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recogni zed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n ingfeaturesof employeeslives

andthevul nerabilityofemployeesintheemploymentrelationshipwas

recognizedYetatthes ametimeworklookslesst raditionaleachyear

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

goalsneedsandt hene edfor exible workarra ngementsma keswork

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

as their primary purp ose the ability to create certainty a ndcla rity in

anemploymentrelationshipt hen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

 Christi neThomlins onisapartneri nthesixlawyeremploymentlawboutique

rmofRubinThoml inson LLPThispaperwaspreparedwit hthesubstant ialas-

sistanceofJamesHee ney

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

CMT

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

ingw ith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with inemploymentcontractsWhena n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t hecommon law

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

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

ofCan adaheld in Machtingerv HOJIndustries Ltd thatt his 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provision sdesignedtolimitt he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termin ationtothemin imumlegislatedstandards must

includeveryspeciclanguagetoth iseectinthewr iencontractThis

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

employmentagreementbycanvassingre centdecisionsin whichcourts

havebeencalledupontointerpretsuchtermin ationprovisions

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

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

thing ofvalue promised byeach party tot he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instanc eSMWaddamsThe Law of ContractsdedAuroraONCanada

LawBookatWaddams

Employm entCont racts

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con sideration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conti nuedemploymentcouldbevalidconsiderationThe

central issue in Techformwaswhoownedtherightstoi nventions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anythi nginreturnfor

signingitT heCourtofAppeal disagreeda ndfoundthatt heconsider-

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

forbearancefromdismissa l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t heCourt of Appeal

notedthepri nciple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sit uationwas also consideredIt was

heldthatwherethereisnoc learpriorintentiontotermi natewhichin-

 Seeforinstanc eSBallCanadianEmploymentLawloose leafAuroraONCanada

LawBookat

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

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

 Ibidatpara