Class Notes (839,588)
Canada (511,417)
LAW 529 (167)
Lecture 5


7 Pages

Law and Business
Course Code
LAW 529
Tim Bartkiw

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Chapter 4- The Employment Contract -Contract requires an offer, acceptance of that offer and consideration Advantages of a Written Employment Contract 1. Reduces risk of misunderstandings - By specifying rights, obligations and expectations of both ER and EE, a written contract reduces risks that could lead to a law suit 2. Addresses contentious issues early Helps to deal with major issues early in their relationship and usually will be dealt in a constructive manner to reach an agreement 3. Reduces uncertainty If disputes do arise, the court will review a well-drafted written contract provides the court with a clear record of terms & conditions - If the agreement is oral, courts must use a balance of probabilities to determine which story is truest Implied Terms - Dispute that is not addressed in oral contract or left out of written contract  Courts would then consider what terms the parties would likely had agreed upon had the issue come up  These assumed terms would then beADDED to the contract Implied Term #1  Absence in express terms relating to contract’s duration and termination notice -> obligation to employer to provide a REASONABLE notice CASE: RBC Dominion Securities vs. Merrill Lynn Canada Inc. - conclusion: EE’s also have an obligation to provide a reasonable notice of resignation and could be liable damages Implied Term #2  Employee owes a “duty of good faith”  Ex: Should not compete with ER during the duration of employer relationship or improper use of confidential information How Formal Should a Written Contract Be? -When a job is senior position -When special issues are involved  Contract should be formalAND comprehensive Most employment relationships are basic and contain the following…  Letter of offering job to employee  Key Terms – conditions (salary, benefits, start date, title, job duties)  Termination clause (eliminates costly litigation) Enforceability and Interpretation of Written Contract -May say that contract is unenforceable 1.   Lack of Consideration – usually provided by the promised exchange of payment for work performed  Problems can arise when an employee works before a contract is finalized – plaintiff may allege that the contract is unenforceable b/c no new consideration was provided in exchange for new terms  CASE: FRANCIS VS. CIBC - employee accepted employment and began working - CIBC could not apply the 3 months notice clause b/c there was no new consideration for added term and therefore entitled to notice of 12 months - Should ensure that final employment contract is finalized before hiring process is complete OR before they begin working - Unless employer is prepared to provide new consideration, it is too late to ask her to sign contract. For ex. Signing bonus 2.   Inequality of Bargaining Power  Where terms of contract were unconscionable (one sided) and the employee did not understand them  Ex. If EE is uneducated or if pressure is given. • How to minimize risk 1. Ensure that the terms represent a reasonable balance b/t the interest of both parties 2. Give candidate a written copy of the proposed contract. Give them time to read it and obtain independent legal advice before signing. 3. Include provision that the candidate had the opportunity to obtain independent legal advice before signing 4. Draw attention to key terms such as non- competition, non- solicitation and termination clause and get EE to initial them 3.   Obsolescence  If its terms no longer reflect the realities of an employee’s position  CASE: LYONDE VS CDNACCEPTANCE CORP - Lyonde worked for over 24 years, position went from junior to VP,Admin - Original contract stated there was no notice of termination - Enforced that there must be a termination clause of 21 months - Job changed so much that the essence of the original contract was fundamentally different Case in Point: Irrcher VS MI Developments, 2003 Facts: Signed a contract that restricted termination notice to 6 months -Over course of employment, accepted responsibilities that were not outlined in employment contract -Dismissed Irrcher in regards to his performance and got 6 months notice of termination Issues: Whether the termination provision of org contract should apply in light of the change in I’s job function Decision: Termination provisions of 1990 contract did not apply b/c the “foundation of the written contract had disappeared.”  To ensure that contracts do not become invalid- parties should update the employment agreement whenever there is a)APROMOTION or B) SIGNIGIFCANT CHANGE IN DUTIES  Promotions or salary increases could be made conditional on execution of an amended employment contract  SHOULD INCLUDE APROVISION THATALLOWS it to be reviewed and updated periodically 4 .Failure to Meet Minimum Statutory Standards  Null and void if does not meet min. statutory standards set by ESA  CASE: MACHTINGER VS HOJ INDUSTRIES (pg 94)  Contract says two weeks of termination  ESAsays 4 weeks for Mach’s length of service  Sued: Common law damages for pay in lieu  Court agreed provision was invalid and granted 7 months reasonable notice pay 5. Use of Ambiguous Language - should use clear and unambiguous terms -Applies rule called contra proferetem, ambiguous language might be interpreted againt the party who drafted the agreement b/c they could’ve avoided liability if they were clearer CASE: FOREMAN VS. 818329 ONTARIO LTD [2003] **EXCEPTION: Employer’s favor ** Facts: Asked current owner to draft a contract when they found out ownership was being transferred - Contract stated that the employer “shall not dismiss” Foreman - Terminated 9 months later, she sued for wrongful dismissal alleging she had a fixed term contract for working lifetime b/c only she can terminate it Issue: Employment contract guaranteed employment for life Decision: Possible to have fixed term employment contract for the lifetime of an employee - Acontract for life requires greater clarity than other fixed term employment contracts “given the profound financial responsibility of such a guarantee” - Foreman was awarded $30,800 in lieu of 12 months reasonable notice Tips when drafting contracts  Use clear language  Be fair when negotiating terms  Give time for party to read, understand and get legal advice  Meet or exceed the min. statutory standards  Being criticial terms to the other party’s attention  Provide additional consideration is include for new term  Customize contracts Common Contractual Terms - Contracts contain general principles however, level of formality and detail varies - Less skilled workers: letter of hire w/ key terms that explain policy manual - Key terms include: name of parties, job start, title & description, duration of contract, compensation offered and termination clause - Managerial positions: High degree of skill, specific contractual terms, inclusion of bonuses, pension arrangements, stock options and perks Important topics address in a contract. 1. Job Description- clarifies expectations of both parties and reduces potential for misunderstandings -If employers don’t say they can modify, EE is entitled to refuse duties that fall outside org. agreement - Employers may say “any and all other duties may b
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