Posts tagged: employment contracts

Employee Terminations: How Employment Contracts and Legal Consultation Prevent Legal Fires

By , May 18, 2015 11:41 pm

I strongly recommend that employers require all new employees to sign an employment contract with a termination clause. As a result, the employer knows how much it will cost to terminate the employee and the employee is effectively precluded from commencing a wrongful dismissal claim.

To read more about the benefits of using employment contracts, click here.

This kind of termination clause does not however prevent an employee from claiming for additional termination pay under the Ontario Human Rights Code (the “Code”). To read a recent court case on this issue, click here.

Cases like this illustrate why I canvass all of the circumstances surrounding a proposed termination with a client before advising on the employee’s legal entitlements.

Is the employee pregnant, or has she recently returned from a pregnancy leave?

Has the employee recently taken time off work because of a disability or recently returned to work following a workplace accident?

Is the person trans gendered and has recently decided to present in a different gender?

If a factor in the employer’s decision to terminate a person’s employment is her pregnancy or because she is disabled or trans gendered then there likely has been a violation of the Code.

Lessons to be learned

1. Insist that all new hires sign an employment contract with a properly drafted termination clause.

2. If a person is terminated because of one (or more) of the 16 personal characteristics set out in the Code such as gender then there is likely a violation of the Code and the employee is likely entitled to more termination pay than set out in the termination clause of her employment contract.

3. Call an employment lawyer and explain all of the circumstances surrounding a termination before terminating the employee’s employment.


For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising and representing employers in connection with employee terminations. If you have any questions, you can contact him at 416 317-9894 or at [email protected]


Avoiding Wrongful Dismissal Litigation: One Employment Contract at a Time

By , March 24, 2015 9:55 am

Many wrongful dismissal cases are determined by the sensibilities of the judge who is appointed to the case. Some are employee friendly. Others are employer friendly.

Consider the opening sentence of a wrongful dismissal case that was decided earlier this month: “Employment law is governed by the notion that the employer should not be able to use its larger power to unfairly gain an advantage over the employee.” I didn’t need to read any further to know who won this case…

The Case of An Employer Trying to Avoid Termination Pay By Requiring An Employee to Enter into a Series of One-Year Fixed Term Contracts

 I strongly oppose the use of fixed term contracts. A contract of indefinite employment with a well-drafted termination clause can usually achieve the same end. It also avoids you the time, cost, disruption and uncertainty associated with litigation.

Here’s what can happen if an organization uses a fixed-term contract:

In Michela v. St. Thomas of Villanova Catholic School, three teachers signed a series of one-year contracts; two of them signed 12 one-year contracts, and the other signed 8 one-year contracts. They were all notified that the last contract would not be renewed when it expired on August 31, 2013. These types of contracts are common in private schools.

The teachers claimed the last contract was not a fixed term contract and were therefore entitled to “reasonable” notice of termination. The school claimed the teachers had signed a one-year fixed term contract that ended on August 31, 2013 and were not entitled to any further notice of termination. The judge looked at the entire agreement and the surrounding circumstances and concluded the last contract was not a one year fixed-term contract. She stated:

“The term (of the 2012-2013 contract) is for one year, but the contract contemplates that it may operate for either a longer or shorter period… (A term in the 2000-2001, 2001-2002, 2002-2003, 2003-2004, 2004-2005 contracts) required the teacher to decline a renewal in writing 30 days before the end of the current contract…. For the first three school years referred to, these contracts also included a term that says that the Agreement would automatically expire on September 1st of the applicable year (i.e. 2000-2001 2001-2002 and 2002-2003) …For the fourth and fifth years, the clause was amended by adding additional direction: The teacher will be notified in writing by April 15th [of the applicable year] if the School does not intend to offer the teacher a full time position for the [subsequent] school year (i.e. 2003-2004 and 2004-2005)”.

 “…For the first three years, which is it? Does the contract expire or, absent a notice declining renewal, was the contract renewed? For the fourth and fifth years, the position depends on a double default. Absent a notice that the School did not intend to offer the teacher a position for the upcoming year or a notice from the teacher declining a renewal, the teacher would continue for another year. Either way, there is ambiguity.

 Lessons to be Learned

 1. Judges are unpredictable. We generally have excellent judges in Ontario who do their best to apply the law fairly. Each judge however has a unique personal, educational and professional background. I believe this background influences how they mete out justice. Two judges hearing the same facts could come to different conclusions. This is one of the reasons why lawyers try to settle cases early in the litigation process; to avoid this litigation risk.

2. Fixed-term contracts can be very costly. In this case, each of the three employees was awarded six months compensation in lieu of notice, and the employer was ordered to pay $ 42 000 in legal costs. The employer was also, of course, required to pay it’s own legal costs. In this case, the school could ill afford these costs. In this regard, the school terminated the three employees (and 2 others) because it believed it was likely facing a $300,000 shortfall in revenue for the 2013-2014 school year.

3. Employment contracts save termination costs. Under a series of one year fixed-term contracts, a teacher with 25 years service earning $ 100 000 a year could be entitled to receive as much as 24 months notice of termination (or up to $ 200 000 pay in lieu of the notice) whereas a school who uses a well-drafted employment contract can reduce this notice period to 8 weeks (or about $ 15 000 in lieu of notice).

