EMPLOYMENT CONTRACTS: BEYOND WRITTEN TERMS

There is a proverb that goes, “A snake that you can see, does not bite.” – One can liken an Employment Contract to this proverb.

An Employment Contract can ward off unnecessary and unwanted claims. It can also bring along with it a snakes’ nest of liabilities. Having a well-drafted Employment Contract is a great investment!

An Employment Contract is a distinctive contract. It is not a typical contract for services. Services are usually not identified with a high degree of specificity in an Employment Contract.

A poorly drafted Employment Contract could result to a claim under the Common Law for payment in lieu of reasonable notice, a Common Law right that far exceeds what any employment legislation in the country provides.

The Ontario Court of Appeal (which can still be used here in Alberta) in Rossman v Canadian Solar Inc., 2019 ONCA 992 at paras 20-23 captures the uniqueness of an Employment Contract and why Employment Contracts are interpreted differently by the Courts (and therefore why you need to take extra care in preparing them!):

20 It is well-established… that “courts interpret employment agreements differently from other commercial agreements”….

21 First, work is a vital aspect of the human condition. Dickson C.J. captured its fundamental import in Reference re Public Service Employee Relations Act (Alberta)…:

Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.

22 Second, employees are most vulnerable at the moment of termination. As expressed by Iacobucci J. in Wallace v. United Grain Growers Ltd.…:

The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection.

23 This crucial fact led Laskin J.A. in Wood to enunciate several “considerations relevant to the interpretation and enforceability of a termination clause”…:

• When employment agreements are made, usually employees have less bargaining power than employers. Employees rarely have enough information or leverage to bargain with employers on an equal footing.
• Many employees are likely unfamiliar with the employment standards in the [Employment Standard Act (ESA) (note that in Alberta it is the Employment Standards Code)] and the obligations the statute imposes on employers. These employees may not seek to challenge unlawful termination clauses.
• The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so.
• Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship.
• A termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment.
• Faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee.

Employment consists of a complex system of interconnected implied and express terms and obligations. It should be protected by a unique document that could make or break an employer or employee. There is always more to each Employment Contract. There is more lurking underneath the plain words. An Employment Contract has a “life” of its own. It is delicate, and every term therein should be so treated. It is important to know what one is signing up for, to protect oneself from unexpected consequences.

Stacey Reginald Ball describes an Employment Contract as:

a complicated accumulation of rights and obligations. The complexity and uniqueness of the contract of employment is demonstrated by examining its constituent elements. It can be and often is, a collection of expressed bilaterally negotiated and agreed upon terms …, terms which are implied by law for policy reasons rather than derived from the intention of the parties…unilateral contracts…, statutory terms, terms created by custom or practice in an industry and terms implied by the conduct of the parties over the course of an employment relationship with some history to it.

All of which is fancy-legalese for, “A big mix of everything”!

Another adage goes, “Not to know is bad; not to wish to know is worse.”

We demystify Employment Contracts. Contact Osuji & Smith Lawyers to understand your obligations and liabilities. We understand the terms and liabilities that could arise from an employment relationship, even the snakes hiding under the words.

Author: Oluchi Peter