Employment agreements avoid awkward hiring situations

Agreements – which should be used for all employees – can be letters rather than 'formal' agreements

By Stuart Rudner

Why do employers persist in presenting brief “offer letters” that set out key terms of the employment relationship and conclude by saying “you will be required to sign an employment agreement before you start” or something to that effect?

Not only is the subsequent employment agreement likely unenforceable, but it creates an awkward situation on the first day of work that can easily be avoided.

As regular readers will know, I always advise employers to use employment agreements for all employees. The form and substance of these documents can and should vary depending upon the nature of the position, and they can take the form of a letter as opposed to a “formal agreement.”

However, these contracts can form the basis of the relationship and set out the fundamental terms and conditions thereof.

Most employers know you cannot simply impose a new contract of employment when there is already one in place. In order to make the new contract enforceable, there must be some form of “consideration” flowing from each party to the other.

In other words, the employee must also receive some benefit from the new contract. This can include anything of value, from a one-time bonus to a salary increase to additional benefits.

However, if there is already an agreement in place (even a verbal one), and the employer then asks the employee to sign a new one, it is unlikely to be enforced when, as is typically the case, the employee is not gaining anything by doing so.

In addition to the legal challenge, this process can create a difficult start to the relationship. What happens if the employee reads the new agreement, protests that it contains terms he never agreed to and refuses to sign? The employer cannot simply “cancel” the hire as there is already an agreement.

The best approach is to tell the successful candidate for a job that you would like to offer employment to them on the terms and conditions set out in a contract of employment, which you can either present immediately or deliver later on.

Provide the candidate with a reasonable opportunity to review the offer and seek legal advice if they choose, and ensure that it is signed long before they start working. There is no benefit to be had from having the employee sign a brief offer letter that “requires” them to sign a future contract, the content of which is unknown to them.

Stuart Rudner is an HR lawyer and a founding partner of Rudner MacDonald LLP, a Toronto-based firm specializing in Canadian employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at srudner@rudnermacdonald.com. You can also follow him on Twitter @CanadianHRLaw and join his Canadian HR Law Group on LinkedIn. 

Stuart Rudner

Stuart Rudner is a founding partner of Rudner MacDonald LLP in Toronto. Follow him on Twitter @CanadianHRLaw. He can be reached at srudner@rudnermacdonald.com.
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