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'Kitchen sink' approach to contracts often fails

Do contracts really matter or are they irrelevant?

Do contracts really matter or are they irrelevant? In the often confusing world of workplace law, why are some agreements upheld when many others are simply overlooked? The answer depends on the purpose the contract is meant to serve.

Independent contractor agreements
It usually will not matter that workers have signed agreements confirming they are not employees. When this characterization is challenged, sometimes years later, courts and tribunals are apt to find the workers were truly employees. No surprise there. The real test is not what a contract says but how the parties behave.

Post-employment restrictions
Many contracts contain broad restrictions preventing workers from competing with their former employers or soliciting their old clients following their departure. Courts easily strike many of these “agreements” down because employers often take a kitchen sink approach to drafting employment contracts. They bargain for excessive protection, no matter how junior or administrative the employee. However, in seeking such protection, they sometimes get none at all.

Policy manuals
In one recent case, the employer argued that since the employee had not reported harassment, as she was required to under the company's policy manual, the company could not take any steps to address it. As a result, it argued, it was the employee who had breached the employment relationship, not the harasser. The court easily dismissed this notion. Although terms in a policy manual can sometimes operate as conditions of an employee's job, those terms must be reasonable or they will not be upheld.

Termination clauses
Similarly, contractual language surrounding termination is often challenged. This is because even without a contract, there is an implied right to reasonable treatment upon termination. Why would anyone agree to anything less? Seldom do employees negotiate contracts on the same footing as their employer. Therefore, courts have developed a number of tests. If the contract is ambiguous, fails to respect statutory standards or is executed under duress, it will be set aside.

Daniel A. Lublin is an employment lawyer with Whitten & Lublin LLP. Reach him at dan@toronto-employmentlawyer.com.

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