Simple way to slash legal costs often ignored

Despite a potential for significant savings in legal fees, many employers don’t use employment agreements
By Stuart Rudner
|Canadian Employment Law Today

Employment lawyers often use the analogy that employment agreements are like pre-nuptial agreements. They are usually entered into, or at least contemplated, at the start of a relationship. The people involved are typically excited and optimistic about their future together. The end of the relationship is not even on their radar screens — people don’t even want to think about it. But they should. If the relationship does come to an end, for whatever reason, the agreement can provide guidance regarding each party’s right and obligations, saving them money and aggravation.

It seems the vast majority of employers in Canada don’t bother to have employees sign an employment agreement. This includes large, multinational corporations. This means the vast majority of employment relationships are based upon verbal agreements, with additional terms implied by law. One of those implied terms, the right to reasonable notice in the event of termination without cause, can cost employers and employees thousands of dollars in legal fees and cause human resources managers untold headaches. That is because the “reasonable notice” requirement is uncertain and open to argument in any given scenario. Having an employment agreement that specifies the notice period can eliminate that uncertainty and greatly reduce legal costs.

Every employee has a contract of employment. But the vast majority of these contracts are verbal. Typically the employee will be interviewed and then, either during the interview or soon thereafter, offered the opportunity to work in a certain position for a certain salary. There may be some discussion as to the amount of vacation or other benefits. He accepts the offer, shows up for work on the designated day, and the employment relationship commences. But the law implies a number of other terms into the contract. For example the Employment Standards Act or equivalent will establish terms regarding items such as hours of work, overtime, statutory holidays, maternity leave, and notice of termination. The common law will also imply terms, particularly regarding notice of termination.