I trumpet the benefits of employment contracts every chance I get. I often write and speak about these benefits.
Two Case Studies
In the last two weeks, I received calls from two clients who benefitted from an employment contract that I wrote several years ago.
Right to Temporarily Lay off
The first client operates a couple of retail stores. There was a fire in one of the stores and the owner called me with questions about her obligations to pay staff while the store was closed.
This client operates a seasonal business so I included a clause in her contract that gave the employer the right to temporarily lay off employees. So the employer has temporarily laid off the affected employees while the store was closed. It did so with no advance notice and the employer has no obligation to pay the employee during this layoff.
Right to Provide the Minimum Notice of Termination Required by Law
The second client operates a professional services business where employee turnover is very low. As a result, the owner employs several long term employees. Several years ago, after attending one of my seminars, he asked me how to get his staff to enter into contracts of continued employment. In exchange for a signing bonus, the employees agreed to sign a contract with the same terms and conditions of employment so that the terms of employment were consistent amongst all employees. One of these terms was a termination clause.
The client called me because she had been having serious problems with one long service employee who was causing staff morale problems and who was the subject of several customer complaints. The owner wanted to discuss whether the employee’s bad behaviour was just cause for termination. Doing so is very difficult for a long-term employee with no written disciplinary record. When I reminded her that she could terminate the person’s employment by providing him with 8 weeks termination pay (even though the employee had been employed for 15 years), he decided to terminate the employee without cause. Without this clause in the employee’s contract, the owner would likely have been obligated to provide the employee with more than 60 weeks’ notice of termination.
Click here for a link to a description of our fixed fee employment contract service.
Lessons to Be Learned:
- Employment contracts should increase an employer’s legal rights.
- Employment contracts should save an employer money in different situations.
- Employment contracts should reduce or eliminate an employer’s legal liability in different situations.
In the recent decision of Andros v Colliers Macaulay Nicolls Inc., the Ontario Court of Appeal (“OCA”) found yet another termination clause to be unenforceable. In this decision, the OCA reaffirmed and clarified various principles surrounding the enforceability of such clauses.
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