U.S-Style Employment Contracts For Ontario Employees

U.S-Style Employment Contracts| Authors: Bram Lecker & Simon Pelsmakher

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U.S-Style Employment Contracts: Does Yours Pass the “Smell Test”?

Canadians and Americans may be culturally similar on some levels. However, in the arena of employment law, we could not be further apart. This is a legal environment that would make the likes of Donald Trump contrite and speechless. Generally, U.S-style employment contracts will not get a passing grade in Canada.

Over the years, our employment laws have become far superior compared to those of the United States. They protect employees from unjust firings, harassment and discrimination due to a disability, illness or pregnancy. In Ontario, 2018 heralded in the passing of Bill 148. And with it, the government elevated employment laws to protect contract workers. Employees now receive enhanced parental leave, vacation time and higher minimum wage. More recently, the Ontario Superior Court took a very decisive step in this direction, too. It sounded the death knell on substandard employment contracts, once and for all.

U.S-Style Employment Contracts

In contrast to Canadian provinces, some U.S. states have increasingly shifted to the right, declaring themselves “Right to Work” labour jurisdictions. They allow employers to end your employment term at-will and with little notice or compensation. Employees do not have to be at fault. You could be out of a job for simple and ambiguous reasons, like “restructuring”. It is no wonder that COVID-19 has left many employees down south in hapless circumstances.

Such policies have long been the wishful dream of Canadian business lobbyists. They have sought provisions to easily get rid of staff, as they see fit. Indeed, COVID-19 gave Ontario employers a small victory in this regard when the Ford government amended Ontario’s employment laws, in early June 2020. While the new rules temporarily kneecap employee rights, they still continue to protect employees fiercely. Indeed, it is not that easy to take employee rights away in Ontario, even by political decree.

Regardless, we continue to see multinational employers doing business in Ontario as if they are in their own jurisdictions. They are either unaware of our laws or blatantly choose to ignore them. It seems like they bring their  U.S-style employment contracts here, change the flag and consider them fit for Ontario employees.

Signing Unfair Employment Contracts

Unless you are Wayne Gretsky, you will always feel powerless and unequal when negotiating employment contracts. For years, employers have forced employees to sign one-sided agreements that restrict their severance entitlements when they are let go. This becomes particularly frustrating when employers require new hires to sign contracts as a condition of employment.

In these situations, employees neither challenge nor pay attention to unfair and illegal provisions. Understandably, many don’t want to rock the boat when they are embarking on a fresh journey with a new employer. However, this leads to buyer’s remorse during terminations. Almost always, employees end up engaging employment lawyers to resolve severance pay disputes.

Ground-Breaking Employment Contract Case

The Ontario Court of Appeal has decisively forged a path in this regard with a strong ruling in the recent case, Waksdale v. Swegon North America Inc. At 42 years of age, Benjamin Waksdale was terminated from his Director of Sales position, which he had held for eight months. He had signed an employment contract that restricted his termination agreements if he was let go without cause. He litigated for severance pay of six months, but the judge dismissed his claim because of the contract he had signed.

Mr. Waksdale escalated his grievance to the Ontario Court of Appeal where amazingly the preceding decision was overturned. The reason? Mr. Waksdale’s contract contained another provision that denied him any severance if his employer fired him with cause. This clause contravened the Employment Standards Act (ESA) and the Court rendered the entire contract null and void. It allowed Mr. Waksdale to pursue his full and unencumbered severance pay per common law.

Null and Void Employment Contracts

For too many years, we have argued that employment contracts should never undermine an employee’s statutory entitlements. Until now, courts often opted to strike out only the offending clauses in employment contracts, while enforcing the rest. This is no longer the case. Ontario’s Court of Appeal has finally proclaimed, “What is dead cannot die.”

If your employment contract contains any provision that contravenes the ESA, then the entire contract becomes unenforceable. In fact, your employment contract must pass a stress test of more than eight stringent technical requirements to ensure compliance. Our courts will throw out contracts that are ambiguously worded or fail to provide adequate considerations.

Ultimately, your employer must offer you reasonable notice or compensation in lieu when they fire you without cause, regardless of what they have stipulated in your employment contract. The definition of reasonable depends on your age, length of service, position and employability. The courts will determine how long it would take you to land a comparable job. Every case is judged on its own merits. However, higher awards in Canada range from 26 to 32 months of your total income and benefits.

Understanding Your Rights

We advise all our clients not to sign any employment contract until we have reviewed it. We can help you understand the terms and conditions your employer is asking you to accept and highlight unjust clauses that may not hold up in court.

Being informed of your rights is always a good first step for levelling the playing field with your employer. Contact us to see if your employment contract passes the “smell test” in Ontario.

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