Employment Contracts - Are They Enforceable

Here is an interesting fact situation that probably happens with greater frequency that any of us will ever know. See if you can figure this one out. This happened to one of my clients.

After my client went to several interviews for a new job, he was called on the telephone and offered the position he sought. During this telephone call, he and the employer agreed on three things: his salary, his job title, and the date that he was to attend the workplace to start his job, some three weeks later. My client arrived on the appointed day at 8:30 am. At noon his boss entered his new office and gave him a stack of papers telling him to read, sign and return them to human resources that day. His boss left him alone in his office to do so. My client did what he was told to do. Some documents pertained to income tax, personal information, emergency contacts, etc. One document was the Company Handbook. Another document was entitled “Employment Agreement”. In that document was a paragraph entitled “Termination without cause”. It was very clear upon my reading of it, that my client’s employment could be terminated without cause during the first three years of employment, upon two weeks notice. My client admitted to reading it, but to not paying much attention to the termination clause. He stated that he signed the documents because he needed the job and had already started working so he wasn’t about to take issue with the substance of the employment agreement.

After close to two years of employment, my client was fired allegedly with cause but the company offered him a “gratuitous payment” of two weeks of salary in accordance with the termination without cause provision in the employment contract. He came to me asking whether he had received the appropriate amount of pay in lieu of notice.

The issue was whether the contract governed this situation or whether the contract was somehow unenforceable thereby allowing my client to resort to common law to establish the appropriate amount of notice. Clearly, it was in his interests to not be bound by the contract, as the reasonable amount of notice in his situation would have been in excess of two weeks. I fired up the research computer and found the following case: Francis v. Canadian Imperial Bank of Commerce (1994) 7 C.C.E.L. (2d) 1 (Ont. C.A.). The facts were almost identical to my client’s case.

In the Francis case, there had been an initial exchange of correspondence upon which the contract was founded. The Bank then attempted to vary the original agreement with its employment contract that restricted the reasonable amount of notice upon termination of employment without cause. The variation was clearly for the Bank’s benefit and to the employee’s detriment. The primary issue for the Court was whether the employment agreement was a valid and binding agreement that therefore varied the implied term of reasonable notice on termination. Underpinning this issue was the principle of contract law, namely, that new or additional consideration is required to support a variation of an existing agreement. In other words, if the Bank was going to be able to vary the terms of the existing contract it should have provided Mr. Francis with additional consideration beyond his salary. If the Bank had wanted to rely upon the terms and conditions of the additional agreement, the Court stated that it should have stated in its original correspondence with Mr. Francis, that his employment at the bank was conditional upon his agreeing to accept the terms of the employer’s standard form of agreement, a copy of which could have been enclosed in the offer letter.

If you have been fired without cause and you signed an employment agreement that the employer now wishes to rely on, please contact me. It may or may not be enforceable.