It’s possibly the worst fraud in workplace law – corporations, with expensive lawyers and deeper pockets, requiring their employees to sign one-sided employment contracts that reduce their legal rights. And employees, without bargaining power or an understanding of the law, often don't realize their interests have been undermined.
What most people don’t understand is that a written employment contract is not a requirement of employment. This is because the law implies a number of essential terms and conditions, such as termination, fair treatment and duration, and it does so whether or not they are written down.
However, because many of those implied terms are considered too employee-generous, most companies insist that employees sign contracts that reduce those implied rights. Employees then unknowingly agree to be eliminated with minimum notice, demoted, see their salary slashed and prevented from competition following their departure – all with legal impunity.
Don’t misunderstand. Employees are not entirely without recourse. The Supreme Court has recognized the unique nature of the employment contract and the inherent power imbalance when negotiating terms. As a result, judges have created various devices to prevent unfairness. If the contract is ambiguous, illegal, provides less than employment standards legislation or is entered into under duress or coercion, it may be set aside.
While these devices provide a level of protection, they still ignore some fundamental truths.
First, employees seldom negotiate contracts, and if they do it’s rarely on equal footing. Either they fear the job offer will be withdrawn and offered to a competitor or they are simply told the language will not be changed. In today’s job market, their fears are not unfounded. Employers, then, usually have their way.
As well, the legal doctrine of freedom contract, which provides employers the right to offer employment on their own terms, is still recognized today, regardless if it is in conflict with practical workplace reality. Therefore, if a contract has been reviewed and executed before employment begins, an employee is often held to the deal that was made, whether fair or not and sometimes many years later.
How do these contracts affect workers? In a file my law firm is handling, the employee had been recruited away from a large American technology firm where he worked for eight years, to join a Canadian competitor. Before he began, he signed what he was told was a “standard form” contract. Six months later he was fired.
It was a simple win – or so he thought. He had a strong claim to make his new employer responsible for the severance he was owed from his old job. But the contract he signed specifically prevents him from making that claim and worse, limits his damages to only one week’s pay. Although the conclusion to his case will probably be based on other factors that are involved, there is one certainty: without that contract, his case would be stronger.
What should employees do? Challenge the enforceability of these contracts, where the facts present them with that argument. I have won in court by raising the inference that a signed contract was without proper consent – such findings are not exceptions. Have any new contract reviewed with a lawyer and don’t be reluctant to renegotiate terms.
Daniel A. Lublin is an employment lawyer focusing on the law of dismissal. He can be reached at email@example.com