitting any counter-offer; pressure during the
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).