Cases where Employment Contracts are Set Aside

Date: 2009
Author: Daniel A. Lublin
Publication: Metro

Employees make mistakes too

Employees are often the author of their own misfortune. Despite my cautionary writings, they routinely sign contracts replete with unfavourable terms. By doing so, they unknowingly agree to be eliminated with minimum notice, demoted, or banished to far away jurisdictions, see their salary slashed and prevented from competing with their employer following their departure – all with legal impunity. Just as often, however, Canadian courts are reluctant to enforce these agreements for a variety of reasons. Here are some examples of situations in which a signed contract will be set aside.
When market-research firm Advanis Inc. terminated Paul Dwyer, it sought to rely on an employment contract Dwyer first signed when he started work. The contract stated that “should it be determined there is not a fit between your skills and the requirements of your job, your employment will be terminated and you will receive severance determined by the employment standards act.” When Dwyer recently challenged this language, arguing that he was entitled to substantially more than what the contract provided, the court noted that since the contract only confirmed that Dwyer would receive what he was already entitled to, instead of limiting him only to those amounts, it could not be upheld.
Once an employee begins work, it is often too late to have him or her sign an agreement, even if on the first day. After a series of interviews, the CIBC extended Trusty Francis an offer of employment. However, on his first day at work he was presented with a number of forms and agreements that attempted to limit his entitlement to three months’ salary if he was fired. At trial, the court found that Francis’s employment contract was consummated when he agreed to the first offer of employment and, because nothing of new value was given to him when he showed up at work, the forms and agreements he was told to sign were unenforceable. Otherwise, the court reasoned, an employer could unilaterally impose new terms of employment at any time and an employee would be without leverage to negotiate.
In another recent case, the employee was able to successfully establish that he had agreed to an oral offer of employment over the telephone and that by resigning from his current job in reliance on that offer, the contract he was later given could not be enforced. Here, the court noted that because the employee had “no other choice” but to sign the agreement, it would not be appropriate to hold him to its terms.
What should employees do? Challenge contracts where the facts support such an argument. I have prevailed in court by raising the inference that a contract was signed without proper consent. Don’t be reluctant to negotiate terms and have any contract reviewed by a lawyer before signing your name.