Armed with the knowledge that an employer can contract out of all but its minimum statutory obligations, I’m mystified why more businesses don’t follow the trend. Nevertheless, for those proactive organizations concerned about the bottom line, the key is to draft contractual provisions that will withstand judicial scrutiny.
Just as my Metro News Column provided the 5 tips for any employee about to begin a new job (read here), in my view, employers would be well advised to make the first move. The roadmap to victory is the flipside of my recipe for employees. Although, I can’t guarantee that my approach will be infallible, by introducing these measures, victory will occur more often than not. And, as the saying goes, the best defence is always a good offence.
For employers with the motivation to diminish the amount of severance paid, better yet, to a mediocre employee, I offer the following eight tips to ensure a valid and enforceable termination provision.
1. Make certain that prior to the point at which the employment offer is made, the prospective candidate has receipt of any offer letter, contract, agreement or otherwise that is being relied upon to comprise the terms of employment. This will avoid any confusion, or worse, misrepresentation that goes to the terms of the offer.
2. The prospective candidate should always be encouraged to obtain independent legal advice or at the very least, be given ample time to consider the nature of the contract. A clear case of duress is a recipe for disaster when it comes to a severance limiting provision.
3. Even if the employee has received appropriate counsel, care should be taken to point out the meaning of the more sophisticated terms, and draw the employee’s attention to the fact of a severance limiting provision. The individual presenting the offer should document this conversation.
4. If re-negotiating the terms of an existing employee’s position, fresh consideration (some compensation or other benefit) must be provided to the employee.
5. Severance limiting language must be clear and unambiguous. A small degree of uncertainty is a prescription for courts to interfere with the bargain an employer though it had made.
6. The termination provision must provide the employee with the minimum amount of severance provided by the governing legislation. In Ontario, the Employment Standards Act, 2000 sets out a ladder of minimum severance payments for any dismissed employee. The legislation should be specifically and clearly referenced in the contract itself. In the contracts that I prepare for my employer clients, I actually provide slightly more than the minimum standards as an employee need to execute a release for what she was already entitled to under the legislation.
7. An otherwise valid contract can be struck down as unconscionable or unreasonable. While the Employment Standard Act, 2000 is a great starting point, employers should renegotiate greater amounts of severance as employees gain tenure or increased value with the organization.
8. Contracts should include a severability provision ensuring that if one aspect of the contract is struck down as unenforceable, the remaining terms of the contract will survive.