Duty of Honesty in Employment Contracts | Authors: Bram Lecker & Kimberley Sebag

The Duty of Honesty in Employment Contracts

If you are in the process of negotiating an employment contract for a new job, then this is an important article to read!  In 2014, during a landmark case, Bhasin vs. Hrynew 2014 SCC 71, the Supreme Court of Canada took a close look at the implied duty of honesty in contractsThe ruling made the expectation of fair play very clear. During contract negotiations, neither party can sabotage the terms or give the other party a wrong impression about the stipulations. For employees, this was pivotal because with employment contracts, employers generally hold the balance of power. This case recognized good faith as a basic organizing principal and provided employees more protection under the law.

Bhasin vs. Hrynew: Duty of Honesty

Harish Bhasin and Larry Hrynew both operated competitive businesses that sold education savings plans for the Can-Am Financial Corporation. Hrynew tried to gain advantage over his competitor, and eventually wiped him out, by influencing Can-Am. He convinced them not to renew Bhasin’s business contract. Consequently, Can-Am began dealing dishonestly with Bhasin, misleading him on several occasions, causing his business to lose value. Subsequently, they terminated his contract.

Bhasin sued for breach of the implied Duty of Honesty in his contract. And the Supreme Court of Canada agreed with him. The Duty of Honesty became a new common law applicable to all contracts. It requires the parties to be honest with each other in relation to the performance of their contractual obligations. They must not lie or otherwise knowingly mislead each other.

Justice Cromwell provided further elaboration about this unstated and straightforward expectation of good faith during contract negotiations. It can manifest itself in different ways for different types of contracts and contractual relationships. In many cases, it requires more than just honesty.

Good Faith Treatment

Accordingly, all employees should expect fair play during discussions and negotiations of employment matters. This includes the terms of your salary and bonus payments, a promotion or an even an internal company investigation. Our courts will frown at employers who act less than forthright, and in bad faith, at any point during your employment relationship. In a wrongful dismissal case, it is not uncommon for judges to award employees additional compensation for bad faith treatment when employers treat them poorly during terminations.

This duty of honesty and good faith, however, comes with limitations. It does not go far enough to engage your loyalty or put your interests first. Courts remain hesitant to interfere too much with free trade and the meeting of the minds that occurs when two parties negotiate and agree into a contract.

Employment and Termination Contracts

Employment contracts are important documents that govern an employment relationship. Similarly, termination agreements set out your compensation terms when the relationship ends.  You must clearly understand these documents before you sign on the dotted line. At the least, ensure an employment lawyer vets these agreements for you.

Sometimes, employers make these offers and they set unreasonably tight deadlines for you to accept them. Now, common law affords you fair play. You can therefore push back and request reasonable timeline extensions to seek legal help.

Hiring an Employment Lawyer

An employment lawyer can help you gain important perspective about your rights. Multinational corporations, especially those with head offices in the U.S., erroneously assume our employments laws are the same.  Your employment contract must pass a stress test of more than eight stringent technical requirements to ensure compliance with our laws. The courts will consider contracts null and void when they are ambiguously worded or fail to provide adequate considerations. An employment lawyer can identify these gaps for you. Sometimes this opens avenues for further negotiation in your favour.

Lecker & Associates are employment and disability benefits lawyers. To properly understand your contract, book a 1-hr consultation with one of our experienced employment lawyers. We have exclusively represented the interests of employees of Ontario for over 35 years.  This is an area of law we understand very well.

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