Canadian Employment Law Today

Have a question for our experts? Email Jeffrey.R.Smith@thomsonreuters.com with Stuart Rudner Ask an Expert RUDNER MaCDONALD TORONTO Canadian HR Reporter, a Thomson Reuters business 2016 2 | January 6, 2016 Have a question for our experts? Email Jeffrey.R.Smith@thomsonreuters.com Have a question for our experts? Email Jeffrey.R.Smith@thomsonreuters.com Have a question for our experts? Email Jeffrey.R.Smith@thomsonreuters.com Question: If an employee is asked to sign a new employment contract with some changes (such as termination provisions), what would be typical considerations to be offered to the employee? Is consideration required if the employee hasn't officially started work yet? Considerations for new employment contract Answer: is question raises a very import- ant issue. In order to have a legally binding contract, both parties must receive some form of consideration. Back when I was in law school, our professor used to explain this through a fairly simple demonstration. First, he would pick one of the students, and offer them $100 in exchange for his T-shirt. When the student accepted, he proclaimed that there was a binding contract in place, as both parties were receiving some benefit from the arrangement. By way of contrast, he would pick another student and say "I'm in a good mood, and I'm going to give you $100." Although the student accepted, our professor explained that this was not a binding contract, but simply a "gratuitous promise." at is because although the stu- dent was going to receive $100, the profes- sor was not receiving any consideration for his agreement. In the employment context, the consider- ation offered to an employee at the outset of the relationship is usually the offer of em- ployment. Once an offer has been made and accepted, an employer must provide some new form of consideration in order to alter the arrangement. Unfortunately, it is not unusual for em- ployers to meet with candidates and, once they have selected their first choice, engage in a negotiation over the key terms, such as pos- ition, compensation and the like, and then reach an agreement and choose a starting date. At that time, the parties have a verbal agreement, which will be supplemented by many terms implied by law (such as the duty to provide reasonable notice of dismissal). Many employers then have the new em- ployee sign a much more detailed contract, which is for the benefit of the employer, when they start work. At that time, it's too late; there is already a binding agreement in place, and in order to replace it with a new agreement, both parties must receive some sort of consideration. is is absolutely true even if the employee has not "officially" started work yet. If she can show that there was a binding agreement, which can be ver- bal or written, then the employer cannot simply put a new agreement in place. With respect to "typical consideration," there is no simple answer. Our courts have been clear in saying that consideration must be "something of value." However, that is deliberately vague. I often recommend that employers attempt to put new contracts in place when they offer a promotion or pay raise, or a non-automatic bonus. ey can also offer a one-time signing bonus, new benefits, or anything else that has a real value. However, the consideration must be something that the employee would not otherwise have received, such as an auto- matic annual pay raise. Employee's refusal to sign new contract with changes Question: If an existing employee refuses to sign a new employment contract with changes and it is impossible to continue under the old terms, can that be considered a resignation or is the employee entitled to notice, even if the employer wants the employee to stay? Answer: If the employer is attempting to negotiate new terms of the employment relationship, and an agreement cannot be reached, then the current agreement will remain in force. An employee cannot be deemed to have resigned if the reality is that the parties sim- ply cannot agree on amendments to their existing agreement. What the employer can do is provide notice of dismissal, which would have to be in accordance with the existing agreement. Unless the existing agreement has an enforceable termination clause, then the relationship will be gov- erned by the common law, which requires reasonable notice of dismissal. As case law has shown, if the employer proposes new terms, and the employee refuses to accept them, then the employer must either provide notice that the employ- ment relationship will end, or continue on the existing terms and conditions. e notice must be the same that would be re- quired if the employer was providing notice of dismissal in the usual course. Stuart Rudner is a founding partner of Rud- ner MacDonald LLP, a Toronto-based em- ployment law firm. He is author of You're Fired: Just Cause for Dismissal in Canada, published by Carswell, a omson Reuters business. He can be reached at srudner@ rudnermacdonald.com. Employment law blog Canadian Employment Law Today invites you to check out its employment law blog, where editor Jeffrey R. Smith discusses recent cases and developments in employment law. The blog includes a tool for readers to offer their comments, so discussion is welcome and encouraged. The blog features topics such as young employees, medical marijuana, religious discrimination and employee criminal charges. You can view the blog at www.employmentlawtoday.com. Many employers have a new employee sign a more detailed contract when they start work. It's already too late; there is already a binding agreement in place.

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