Employment contract may cause later problem

Date: 2006
Author: Daniel A. Lublin
Publication: Metro
Recently, I was consulted by an employee who was terminated after 10 years of faithful service. Given her tenure and responsibilities, she would have been entitled to a substantial termination package, but she had signed an employment contract that limited her termination payments to a much smaller amount.
“I didn’t realize what I was signing years ago would come back to haunt me now,” she said.
Unfortunately for this employee, the contract she signed when her employment began was valid and enforceable. She had unknowingly disentitled herself to thousands of dollars.
Employers often attempt to have you sign contracts that limit your entitlement to a termination package. An example of the language I sometimes see is “The parties agree that should your employment be terminated, the Company will provide you with the minimum termination notice as set out in the Employment Standards Act.”  In some cases, these “termination provisions” are entirely legal and the contract you sign at the beginning of your employment will bind you to those terms many years down the road. Without even knowing it, you may have given your employer the right to withhold substantial amounts of money that you otherwise would have been entitled to. However, to protect you, the law now requires a number of safeguards are met to ensure you don’t unknowingly sign away your rights. Here are five legal points to remember to keep your money in your pockets:

  1. All termination provisions must comply with the minimum principles of the Employment Standards Act. In other words, if any termination provision does not provide you with at least equal to or more generous entitlements than the minimum amounts you receive by law, the termination provision will be void.
  2. Employment contracts should be signed before an employee begins working. This is particularly so where the employment contract contains a termination provision or any other unfavorable term.
  3. Where an employer requires that a termination provision is signed following the commencement of the job, there must be some form of additional benefit given to the employee for doing so. A pay raise, signing bonus, promotion or even a promise not to something disadvantageous to the employee are all valid benefits that will create an enforceable termination provision.
  4. Termination provisions written in vague terms are unlikely to be seen as valid.
  5. Any time an employee is presented with an employment contract or agreement, he or she should be given the opportunity and time to obtain independent legal advice before having to sign.  Employers who rush employees into signing detrimental terms without the opportunity to consult a lawyer risk creating an invalid contract.