3 Common Problems with EMPLOYMENT CONTRACTS

3 COMMON MISTAKES WITH EMPLOYMENT CONTRACTS

In the course of our work at Osuji & Smith Lawyers, we often come across different types of employment contracts being used by numerous employers. These vary greatly in content, correctness, stance, and quality and there is a wide range of legal wrongs with these employment contracts. Oftentimes, the employer knows that their contract does not sufficiently protect the employee during and after the course of the employment relationship; other times, there are potential issues in the contract that the employer had not even thought about.

With that in mind, here are the top 3 common problems we encounter with employment contracts that we read. Are any of these issues present in the employment contract with your employer or do any of these apply to your business?

1. No Written Employment Agreement

Most employees are vaguely aware that the terms of their employment should be put down in writing. It is surprising how many employees, especially those in family-owned businesses, or small businesses, have nothing written down about the terms and conditions of their employment. For the avoidance of doubt, employees must receive, at least, a detailed description of their job role and details of their remuneration by the time they have worked for at least two months. However, even if you do not sign a written agreement with your employer, courts will impose contractual obligations on both parties, including the minimum entitlements under the applicable employment legislations. In any event, it is recommended that the terms of an employee’s contract be reduced into writing.

2. Out of Date and Irrelevant Clauses

Employment Law is always evolving and changing regularly, so it’s crucial that employers ensure their contracts are checked on a regular basis to ensure they comply with prevailing requirements and provisions. Depending on how long the contract is, and the clauses included in it, they may well be out of date and not in line with Employment Standards Code, Alberta and Alberta Human Rights Act.

Also, if business owners have used an employment contract template sourced from another business or the internet, it may have missing clauses which are important to their business or may contain clauses that are completely irrelevant to the business. Before signing an employment contract, potential employees should ensure that the clauses contained in the contract are relevant to them and isn’t outdated.

3. Lack of Clarity

When employment contracts are too long and wordy, they lose their meaning and clarity which reduce the likelihood of the meaning being concise and clear. We’ve come across situations where employment contracts have vague, ambiguous, confusing, misleading, and completely incomprehensible clauses. Oftentimes, potential employees hurriedly sign away their rights without fully understanding what that provision/ clause means.

In Rossman v. Canadian Solar Inc., 2019 ONCA 992, Justice James MacPherson determined that an “ambiguous” termination clause in an employment contract was unenforceable, notwithstanding the presence of a “saving” provision in the same contract designed to ensure the clause remained valid.

In 2010, Noah Rossman commenced employment as a regional sales manager with Canadian Solar Inc. and Canadian Solar Solutions Inc. (collectively, “Canadian Solar”), under a written employment agreement. Rossman was presented with a new employment contract when he was promoted two years later, which he signed. Both agreements contained identical termination clauses, which included the stipulation that upon termination, “Benefits shall cease 4 weeks from the written notice.”

Two years later when Canadian Solar terminated Rossman without cause, this singular line lay at the core of Rossman’s wrongful dismissal lawsuit. As part of the ensuing litigation, both parties brought forth competing motions for summary judgment. While Canadian Solar requested the dismissal of the suit, Rossman sought common law damages assessed on a reasonable notice basis. He was successful, with the motions judge determining the termination clause to be unenforceable, and subsequently awarding Rossman five months’ worth of pay in lieu of notice.

Conclusion

One reason as to why you may encounter some or all of these problems in your employment contract is due to more and more people choosing to draft contracts themselves, trusting the good faith relationship they may have with the other party and assuming they understood the terms and conditions rather than utilizing services of an expert. While this may seem like a great way to make the process of drafting a contract less expensive, quicker, and easier, in the long run, the opposite may prove to be true.

Before you sign your existing or next employment contract, don’t hesitate to contact us for a comprehensive employment contract review. 

Author: Lydia Iboko

Also read: Fair Agreements: Do Workplace Policies Form Part of the Employment Contract?