It was long held that an employer must have an employee sign an employment contract prior to their first day of employment. This rule was based on the guiding principle of contract law that consideration must flow between the parties in order to enter into a binding agreement.
If a contract was introduced after the employee’s start date, the employer was required to provide fresh consideration, such as a signing bonus. Contracts were routinely set aside if the employer had the employee sign a contract after the start date, and the contract included an adverse term such as a termination provision that limited the employee’s default common law entitlements.
The Ontario Court of Appeal’s recent decision in Wood v. Fred Deeley Imports Ltd. discussed in our earlier blog “Termination Clauses – Clarity from the Court of Appeal” signaled a change to this practice.
In this case, employee Julia Wood signed an employment agreement the day after she commenced work for the Harley-Davidson distributor.
In a significant conclusion, the Court stated that Wood’s signing of the contract the day after she started working was “no doubt a matter of administrative convenience”. Deeley did not unilaterally impose a new term of Wood’s employment; therefore, fresh consideration was not required.
Deeley showed that there was an exchange of information in the form of phone calls and emails between the parties as they negotiated the employment contract prior to Wood’s first day of work. These negotiations resulted in a completed contract which Wood was provided by email.
Importantly, Wood did not see her contract for the first time until her start date. It was simply unsigned until after she began work.
Further, the contract did not contain any additional material terms Wood hadn’t already agreed on by email or on a telephone call a week prior to her start date.
This conclusion is good news for employers who might have difficulty getting the formal employment contract signed prior to an employee’s start date. Many employees do not have a printer and scanner or other means to conveniently return the signed employment contract prior to beginning work. Most if not all employees do, however, have email, and Wood suggests that a careful exchange of emails setting out the contract, attaching a copy of the final version of the contract, and then getting email confirmation will likely suffice, pending the employee signing off when she arrives on the first day or shortly thereafter.
This can provide some welcomed flexibility in what is often a difficult onboarding process for new employees.
Employers should be able to establish that the employment contract, or at least the terms of the agreement, were negotiated before the start date of employment if the contract is signed the day of, or shortly afterwards. Failing to do so may be costly depending on which terms of the agreement are challenged for enforceability. It is also vital that new terms not be added to the contract after the employee has agreed to it.
Lessons for Employers
Rather than leaving it to chance or litigation, it is always best that employers comply with the guiding principle of contract law and have the employment contract signed well prior to the start date, not on the start date, nor after the start date. Consulting an employment lawyer well in advance of signing an employment agreement prior to confirming the start date is the best practice. Never should there be an understanding, oral or otherwise, that an agreement to work has been entered into based on the employers representations such as confirming a start date to the prospective employee.
Lessons for Employees
Employees who are terminated should always obtain legal advice to determine whether they are entitled to common law notice, or whether their notice is limited by signing an employment contract. Even if the employment contract which limits notice is signed there may be circumstances where the termination clause is not valid and/or enforceable. If so, the employee may be entitled to common law notice being a substantially greater amount of notice or pay in lieu of notice than offered by the employer. Consulting with an experienced employment lawyer as soon as receiving an employment contract is always recommended.
Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.
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