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 2017 2 | August 30, 2017 Canadian HR Reporter, a Thomson Reuters business 2017 2 | August 30, 2017 New employment contract for promoted employee Question: If an employee is required to sign a new employment contract that introduces a new severance clause and changes other elements in order to get a promotion, is the new position enough to justify the changes? Answer: e short answer to this question is yes, as long as the promotion is in exchange of a valid contract. As a starting point, in order to create a binding contract, there must be consider- ation — that is, both parties must receive something of value in exchange for their promise of performance of their duties or obligations under the contract. Without consideration flowing both ways, what you have is a gratuitous promise, not a contract. e opportunity to have a job is an obvi- ous form of consideration. Once an employ- ee already has the job, it is difficult for the employer to demonstrate that the employee received fresh consideration for agreeing to the terms and conditions in the written agreement. Fresh consideration may be giv- en if the employer provides some new ben- efits, such as a promotion, a one-time pay- ment, salary increase, or additional vacation time or benefits. e promotion should be conditional upon the employee's execution of the new agreement. e order in which events unfold is significant. For example, if the employee is asked to sign a new employment contract af- ter she has already received the promotion, there may be a lack of fresh consideration and the contract may not be binding. Simi- larly, if the employee was going to receive the promotion anyways, the employment contract may not be binding due to lack of sufficient consideration. Employers need to remember that the is- sue is not whether the employee signs, but rather, whether the contract would be legally enforceable. Usually this becomes an issue at the time of termination, when on the one hand, the employer will purport to rely upon the termination or severance clause, and on the other hand, the employee or her lawyer will take the position that the contract is un- enforceable due to a lack of proper consider- ation given at the time of signing. Employers should also be careful when drafting employment contracts to en- sure that the terms, such as the severance clause, are enforceable. As well, employ- ers would be well-advised to provide em- ployees with a reasonable amount of time during which they can review the contract and obtain independent legal advice, if they wish to do so. As of Sept. 1, Stuart Rudner and his team will be part of Rudner Law, an employ- ment law firm in Markham, Ont. He is the author of You're Fired: Just Cause for Dismissal in Canada published by Car- swell, a omson Reuters business. He can be reached at srudner@rudnerlaw.com or 416-864-8500. is article was co-written by Nadia Zaman, an associate with Rud- ner Law. New hire's refusal to sign non-compete agreement Question: If a new employee refuses to sign a non-compete agreement, can the employer retract the job offer? Answer: e short answer is yes. A basic premise of contract law is that there must be offer, acceptance, and consid- eration in order to form a binding contract. An offer can always be retracted before ac- ceptance. If an employer makes a job offer that includes a non-compete agreement, and a new employee refuses to sign the non- compete, then the employee may reject the offer completely or provide a counter-offer (such as ask that the duration of the non- compete be reduced). At that point, it is open to the employer to either accept the employee's counter-offer, reject it and re- tract the job offer, or make another counter- offer. Practically speaking, although these options are certainly available, employers would be well-advised to negotiate in good faith at all times. As a starting point, employers must re- member that non-competition agreements are prima facie unenforceable. ey will only be enforced where lesser restrictions, such as non-solicitation clauses, will not ad- equately protect the employer. For example, if it is clear that clients will follow the former employee, even if she does not solicit them herself, then an employer may be able to suc- cessfully demonstrate that a non-compete clause will be needed to protect itself. When drafting a non-compete clause, em- ployers would be well-advised to consider whether they can demonstrate, if challenged, that their interests cannot be adequately pro- tected by a less restrictive clause such as a non- solicit. If a non-solicit clause would provide sufficient protection, then that is what should be used instead of a non-compete. Practically speaking, it would be wise to include both, so that even if the non-compete is struck out in a court of law, the non-solicit may still be in place. Needless to say, these covenants should be drafted very carefully in order to ensure that they are enforceable. Employers should keep in mind that even if an employee signs a non-compete, it does not mean that it will be enforceable — not only does a court have to agree that the non-compete is reasonably necessary, but the terms of the covenant must be rea- sonable as well or it will not be enforceable. On that note, courts will not "fix" restric- tive covenants that are overly ambitious or restrictive. For example, if a non-compete restricts the individual for two years, and a court deems one year to be appropriate, rather than reducing it to one year, the court will strike out the clause in its entirety. Em- ployers must be careful: If they ask for too much, they will get nothing. 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 dismissing employees with disabilities, workers' compensation for stress, and managing employee vacation time. You can view the blog at www.employmentlawtoday.com.

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