Beware the common pitfalls of changing employment contracts

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It’s inevitable that as operations and roles change, some employment agreements need to change as well. But the law dictates that you do this in a certain way, and just sitting down with the employee in question and asking them to sign is not it.

Handing a new contract to workers at an annual review and giving them a pen is a mistake Toronto employment lawyer Stuart Rudner, from law firm Miller Thomson, has seen employers making too often.

“They don’t give them any notice of the change, or time to consider it, and they don’t obtain legal advice,” Rudner says. “Often the message, implicitly or explicitly, is ‘If you don’t sign it then your employment will end’.”

Canadian law requires that employers give a “reasonable” amount of notice because the process essentially ends the worker’s contract and starts them on another. If your current employment agreement specifies how much notice must be given in the case of a termination without cause, go by that guideline. There’s an unofficial maximum period of two years in Canada, which is usually reserved for high-level executives. But even a clerical worker who’s been there 15 years could be entitled to more than a year.

“The courts will look at how long an employee has been working, how old they are and what kind of job they’re doing to determine what an appropriate notice period is,” Rudner says.

And don’t think that if an employee currently has no written contract that you can have them sign one this afternoon – a verbal contract is binding and requires the same negotiations or notice.

A better approach to moving an employee onto a new contract can be negotiation. No notice is required, but it usually involves a trade-off. Whether it’s a one-off payment, a non-routine pay rise or better benefits, the employee is getting something out of the change that makes it worthwhile to them to sign the new contract. The employer is giving something away, but in return the process of getting a new contract bedded down is expedited.

 

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