Employment Contracts: Enhancing Enforceability Through Drafting and Implementation

• Author: Christine M. Thomlinson
• Pages: 101-134



EmploymentContracts

EnhancingEnforceabilityThrough

DraingandImplementation

Christine M. Thomlinson*

A. INTRODUCTION

Itappears t hatw ith each passing year worktakes on i ncreasing sig-

nicanceinpeopleslivesThisprinciplehasbeenrecognizedbytheSu-

premeCourtofCanadainWallacevUnitedGrainGrowersLtdinwhich

itwasheldthatworkisoneofthedeningfeaturesofemployeeslives

andthevulnerabilityofemployeesintheemploymentrelationshipwas

recognizedYetatthesametimeworklookslesstraditionaleachyear

Technologicaladvancementsnewgenerationsofworkerswithdierent

goalsneedsandtheneedforexibleworkarrangementsmakeswork

todayveryhardtodeneIfemploymentcontractscanbeseentohave

astheirprimarypurposetheabilitytocreatecertaintyandclarityin

anemploymentrelationshipthenitwouldappearthattherehasnever

been a beer time for advocating their usage That being said court s

continuetonotethevulnerabilityofemployeesintheemploymentrela-

tionshipandmakendingsthatemploymentcontractsareinvalidren-

deringvoidemployerandemployeeeortstoinjectcertaintyintotheir

relationship

 ChristineThomlinsonisapartnerinthesixlawyeremploymentlawboutique

rmofRubinThomlinsonLLPThispaperwaspreparedwiththesubstantialas-

sistanceofJamesHeeney

 DLRthatparaSCCWallace

CMT

Thispapercontainsareviewofthemoresignicantdecisionsdeal-

ingwiththeenforceabilityofemploymentcontractsoverrecentyears

Althoughthepaperisdividedintoseparateissuesdealingwithenforce-

abilitythemajorityofitisdedicatedtotheenforceabilityoftermination

provisionscontainedwithinemploymentcontractsWhenanemployee

beginstoworkforanemployerthereexistsanemploymentagreement

even absent a wrien document Certain terms a re implied into this

employmentagreementbythecommonlawsuchasthecommonlaw

presumptionthatindenitetermemploymentmaybeterminatedonly

ifreasonablenoticeorpayinlieuofnoticeisgivenTheSupremeCourt

ofCanadaheldinMachtingervHOJIndustriesLtdthatthispresump-

tion is rebuablebut only if t he contract clearlysp ecies some other

periodofnoticewhetherexpresslyorimpliedlyForthisreasonmany

employerspreparewrienemploymentagreementsfortheiremployees

inanaempttoataminimumcontractoutoftheobligationtoprovide

employeeswithreasonablenotice

Despitet he eort that employersexpend in prepar ing them con-

tractualnoticeprovisionsdesignedtolimitthenoticeperiodarenotal-

waysenforceableCourtshaverefusedtoenforceterminationprovisions

thatareunclearambiguousthatcontractoutofemploymentstandards

legislation that are not regularly updated and are without consider-

ationTheincreasedlevelofjudicialscrutinysurroundingtermination

provisionshaspromptedemployerstoaskcanyoulimitnoticetothe

minimumperiodsmandatedbyemploymentstandardslegislationany-

moreThesimpleanswertothisquestionappearstobeyesHowever

anemployerthatwishestolimitanemployeesentitlementtonoticeand

orseveranceonterminationtotheminimumlegislatedstandardsmust

includeveryspeciclanguagetothiseectinthewriencontractThis

paperconsidershowtocreateanenforceableterminationprovisioninan

employmentagreementbycanvassingrecentdecisionsinwhichcourts

havebeencalledupontointerpretsuchterminationprovisions

 

Inordertobevalidcontractsmustincludeconsiderationiesome-

thingofvaluepromisedbyeachpartytothebargainInemployment

contracts the consideration is the employerspromise to hire and t he

 CCELatparaSCCMachtinger

 SeeforinstanceSMWaddamsThe Law of ContractsdedAuroraONCanada

LawBookatWaddams

EmploymentContracts

employees promise to perform service For many years the general

principlethattheemployerspromisetocontinue to employ an employee

wasnotlegallyvalidconsiderationseemedseledThisprinciplewas

well articulated in Francis v Canadian Imperial Bank of Commerce in

whichMrFranciswasaskedtoanddidsignanemploymentagreement

which limited his entitlement to severance on dism issal only aer he

commencedemploymentwiththeBankSinceconsiderationwasfound

tohavepassedatthepointatwhichMrFrancescommencedemploy-

mentandnonewconsiderationexistedwhenhewaslateraskedtosign

thecontractthecontractwasheldtobeunenforceable

HoweverinTechform Products Ltd. v. Woldathequestionagainarose

astowhethercontinuedemploymentcouldbevalidconsiderationThe

central issue in Techformwaswhoownedtherightstoinventionsdevel-

opedbyMrWoldaTechformorMrWoldaaformeremployeewho

becameanindependentcontractorMrWoldahadsignedanEmployee

TechnologyAgreementaerprovidingconsultingservicesforthreeor

fouryearsThetrialjudgefoundthattheAgreementwasinvalidforlack

ofconsiderationbecauseMrWoldadidnotreceiveanythinginreturnfor

signingitTheCourtofAppealdisagreedandfoundthattheconsider-

ationfortheAgreementwascontinuedemploymentalongwithimplied

forbearancefromdismissalforareasonableperiodoftimeByagreeing

nottoterminateMrWoldasconsultancyagreementforareasonablepe-

riodoftimeifhesignedtheEmployeeTechnologyAgreementthecourt

heldthatTechformprovidedMrWoldawithconsiderationsucientto

maketheAgreementbinding

The importance of forbearance from dism issal as a component of

considerationinTechform wasnotoverlookedAstheCourtofAppeal

notedtheprinciplethatisfundamentaltoconsiderationinthecontext

of an employmentcontract ame ndmentis t hat in return for the new

promise received by the employers omething must pass to the em-

ployeeInadditionthesomethingmustgobeyondthattowhichthe

employeeisentitledundertheoriginalcontractItwasheldinTechform

thatcontinuedemploymentrepresentsnothingmoreofvalueowing

totheemployeethanundertheoriginalcontractThequestionofwhat

constitutesforbearanceinsuchasituationwasalsoconsideredItwas

heldthatwherethereisnoclearpriorintentiontoterminatewhichin-

 SeeforinstanceSBallCanadianEmploymentLawlooseleafAuroraONCanada

LawBookat

 CCELOntCtGenDiv

 OJNoCATechform

 Ibidatpara