A recent Ontario case provides a good reminder of the importance
of a clear and thorough employment contract. In the case, an employee with eight months'
service claimed he had a five-year fixed term contract and sued for
more than four years of lost wages.
The parties had negotiated the employee's move from
Vancouver to the Toronto to work in the employer's jewelry
store. The parties discussed the employment terms, which the
employee alleged included the five year guarantee. The employer
then put the offer in writing, but made no reference to a fixed
period. The employee said he followed up over the phone, asking
about the five year term and was told that he would be
After moving to Toronto, the employee asked the employer to sign
a letter and a new contract which stated that he had been
guaranteed five years' employment. The employer understood that
these documents were intended to help the employee secure a
mortgage, and signed both.
A little later, the employer learned that the employee was
pursuing employment with another store. The employer was upset and
dismissed the employee. The employee then sued to enforce what he
argue was a five year contract.
After seven days of trial, the Court sided with the employer. In
a bit of a twist on the typical case, the Court held that the
employee had attempted to take advantage of the employer.
The Court ruled that the documents the employer signed to help
with the mortgage were not enforceable employment contracts.
However, since the employment agreement did not specify
entitlements on termination, the employer was ordered to pay the
employee two months of pay in lieu of notice. Costs have not been
Best practices for employment contracts
While this case is a bit unique, it demonstrates some best
practices to keep in mind:
Ensure that the contract is signed before the employee starts
Ensure the employee has had the opportunity to consult a lawyer
and ask questions
If there have been negotiations with the employee, include a
term in the contract stating that it replaces and supersedes all
previous discussions and agreements between the parties. The
contract should also provide that it can only be modified by the
parties in writing
If the employee takes on a new role, consider having the
employee sign a new employment agreement for that position.
Alternatively, the original agreement should provide that it
(including the termination provision) applies regardless of changes
to the employee's role over time
Include a clear termination provision that sets out the
employee's entitlements if terminated "without cause"
in the future. This must meet or exceed minimum statutory standards
for notice, pay in lieu, benefits, and severance (if
By following these practices, employers can reduce the risk of a
claim and their exposure to costly litigation.
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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.
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