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers and employees on all aspects of the employment relationship including employment contracts. If you have any questions, you can contact him at 416 317-9894 or at [email protected]


Preventing Legal Fires: Employment Contracts, No Discrimination Policies and Disability Management Programs

By , November 11, 2014 10:38 am

I have been providing employment law advice to employers for over 25 years. I provide preventive advice and I put out legal fires. When I provide the former services I am a solicitor and when I provide the latter I am a barrister.

For various reasons, small employers are generally reluctant to pay a solicitor for preventative advice. In my experience, failure to do so can result in the employer paying a lot more money to a barrister in the future to put out legal fires.

This blog discusses three kinds of services that you can purchase from an employment lawyer that can reduce or prevent legal claims.

Employment Contracts

An employment contract sets out the terms and conditions of an employee’s employment. After learning the benefits of this contract, any rational employer should pay an employment lawyer to prepare a properly written employment contract. For example, the termination clause alone could save an employer over $ 40 000 in connection with the termination of a 12 year employee who earns about $ 50 000 per year.

No Discrimination Policy

A no discrimination policy prohibits discrimination in the workplace and establishes a complaint process for employees who believe they have been subjected to discrimination. Employees are knowledgeable about their right to not be discriminated against because of pregnancy, their age, their race, their gender and 12 other personal characteristics. It costs an employee nothing to file an application with the Ontario Human Rights Tribunal (OHRT). Defending this kind of application can be very costly and if you win the case the employee will not be ordered to pay your legal costs. Damage awards can be significant. An adjudicator recently ordered an employer to reinstate a disabled employee with 9 years back pay.

If you have an internal complaint process there is a good chance the employee will use it and you can avoid a complaint to the (OHRT). It also makes business sense to have this kind of policy because it is an early warning signal that discrimination is taking place. Without it, undetected discrimination can result in absenteeism, lost productivity and resignations.

Disability Management Program

A disability management program establishes a process for managing disabled employees. Disabled employees have special rights. Among other things, an employer is generally required to accommodate a disabled employee unless this would result in undue hardship.

When confronted with a disabled employee who is requesting accommodation, some small employers simply lay off the employee and tell the employee to collect employment insurance disability benefits, or refuse to transfer the employee to a vacant position within the organization. In some cases, this is a big mistake that can result in expensive litigation. For example, failure to re-employ an employee who has a workplace disability can cost an employer two years of the employee’s salary under Ontario’s workers compensation legislation.

We suggest that an employer establish a disability management program. This program can, among other things, give you the right to send the employee to a doctor of your choosing. It can also establish a procedure for you to follow in each case so you have satisfied the procedural duty to accommodate.

The Current Legal Landscape

New employment laws and higher damage awards should make small employers take pause and consider whether paying for these three services is an investment worth making. The alternative, which is a legal fire storm, can cripple a small business.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on employment law issues. If you have any questions concerning your rights and obligations in relation to your employees, you can contact him at 416 317-9894 or at [email protected]

Debunking the Myths about Probationary Employees

By , July 28, 2014 11:32 am

According to thelawdictionary.org the word probation means: “Determining if a candidate is suitable for a job before giving his full time creditation as a member of an organization.”

Most employers believe that a probationary employee can be terminated at any time with no notice. Not true.

To achieve this objective, the employer must clearly set out the employer’s rights in an employment contract.

For more information about employment contracts, click here

Here are five questions we are asked about probationary employees

Q1 – Can we avoid paying termination pay to a probationary employee?

A – Under the Employment Standards Act (ESA), an employer has no obligation to provide notice of termination to an employee with less than 3 months service. If the employee has signed an employment contract with a termination clause that limits the employee’s rights to ESA minimums then the employer can avoid this obligation.

For more information about the ESA, click here 

Q2 – Can we extend an employee’s probationary period?

A – An employer can extend the probationary period and we suggest reserving this right in an employment contract. However, an employer cannot avoid the minimum notice requirements under the ESA. An employee who has worked more than 3 months and less than a year is owed one week notice of termination (or one week pay in lieu of this notice). On the other hand, if the probationary period is extended, and the employee has not signed an employment agreement with a termination clause then the employee is entitled to “reasonable” notice of termination which could be three months or more. A big difference.

For more information on wrongful dismissal, click here

Q3 – Can we delay a scheduled wage increase at the end of a probationary period?

A – It depends on the wording of the employment contract. If the contract states that the person’s wage rate will be increased after 3 months without any qualification- then failure to do so is likely a breach of contract.

Q4 – Can we delay an employee’s eligibility to receive employee benefits?

A – It depends on the wording of the employment contract and the terms of the group benefit plan.  If the contract says the employee is entitled to enroll in group employee benefit plans after a 90 day waiting period without qualification then failure to do so is likely a breach of contract.

Q5 – Can we terminate an employee during the probationary period for any reason?

A – No. If a person becomes disabled during a probationary period and is terminated for this reason then there has been a violation of Ontario’s Human Rights Code. An employer cannot contract out of the Code. Accordingly the disabled employee in this example could commence an application under the Code and be awarded damages for lost income as well as general damages.

For more information on Ontario’s Human Rights Code, click here


For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

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