Employers often invest a lot of resources and time recruiting
employees. After the applications are reviewed and screened, the
interviews conducted, and the successful candidate chosen,
employers often either forget to finish the hiring process by
having the employee complete an employment agreement, or delay
getting the employment agreement completed.
That failure or delay can have disastrous consequences. In the
recent Ontario court decision of Holland v. Hostopia.com
Inc., an employer found out exactly how disastrous.
Mr. Holland was recruited to fill a sales position with the
employer. At the time of hire, Mr. Holland was given an offer of
employment, which set out the basic terms of employment. That offer
indicated that a formal contract of employment would be prepared
and provided to Mr. Holland. Mr. Holland signed the employment
offer and commenced employment.
Nine months later, Mr. Holland was given a contract of
employment, which he signed without protest. In the contract of
employment, but not in the letter of offer, was a term that allowed
the employer to terminate Mr. Holland, without cause, by providing
him with the appropriate amount of notice required under the
employment standards legislation. The contract also provided an
acknowledgement that Mr. Holland read and understood the terms of
the contract, and that he had been given an opportunity to seek
independent legal advice.
Seven years later, Mr. Holland's employment was terminated
without cause. On termination, the employer attempted to rely upon
the terms of the employment contract. The employer paid Mr. Holland
an amount which was slightly more than what Mr. Holland would be
entitled to under the employment standards legislation.
But, not so fast. Mr. Holland argued that at the time of hire,
he had not agreed to any limit on the amount he would receive on
termination. The Ontario Court of Appeal agreed. Giving Mr. Holland
a contract of employment nine months after he started employment,
without also giving him something in exchange for his signing the
agreement (consideration), meant that the employer could not rely
on the additional terms included in the contract of employment.
In making this decision, the Ontario Court of Appeal relied upon
a number of earlier decisions to the same effect, that any attempt
by an employer to get an employee to agree to new terms of
employment after hire, without giving the employee something in
exchange – such as a pay increase or lump sum payment–
are of no effect. As a result, the court determined that Mr.
Holland was not bound to accept only the employment standards
minimums, but instead he was entitled to payment in lieu of
reasonable notice (a much greater amount) on termination. The
reasonable notice period is determined on a case-by-case basis with
reference to the character of employment, availability of similar
work, length of service, age, and qualifications of each
Offers of employment may not be
Many employers continue to use simple offers of employment. Offers
of employment most often do not contain one of the most important
provisions in the employment relationship – the termination
provision. If you are going to use only an offer of employment when
hiring employees, be sure that all the terms of employment are set
out in the offer. However, you will find that approach will result
in the offer of employment looking very much like an employment
If you are going to follow up an offer of employment
with an employment agreement, do it before the employee starts
Other employers, who want to get the new employee signed up, will
do what the employer here did – provide an offer of
employment, with the promise of an employment agreement to come
later. If this is your approach, then you must be sure that the
employment agreement is signed by the employee before the employee
begins employment. Remember that the employment agreement must not
be inconsistent with the terms of the offer of employment.
Employment agreements and offers of employment must
include provisions for termination
One of the reasons pre-nuptial agreements are popular is that both
parties recognize that the best time to talk about divorce is when
everything is shiny, new and rosy, and when neither party thinks
that divorce is possible. The same is true in the employment
The best time to confirm what the termination period will be is
when the employment relationship is just beginning. Then, just as
in a marriage, there is no anticipation that the employment
relationship will ever come to an end. It is always more difficult
to discuss and agree to termination provisions when the
relationship is starting to sour.
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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