You Want Me to Sign a New Employment Contract?

When you start a new job, often you sign a one or two page letter agreeing to certain terms of employment. Sometimes the agreement is many pages, and lawyers are involved. Whatever you sign at the start of your employment, it constitutes an employment agreement between you and your employer. It is not typical that these agreements are amended after you have started working.

Companies occasionally need to reorganize positions, or they come to recognize that they are at risk of losing a key employee and want to help ensure that employee is incented to stay in their position, so they may come up with a revised employment contract to accomplish that. Often the agreement will specify a longer notice period from the employee on resignation, and in return offer larger severance provisions in return if the employee ends up being released without cause.

As an employee, this can be a difficult prospect to deal with. You may like things as they are, or feel like you are being pushed around when faced with signing a contract. What do you do?

In the case of an employer trying to reduce the risk that you would leave, offering a larger severance package is slightly contradictory – they want you to stay, so the likelihood of your being laid off is pretty small, so is a generous severance package significant compensation for signing the agreement?

If an employer is trying to reduce the risk of you leaving, you likely have some room to negotiate. If the employer is reorganizing for financial reasons, you may have less room for bargaining. Some thoughts on what you should be thinking about:

  • Is there room to negotiate? If yes, then consider signing bonuses, paid parking, minimum annual raises, company-paid cell phone, etc. 
  • Ensure that the time-frame of the contract makes sense for your personal plans and expectations (if your kids graduate in three years, are you willing to tie your hands for the next 15 until retirement?)
  • If the company is in trouble, are there provisions for review once the company gets out of trouble?
  • Will the company reimburse any legal costs you incur to review the contract?
  • If a more generous severance package is being offered, ensure that it is not less than the statutory requirements you would otherwise be entitled to. This is especially true if the contract is long-term in nature, and a lay-off could happen many years down the road when statutory severance owed to you may be more significant.
  • Once you have a contract you are happy with, get legal advice!

 There are some alternatives for employers aside from employment contracts. Treating and paying employees fairly, giving meaningful work and otherwise cultivating a positive work environment is one way to try and retain employees. Offering a retention bonus after 3, 5 or 10 years may be another way to create an incentive to stay.

 On the nastier side, in some cases an employer can give you notice of a change in your job conditions, give you two weeks to review, and if you refuse to sign at the end of that two weeks, they can consider that as a resignation and the two weeks as your notice period… you have just quit! Ensure you understand where the employer stands on negotiation of the contract when you are first presented with the employment contract.

 The general rule is that an employer cannot force an existing employee to sign a new employment contract – so threats are not allowed (contracts signed under duress are not typically considered valid, though you often have to go to court to prove it occurred).

 Remember that a contract is offer, acceptance and consideration. If one of those components is missing, then it is not a good contract. If you can negotiate for better compensation (consideration), then do so.

 In the end, remember that the employer is presenting you with a change in the contract because they want you to sign it, so it is often in the employee’s best interest to negotiate for something in return, and then sign.

 References for this article:

Federal law: http://laws.justice.gc.ca/en/L-2/

There is not much info here, employment contracts appear to be adjudicated by common law and not statute.

 BC info: http://www.canadalegal.info/prov-bc/0-ref-library/employment-law/wrongful-dismissal-bc-rk0405-01.html

When there is little or no consideration provided for the revised contract of employment (after the employment has already begun), a challenge which will often be available.

 AB Labour law: http://www.slsedmonton.com/civil/employment-law/

Generally, an employer cannot demote, transfer, suspend, or reduce an employee’s wages without her consent or without reasonable notice. An employer cannot change any of the major terms of employment unless the employee consents or is given reasonable notice of the change. Otherwise, an employee may be able to treat the change as a dismissal or firing and ask for termination pay. However, an employer may be able to give an employee reasonable notice of the demotion and then demote them.

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