Drafting employment contracts

Date: 2010
Author: Daniel A. Lublin
Publication: Metro

“Kitchen sink” approach often fails

The virtuous man is never a novice in worldly things. – Marcus Valerius Martialis
Employers often take a kitchen sink approach to drafting employment contracts. They bargain for excessive protection, no matter how junior or administrative the employee. However, in seeking such protection, they sometimes get none at all.
Probationary periods: There is no implied right to a probationary period. That is, unless a contract provides for it, it simply does not exist. Even having been dealt such an easy hand, many employers still get this wrong. It is not enough to refer to an employee as probationary. The contract must state that the employee can be fired for any reason, without pay or notice, during the probationary period. Otherwise, don’t refer to a probationary period at all.
Severance provisions: The courts still permit employers to pay dismissed employees less than what is fair. If a contract clearly permits termination upon payment of only statutory requirements, there is no right to severance, no matter how long or meritorious the employee’s tenure. There is only a right to get what the contract says. However, so many of these clauses are unenforceable because of how they were drafted. In a recent Ontario case where the contract allowed dismissal “as determined by” provincial legislation, the contract did not prevent the employee from suing for more because it was not drafted in a manner that excluded paying more, despite that intention.
Constructive dismissal: Pay cuts, demotions, changed responsibilities or changed geographic location can amount to a dismissal, unless a contract says otherwise. But to protect an employer against a constructive dismissal suit, the contract must provide that these “changes” have been contemplated and were specifically accepted by the employee. Many contracts don’t, and an employee who is upset at the prospects of a revised job can suddenly resign and then sue.
Reference to policy manual: For a policy manual to form a “term” of employment, it is not enough to refer to the existence of the company’s manual in the contract. The manual must be attached to the contract, and the contract must confirm that the employee has read the manual and accepts it as part of the terms of the contract.
Resignation: If an employee who has resigned with notice is asked to leave immediately, the employee is generally entitled to pay for the remaining period of notice given. While most contracts set the period of advance notice required, few provide that if the employee is then asked to immediately leave, he or she will not be entitled to further payment.
Restrictive covenants: Courts have always held that post-employment restrictions are void unless they are absolutely required and drafted in a manner that meets a “reasonable” standard. Despite the importance of getting this right, many employers miserably fail. Don’t leave drafting contracts to beginners or chance.