Employment Contracts: New Employees Beware

Employment Contracts: New Employees Beware

Congratulations, you just received a new job offer!

After all the hard work involved in the hiring process, the last thing on most candidates’ minds is how signing a new employment contract may be limiting their rights upon termination. However, you should be fully aware of how your severance entitlements may be limited by the proposed employment contract as there can be significant consequences to you and your family.

Typical limiting provisions either fully or partially exempt the employee from a common law severance entitlement upon termination. This exemption is crystallized upon the employee signing the contract and can only be disregarded in extenuating circumstances. Recent case law including Nemeth v. Hatch Ltd., 2018 ONCA 7 and Stangenberg v. Bellamy Software, 2016 ABQB 160 have held that such limiting provisions are enforceable so long as the following criteria are met:

  • The provision complies with the statutory minimums in the Employment Standards Code;
  • The language of the limiting provision is clear and unambiguous;
  • There must be consideration for the contract; and,
  • There is no evidence of unconscionable conduct at the time of signing the contract.

The Employment Standards Code (ESC) vs common law severance entitlements

All employers must comply with the statutory minimum severance entitlements under the ESC. Under the ESC, an employee will receive a maximum of 8 weeks severance pay in lieu of notice whereas, under the common law, the same employee may be entitled to a maximum of 2 years severance. Due to the significant contrast in entitlement under the ESC and common law, it is essential to understand how your employer proposes to limit your severance entitlements prior to signing your employment contract. If your employer is proposing to limit your severance entitlement to the ESC statutory minimums you may be waiving significant amounts of severance should you become a long-term employee.

What you can to do protect yourself

If you intend to sign a new employment contract, call West Legal today. The lawyers at West Legal can review your contract and advise you on any proposed limitations to your severance entitlements along with your other rights and obligations so that you can confidently accept the terms of employment.