Worker signed contract less than two weeks after starting, but B.C. court says it was unenforceable
A recent British Columbia Supreme Court decision serves as a healthy reminder for employers: Make sure the employment contract is signed before the employee starts his new job. Otherwise, the entire contract might be unenforceable.
Paul Krieser started working for Active Chemicals Ltd. on May 24, 1988. But he wasn’t given an employment contract to sign until June 3. Among other things, the contract restricted the amount of notice he would receive upon termination.
Krieser said he was under the impression that if he did not sign the contract, he would be let go. A representative of the defendant confirmed that if he had not signed, it would not have continued to employ him.
“I believe that I made it clear to Mr. Krieser when I reviewed the agreement with him that signing (it) was a term of his employment,” the representative said in his affidavit. “If Mr. Krieser did not want to be bound by the agreement, his options were to resign or to be terminated.”
The employer said the short delay between the employment interview and the signing of the contract indicated that it simply represented the culmination of negotiations with Krieser. It should not be viewed as a new agreement, it said.
The court said the contract introduced terms that were detrimental to Krieser. The evidence was clear the two did not discuss termination provisions or other terms regarding intellectual property rights and restrictions on competition before June 3. Krieser began employment on May 24 on the basis these matters would be governed by the common law, the court said. The contract introduced new restrictions on his pre-existing common law rights.
The court rejected the employer’s argument that the short period between the time he started and the time he signed meant it wasn’t a new contract and simply represented the culmination of negotiations. It said there was no evidence there were any negotiations.
The law is clear that there must be adequate consideration for signing a contract. In employment law, continuing the worker’s employment is not usually enough on its own. In Hobbs v. TDI Canada Ltd. the Ontario Court of Appeal said the law does not permit employers to present employees with changed terms of employment, threaten to fire them if they do not agree to them and then rely on the continued employment relationship as consideration for the new terms.
The B.C. Supreme Court agreed with the Ontario court’s opinion.
“Some additional benefit must flow to the (employee) from signing, beyond continued employment for an unknown period,” it said. “The benefit might be greater security of employment through forbearance for a specified time, or it might be a new term beneficial to the employee in the revised agreement, but adequate consideration requires something more than the bald promise that ‘we won’t fire you right now.’”
The court accepted that Krieser would have been let go if he had not signed. In Techform Products v. Wolda, the Ontario Court of Appeal said continued employment could, in some cases, constitute consideration. But the employer had to have a clear prior intention to terminate that it was willing to set aside. It couldn’t, out of the blue, amend the contract and say, “Sign or you’re fired.”
In Krieser there was nothing in the contract to benefit the worker nor was there any evidence that signing it provided him with increased job security, the court said. Therefore, the contract was unenforceable and Krieser’s severance entitlement would be determined by common law principles, not those set out in the contract. Krieser’s employment was terminated on Nov. 25, 2004. Under the terms of the contract, Krieser would have been entitled to only six months’ notice. But the court awarded him 13 months’ notice.
For more information see:
• Krieser v. Active Chemicals Ltd., 2005 CarswellBC 2241 (B.C. S.C.)
Paul Krieser started working for Active Chemicals Ltd. on May 24, 1988. But he wasn’t given an employment contract to sign until June 3. Among other things, the contract restricted the amount of notice he would receive upon termination.
Krieser said he was under the impression that if he did not sign the contract, he would be let go. A representative of the defendant confirmed that if he had not signed, it would not have continued to employ him.
“I believe that I made it clear to Mr. Krieser when I reviewed the agreement with him that signing (it) was a term of his employment,” the representative said in his affidavit. “If Mr. Krieser did not want to be bound by the agreement, his options were to resign or to be terminated.”
The employer said the short delay between the employment interview and the signing of the contract indicated that it simply represented the culmination of negotiations with Krieser. It should not be viewed as a new agreement, it said.
The court said the contract introduced terms that were detrimental to Krieser. The evidence was clear the two did not discuss termination provisions or other terms regarding intellectual property rights and restrictions on competition before June 3. Krieser began employment on May 24 on the basis these matters would be governed by the common law, the court said. The contract introduced new restrictions on his pre-existing common law rights.
The court rejected the employer’s argument that the short period between the time he started and the time he signed meant it wasn’t a new contract and simply represented the culmination of negotiations. It said there was no evidence there were any negotiations.
The law is clear that there must be adequate consideration for signing a contract. In employment law, continuing the worker’s employment is not usually enough on its own. In Hobbs v. TDI Canada Ltd. the Ontario Court of Appeal said the law does not permit employers to present employees with changed terms of employment, threaten to fire them if they do not agree to them and then rely on the continued employment relationship as consideration for the new terms.
The B.C. Supreme Court agreed with the Ontario court’s opinion.
“Some additional benefit must flow to the (employee) from signing, beyond continued employment for an unknown period,” it said. “The benefit might be greater security of employment through forbearance for a specified time, or it might be a new term beneficial to the employee in the revised agreement, but adequate consideration requires something more than the bald promise that ‘we won’t fire you right now.’”
The court accepted that Krieser would have been let go if he had not signed. In Techform Products v. Wolda, the Ontario Court of Appeal said continued employment could, in some cases, constitute consideration. But the employer had to have a clear prior intention to terminate that it was willing to set aside. It couldn’t, out of the blue, amend the contract and say, “Sign or you’re fired.”
In Krieser there was nothing in the contract to benefit the worker nor was there any evidence that signing it provided him with increased job security, the court said. Therefore, the contract was unenforceable and Krieser’s severance entitlement would be determined by common law principles, not those set out in the contract. Krieser’s employment was terminated on Nov. 25, 2004. Under the terms of the contract, Krieser would have been entitled to only six months’ notice. But the court awarded him 13 months’ notice.
For more information see:
• Krieser v. Active Chemicals Ltd., 2005 CarswellBC 2241 (B.C. S.C.)
