Author: Daniel A. Lublin
It’s possibly the worst fraud in workplace law – Corporations, with expensive lawyers and deeper pockets, convincing employees to sign one-sided contracts that reduce their legal rights. And employees, without bargaining power or an understanding of the law, not realizing their interests have been undermined.
The landscape wasn’t always tilted. Employees used to work mostly without contracts or with simple offer letters that only specified the basics: position, compensation and duration. But, as a function of learning from past mistakes, employers woke up and started sharpening their pens: why not prevent expensive lawsuits, exorbitant severance packages and competition from former employees, all with a single contract. The result is the modern employment contract, replete with employer-friendly terms. Employees now unknowingly agree to be eliminated with minimum notice, demoted, banished to far away jurisdictions, see their salary slashed, prevented from competition following their departure, and have promises broken at their employer’s pleasure – all with legal impunity.
Don’t misunderstand. Employees are not entirely without recourse. The Supreme Court has recognized the unique nature of the employment contract and the inherent power imbalance when negotiating terms. As a result, judges have created various devices to prevent unfairness. If the contract is ambiguous, illegal, provides less than employment standards legislation or is entered into under duress or coercion, it may be set aside.
While these devices provide a level of protection, they still ignore some fundamental truths. First, employees seldom negotiate contracts and if they do, it’s rarely on equal footing. Either they fear the job offer will be withdrawn and offered to a competitor or they are simply told the language will not be changed. In today’s slowing job market, their fears are not unfounded. Employers, then, usually have their way.
As well, the legal doctrine of freedom contract, which provides employers the right to offer employment on their own terms, is still recognized today, although it is often in conflict with commercial and legal reality. Therefore, if a contract has been reviewed and executed before employment begins, an employee is often held to the deal that was made, whether fair or not.
How do these contracts affect workers? In a file I have, the employee had been recruited away from a large American technology firm where he worked for 8 years, to join a Canadian competitor. Before he began, he signed what he was told was a “standard form” contract. Six months later he was fired.
It was a simple win – or so he thought. He had a strong legal claim for inducement, which meant that his new employer would be responsible for the severance he was owed from his old job. But the contract he signed specifically prevents him from making that claim and worse, limits his damages to only one week’s pay. Although the conclusion to his case will probably be based on other factors that are involved, there is one certainty: without the contract, his case would be stronger.
What should employees do? Challenge the enforceability of these contracts, where the facts present them with that argument. I have won in court by raising the inference that a signed contract was without proper consent – such findings are not exceptions. Have any new contract reviewed with a lawyer and don’t be reluctant to renegotiate terms.
Employees must read the fine print