Employment Contracts

Invalid Employment Contracts

There are several problems that can exist in employment contracts, and which can result a written contract to be legally invalid or unenforceable.  These include:

(a) Successive or fixed term contracts / expired contracts – Courts may hold that successive fixed term contracts in fact amount to a employment contract of an indefinite term. If an employee had a fixed term contract, but continued to work beyond expiration of the term, the contract will become one of an indefinite term. If an employee had an indefinite term contract, and then signed a fixed-term contract, the new contract may not be valid.

(b) Consideration – a lawyer specializing in employment law will want to compare the signature dates on the written contract with the date on which work actually commenced.

(c) Contracts invalid due to vagueness or ambiguity – Vague or ambiguous contract terms may be unenforceable. Courts examine the wording of the contract terms to determine whether a clause is enforceable for vagueness or ambiguity. If a clause is not enforceable, courts may base the terms of the agreement on the conduct of the employer and employee and on pre-contractual communications between the parties, rather than on the wording in the written document. For example, see: Alsip v Tap Rollshutters Inc. alba Talius, 2016 BCCA 252.

(d) Contracts invalid due to non-compliance with the ESA – Any term that does not meet the minimum standards set out by the ESA (for provincially regulated employees) or the Canada Labour Code (for federally regulated employees) is invalid. A contractual termination clause is not enforceable if, at any time, it provides for less than his/her notice entitlement under the ESA. See, for example Shore v. Ladner Downs, [1998] 160 DLR (4th) 76. If a notice provision in a contract is invalid, then the employee will likely receive whatever amount he/she was entitled to under the common law, instead of what the document states. An employment lawyer will assess whether the contractual notice provision violates the ESA by considering the maximum entitlement that an employee could receive under the ESA.

In Long v. Delta Catalytic Industrial Services Inc., [1998] A.J. No. 131, 35 C.C.E.L. (2d) 70 (Q.B.) at 78 an employment contract contained an express clause stating that the employee’s notice period and other severance entitlements would be determined by the employer’s policy manual as it existed on the date of termination. The employer also had sole discretion to change its manual from time to time.  Justice Fruman, J stated that a provision such as this could only be valid if the employer can establish that there is “clear, express and unambiguous” assent by the employee to such broad powers by the employer to change the terms of the employment contract.  Declining to uphold the contract, Justice Fruman stated:

 “Employers bear the onus of proving a contract which limits severance entitlement. They can anticipate a stiff evidentiary battle. It is incumbent on an employer to keep detailed records of everything relevant to the formation of the contract, including timing of events, meetings and delivery of documents; copies of letters, agreements and other documents given to employees; outlines of explanations and disclosures made at meetings and interviews; recommendations made and opportunities given to employees to obtain independent advice; and particulars of delivery of signed agreements to employees. If an employer relies on its dismissed employee to supply this information, it might expect to find itself at the wrong end of a judgment more often than not”

The above assumes that the contract is not a fixed term contract. For fixed term contracts containing severance clauses, the above may have been qualified (at least in BC) by case law in the past few years.

There are other less common reasons that employment contracts may be invalid.  An employment lawyer will be able to assess whether other factors may be present which render a contract invalid.

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