Steps to take at the time of hire to help ensure parting isn’t such painful sorrow
At the start of the employment relationship, neither side is usually giving much thought to what might happen if things sour down the road.
From an employer’s point of view, that’s a shame. Because if the appropriate steps are taken at the time of hire, it could save the employer a lot of grief in case something goes wrong.
But, unfortunately, many employers continue to shy away from employment contracts because of a fear they will scare off good candidates or detrimentally alter the corporate culture. But as long as the terms of the contract are reasonable, taking into account the seniority of the position, employees won’t object to signing one. In fact, most employees expect it.
The following are some areas that should be considered for inclusion in employment contracts in order to protect employers if there’s a breakdown of the employment relationship:
•Termination clause: The clause must indicate the employee can be terminated without notice or pay in lieu of notice in the event the employer has just cause.
Consideration should be given to whether a definition of just cause is beneficial in the particular circumstances. The termination clause should also set out a formula-based notice of termination that provides a set period of weeks notice for each completed year of service.
So long as the notice provided is no less than the applicable provincial statutory minimum, such clauses will be enforceable (subject to the implementation concerns set out below.)
This clause should also require that the employee give a set period of advance notice or resignation.
•Truth provision: Some contracts (or applications for employment) have a provision that states all information contained in the candidate’s application for employment and resumé are truthful and have been relied on by the employer in making an offer of employment.
The provision then goes on to state that in the event it is later learned the candidate’s qualifications or credentials have been misrepresented, the employer will have the right to terminate employment for just cause.
Recent studies indicate there is a high level of employee misrepresentation in resumés. Therefore, this type of provision is useful for employers if it becomes clear after hire that an employee has misstated or overstated her skills or expertise.
•Inducement provision: Upon termination of employment, an employer is potentially exposed to a lengthier period of reasonable notice if it has induced an employee to leave secure employment to come and work for it.
But leaving a secure position with another employer is a necessary but not sufficient factor to give to a finding of inducement. If the employee was willing to leave previous employment for reasons other than the employer actively encouraging him to do so, there is no inducement.
In other words, if the employee is what has been described as a “willing seducee,” this will mitigate against an extension of the notice period based on inducement. To guard against this type of argument, employers should consider including a statement in the employment contract that the employee agrees he has not been induced to leave secure employment elsewhere and that any period of notice upon termination of employment shall be based solely on a consideration of the employee’s service with the employer.
•Restrictive covenants: Employers should consider the inclusion of an appropriate and reasonable restrictive covenant in the employment contract.
A restrictive covenant is a contractual undertaking to refrain from certain conduct. In the context of employment there are three general types of restrictive covenants: confidentiality, non-solicitation and non-competition agreements.
An employer is required to use the least intrusive restrictive covenant that would adequately protect the employer’s legitimate business interests. Generally, confidentiality agreements are enforceable. An employer has a proprietary interest in its confidential information and can protect this information by having employees sign a provision requiring an employee to keep this information confidential both during the term of employment and subsequent to termination of employment.
Depending on the level of employee, a non-solicitation covenant may also be appropriate. A non-solicitation covenant typically states that a departing employee may not solicit the employer’s customers or employees for a specific period of time subsequent to the termination of the employee’s relationship with the employer.
As a general rule, non-solicitation clauses are permissible so long as they are reasonable in scope in respect of time, geographic area and the prohibited conduct covered.
By contrast, a non-competition agreement that prohibits an employee from dealing with an entire sector of business post-termination is particularly intrusive on the future rights of an employee.
Generally, the courts will not enforce a non-competition clause if a non-solicitation clause would adequately protect an employer’s interests. Non-competition clauses will only be upheld in those situations where a non-competition clause is the only way an employer can protect its legitimate business interests from the former employee. Generally, these types of clauses should only be considered in cases of top management where they may be enforceable.
Having the appropriate items of protection in place in an employment contract is of no value to an employer if a court later holds the contract is unenforceable. To ensure the contract will be upheld by a court, employers must ensure the candidate is provided with the contract well prior to the commencement of employment, preferably at the time the position is formally offered.
It is important the employment agreement not be signed immediately at the time the offer is made. The prospective employee should be given adequate time to take the employment agreement away so she may consider it with her family, friends and professional advisors and seek independent legal advice should she deem it necessary. Receipt of a signed copy of the agreement by the employer should signal the candidate’s acceptance of the offer of employment.
In no circumstance should the employee be permitted to commence working prior to returning a signed copy of the employment agreement. If the above procedure is not followed, it will be open to the employee to argue the employment agreement is unenforceable.
Taking the above steps at the time of hire goes a long way in ensuring that an employer avoids a nasty surprise when the employment relationship comes to an end.
