Employment Contract: Another Reason to Review and Update It

Jun 28, 2012

Employment Contracts

We recommend that every new hire sign an employment contract with a termination clause.

If the termination clause provides the employee with more than the minimum notice of termination provided under the Employment Standards Act, then can a terminated employee collect termination pay from your organization and salary from another employee at the same time?

Last week, the Ontario Court of Appeal decided that the answer to this question was yes, unless the termination clause explicitly permits the terminating employer to deduct the salary from the new employer.

The Facts: In this case, Mr. Bowes was entitled to six months notice of termination or pay in lieu of this notice under the terms of his written employment contract. He was terminated without any notice. He found another job during the six months following his termination earning the same income and his former employer stopped paying him termination pay.

The Decision: The Court of Appeal concluded that Mr. Bowes could collect termination from his former employer and income from his new employer until six months after his termination.

Lesson to be learned:  An employer should make sure that the termination clause in its employment contract explicitly addresses this issue of what happens to any income that a terminated employee earns during the agreed upon notice period.

The provincial government and judges are forever changing the employment law landscape. It is important to review your employment contracts, policies and practices to make sure they comply with all employment laws and are up to date.

We offer one-hour employment law check-ups where we will review your organization’s legal obligations and any employment law policies that are of particular interest to you. To give you some idea of the areas you can review, check out our Workplace Audit: 20 Areas to Consider.

If you want to amend your employment contract to enhance your management rights or have us conduct an employment law checkup at your workplace, please email us at [email protected] or call us at 1-888-640-1728.

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