A common trope in popular culture is the deal with the devil, where a person signs away their soul for something. The usual result is that the devil tricks them, and the promised reward is not what they were expecting or had agreed to.
This would not be enforceable in Canada, and a client could sue for their soul back, performance of the contract so what they thought they were getting is delivered, or monetary damages for the loss of their soul and failure to receive what was agreed to, or combinations of the above.
A large reason this trope exists is because contracts have this power. If a person enters into a legally binding, valid contract that meets all the requirements to be enforceable, it generally does not matter if that contract is advantageous or even detrimental for that person.
For an employee, the employment contract, in whatever form it takes, governs the agreement. Contract review is usually the first step in resolving employment issues. It is especially crucial for constructive dismissal, which relies on the repudiation of the contract as the basis for the employee considering themselves terminated.
The principle of Contra proferentem favors the employee. This means that if a contract is unclear, it will be interpreted favoring the party who did not write the contract. For employees, this almost always means interpretation is in their favor. It is part of the recognition that in many situations’ contracts are between parties with unequal bargaining power, as an employer and employee, and the weaker party needs to be protected.
The requirements for a contract to be enforceable are stringent. In Bhasin v Hrynew the Supreme Court of Canada stated that there is a duty to act honestly regarding contractual obligations. This is an extension of the duty of good faith and means each party must consider the reasonable expectations of the other regarding the contract.
There are also factors that would create a defect in the contracting process, such as incapacity, duress, and undue influence.
One common misconception is that an employment contract needs to be in writing. This is not true. That being said, most employers will want one in writing. It is challenging to prove an oral contract meets all the requirements — especially a more complicated one such as for employment.
Proof is essential to an employer because absent any valid and enforceable restrictive clauses, a contract is by default under the common law. This is important because a common restrictive clause is to limit the amount of termination pay and severance an employee is entitled to. The difference between the two possibilities can be enormous, such as two years worth of pay, benefits, and bonuses.
For a contract to be enforceable, it must meet seven basic criteria:
- Offer – There must be an offer. For a standard employment contract, this would be the job offer.
- Certainty of Terms – A contract must be certain in its terms. The rule is that terms must be ascertained (known) or ascertainable (able to be worked out). A part-time job may have variable hours, but the employment contract would still be certain if it set out ranges of possible hours and pay in return.
- Acceptance – A contract must be accepted by the party it was offered to, generally, in employment that is done via a signature.
- Communication – Both the offer and acceptance must be communicated to the other party in the form requested. This is generally not an issue for employment contracts.
- Consideration – There is a requirement that there is an exchange of something that has value in the eyes of the law. For employment, that is, wages for work.
- Intention to Create Legal Relations – This is easiest explained via an example. If a friend invites you over to sleep at their house for a night, and you agree, it could meet all the other contractual requirements. However, there is not an intention to create a legal agreement. This is not an issue for employment contracts.
- Legality – A contract must be legal. For employment, this means if the contract does not meet the applicable legislation (laws made by the government) such as the Employment Standards Act, Canada Labour Code, or the Human Rights Code, it is not enforceable.
This also means the contract must not violate the common law (decisions made by judges). Often a statue will have a single line about a specific issue. Then there will be a paragraph or two in a regulation to that legislation. In contrast, a decision by a judge interpreting that line will be many pages just on that single issue.
It is imperative to remember that the common law is layered on top of legislations and will supersede them. Legislation sometimes will not be updated for decades. For example, in 1988, the Supreme Court of Canada held that abortion was not a crime. The Criminal Code was amended to reflect this in 2019.
A person without legal training, just reading the law, would not have known of over 30 years of jurisprudence. Similar decisions happen in employment law on an almost continual basis, and what could have been a valid contract when it was signed is now voidable. As mentioned above, this could lead to a very substantial entitlement on termination.
If you have concerns about your employment contract, have been terminated, or have had employment issues, we encourage you to contact De Bousquet PC.