Employment Contracts/Offer Letters

By Sherrard Kuzz LLP

I often work with employers that complain about the amount of termination pay required when they terminate an employee (note: this is not severance pay).

Much of the cost stems from the structure of the offer letter or employment contract. Some of the issues relate to poor performance management and/or documentation. Yet others result from poor or 'mixed' practices that set a precedent.

However, if you take great care in creating an offer of employment, you can mitigate your risk and costs upon termination. Carefully worded documents, if signed by a new hire (they need to be counselled to get independent legal advice) can clearly define termination pay or pay in lieu of notice as the Employment Standards minimums.

"It is entirely legal to have an employee sign an agreement that restricts their notice of termination (or pay in lieu thereof) provided the amount agreed is not less than the ESA minimum" says Keith Burkhardt of Sherrard Kuzz, LLP, Toronto. "Frankly, I do not know why employers do not have a termination provision defining notice in every contract - it provides a great safety net. Courts have routinely stated that if a contract dictates a notice period that is guaranteed to always be equal to or greater than the ESA, it will be enforceable."

There are pluses and minuses to taking this approach - some employees will want more and mitigation/alternate employment is moot because the notice period must be paid whether the employee finds a job or not. You also need to be certain that all of your termination actions are consistent.

Employers may want to audit their hiring process and revisit their practices in order to have 'certainty' at the end of a contract.

HR-Fusion’s Strategic Partner, Sherrard Kuzz LLP, is one of Canada's leading employment and labour law firms. They represent the interests of employers, unionized and non-unionized, and operate in both the public and private sectors. Their clients are domestic and foreign ranging in size and complexity of operations from small, single-location, single-business enterprises to large, diverse multinational corporations.