Chris Foulon is a partner in Israel Foulon LLP an employment and labour firm in Toronto. He can be reached at (416) 640-1550 or [email protected].
From an employer’s point of view, that’s a shame. Because if the appropriate steps are taken at the time of hire, it could save the employer a lot of grief in case something goes wrong.
But, unfortunately, many employers continue to shy away from employment contracts because of a fear they will scare off good candidates or detrimentally alter the corporate culture. But as long as the terms of the contract are reasonable, taking into account the seniority of the position, employees won’t object to signing one. In fact, most employees expect it.
The following are some areas that should be considered for inclusion in employment contracts in order to protect employers if there’s a breakdown of the employment relationship:
•Termination clause: The clause must indicate the employee can be terminated without notice or pay in lieu of notice in the event the employer has just cause.
Consideration should be given to whether a definition of just cause is beneficial in the particular circumstances. The termination clause should also set out a formula-based notice of termination that provides a set period of weeks notice for each completed year of service.
So long as the notice provided is no less than the applicable provincial statutory minimum, such clauses will be enforceable (subject to the implementation concerns set out below.)
This clause should also require that the employee give a set period of advance notice or resignation.
•Truth provision: Some contracts (or applications for employment) have a provision that states all information contained in the candidate’s application for employment and resumé are truthful and have been relied on by the employer in making an offer of employment.
The provision then goes on to state that in the event it is later learned the candidate’s qualifications or credentials have been misrepresented, the employer will have the right to terminate employment for just cause.
Recent studies indicate there is a high level of employee misrepresentation in resumés. Therefore, this type of provision is useful for employers if it becomes clear after hire that an employee has misstated or overstated her skills or expertise.
•Inducement provision: Upon termination of employment, an employer is potentially exposed to a lengthier period of reasonable notice if it has induced an employee to leave secure employment to come and work for it.
But leaving a secure position with another employer is a necessary but not sufficient factor to give to a finding of inducement. If the employee was willing to leave previous employment for reasons other than the employer actively encouraging him to do so, there is no inducement.
In other words, if the employee is what has been described as a “willing seducee,” this will mitigate against an extension of the notice period based on inducement. To guard against this type of argument, employers should consider including a statement in the employment contract that the employee agrees he has not been induced to leave secure employment elsewhere and that any period of notice upon termination of employment shall be based solely on a consideration of the employee’s service with the employer.
•Restrictive covenants: Employers should consider the inclusion of an appropriate and reasonable restrictive covenant in the employment contract.
A restrictive covenant is a contractual undertaking to refrain from certain conduct. In the context of employment there are three general types of restrictive covenants: confidentiality, non-solicitation and non-competition agreements.
An employer is required to use the least intrusive restrictive covenant that would adequately protect the employer’s legitimate business interests. Generally, confidentiality agreements are enforceable. An employer has a proprietary interest in its confidential information and can protect this information by having employees sign a provision requiring an employee to keep this information confidential both during the term of employment and subsequent to termination of employment.
Depending on the level of employee, a non-solicitation covenant may also be appropriate. A non-solicitation covenant typically states that a departing employee may not solicit the employer’s customers or employees for a specific period of time subsequent to the termination of the employee’s relationship with the employer.
As a general rule, non-solicitation clauses are permissible so long as they are reasonable in scope in respect of time, geographic area and the prohibited conduct covered.
By contrast, a non-competition agreement that prohibits an employee from dealing with an entire sector of business post-termination is particularly intrusive on the future rights of an employee.
Generally, the courts will not enforce a non-competition clause if a non-solicitation clause would adequately protect an employer’s interests. Non-competition clauses will only be upheld in those situations where a non-competition clause is the only way an employer can protect its legitimate business interests from the former employee. Generally, these types of clauses should only be considered in cases of top management where they may be enforceable.
Having the appropriate items of protection in place in an employment contract is of no value to an employer if a court later holds the contract is unenforceable. To ensure the contract will be upheld by a court, employers must ensure the candidate is provided with the contract well prior to the commencement of employment, preferably at the time the position is formally offered.
It is important the employment agreement not be signed immediately at the time the offer is made. The prospective employee should be given adequate time to take the employment agreement away so she may consider it with her family, friends and professional advisors and seek independent legal advice should she deem it necessary. Receipt of a signed copy of the agreement by the employer should signal the candidate’s acceptance of the offer of employment.
In no circumstance should the employee be permitted to commence working prior to returning a signed copy of the employment agreement. If the above procedure is not followed, it will be open to the employee to argue the employment agreement is unenforceable.
Taking the above steps at the time of hire goes a long way in ensuring that an employer avoids a nasty surprise when the employment relationship comes to an end.
Chris Foulon is a partner in Israel Foulon LLP an employment and labour firm in Toronto. He can be reached at (416) 640-1550 or [email protected].
