What you don't know can hurt you – part 2

Without proper contracts and policies in place, employers are exposed to unnecessary liability

What you don't know can hurt you – part 2
Nadia Zaman

Dear employer,

Do you still have new employees sign their contract on the first day? Do you have workers that are paid as “contractors” but are really no different than your employees?

The good news is you are not alone. The bad news is that it can expose you to unnecessary liability.

Recently, I wrote a letter to you to expose some common myths and to help you make strategic decisions. I warned that what you don’t know can hurt you.

For example, if you don’t have proper contracts and policies in place and an issue suddenly arises – perhaps an employee complains they are being discriminated against, being harassed, or constructively dismissed – you will not have the appropriate protections in place. Without those protections, you will end up being exposed to not only unnecessary liability but also a bad reputation and loss of employee morale.

I noted that there are several other myths that I will leave for another day. Well, today is the day!

Here are some of the other prevalent myths and mistakes:

Having employees sign employment contracts after they have started working: An employment contract is a strategic tool employers can use to dramatically reduce their severance obligations and maximize their rights and flexibility. However, employers often make the mistake of not implementing contracts properly, resulting in a contract that is unenforceable due to lack of consideration.

Consideration is something of value in exchange for signing the contract. When an employee has not yet started working for your company, the offer of employment itself can constitute consideration. But when an employee has already started working, you must provide them with fresh consideration in exchange for signing an employment agreement (for example, a signing bonus, raise, more vacation days). If you don't want to do that, make sure you get the employee to sign the agreement before they commence employment. Even if the employee signs the contract on their first day of work, it will be unenforceable, barring exceptional circumstances.

And of course, ensure the contract has been reviewed by an employment lawyer. For instance, it will be worthless to have a termination clause if it is unenforceable. Your employment lawyer will be able to advise you and limit your severance obligations — it could be the difference between an employee being entitled to receive eight weeks of pay versus 24 months.

Playing "nice" when employees have behavioural and/or performance issues and not documenting any concerns: One of the best ways employers can protect themselves is by documenting concerns regarding an employee's performance or behaviour. However, some employers don't want to be seen as harsh and end up trying to soften the blow of a negative performance review or an employee's misconduct to their own detriment. Many managers have never been trained on how to manage, or how to have difficult conversations. As a result, they avoid them.

Consider this: if you only raise such concerns verbally, while praising the employee in writing, what will happen when you want to dismiss the employee for such concerns and they allege it is due to reprisal and/or discrimination? You will lack the documentation to support your position and could be exposed to substantial liability. On the flip side, if you keep your concerns well-documented, you can use that as supporting evidence to show your decision to dismiss was entirely unrelated to any protected ground under human rights legislation and was not a reprisal for the employee trying to exercise their rights.

So here's your strategic mantra: document, document, document.

Assuming that a workplace investigation only needs to be conducted when there is a formal complaint: Pursuant to the Occupational Health and Safety Act, employers are required to conduct an investigation when they are aware or ought to be aware of workplace harassment, bullying or violence. What does this mean in practice? Even if an employee has not lodged a formal complaint, but you know (or should know) an employee is being harassed, then the obligation to investigate will be triggered.

You have a duty to provide a safe workplace for all employees — don't wait for an employee to bring a formal complaint. Of course, an “investigation” can take many forms, and your obligation is to conduct one that is reasonable in the circumstances.

Misclassifying employees as independent contractors: This is a fairly common mistake that can expose you to substantial liability. Why? Because unlike independent contractors, employees have various protections under the applicable employment standards legislation. And it is not enough to simply label and pay them as an independent contractor, because courts will look at the true nature of the relationship to determine whether the worker is an employee.

We can draft a very strong contract, but if the reality is that the worker is treated like an employee, the courts (or Canada Revenue Agency) will deem them to be one.

As I noted in my last letter, strategic use of contracts and policies is critical to protecting your workplace. In particular, you can use contracts, policies and procedures strategically to

  • reduce labour costs
  • minimize risk and liability
  • maximize your rights and flexibility as an employer.

In addition, if you keep supporting documentation as issues arise, you will likely be able to use that to protect yourself in the event an employee alleges, for example, that you discriminated against them.

What you don’t know can hurt you, but what you do know can help you, if you approach HR strategically. Rather than assuming, make informed decisions. Remember that employment relationships are legal relationships.

As we often say, “If you think you need an employment lawyer, you probably do.” And although we seldom say it, if you think you don't need an employment lawyer, you should probably get an HR checkup.



Your employment lawyer

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