Costly mistake as employment contract deemed invalid

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Employers are being warned to carefully consider what they communicate to successful job applicants during interviews as it could deem later agreements invalid – just like a recent case in the Ontario Superior Court.

In the case, Buaron v. AcuityAds Inc., an employment agreement that was signed after an offer letter was presented to the prospective employee was deemed unenforceable by the court.

The case

During the recruitment process, employee Joseph Buaron had a series of discussions with AcuityAds’ chief operating officer – eventually, the dialogue resulted in an e-mail sent to 34-year-old Buaron with an offer letter attached that outlined his salary, title, vacation, probationary period and participation in the benefits plan.

Ontario-based Buaron signed the agreement a few days later and began work shortly after but – less than 10 months later – he was dismissed for “cost cutting” purposes.

The IT professional – who was being paid $110,000 annually at the time – demanded severance pay well above the 1 week’s pay stipulated in his employment agreement but since no resolution could be reached, litigation ensued.

The outcome

In an outcome that may sound surprising to some HR professionals, the court deemed the employment agreement unenforceable and awarded Buaron 4 months’ pay in lieu of reasonable notice.

The agreement was properly drafted and had been signed prior to the employee starting work – so what was the problem?

Buaron argued, successfully as it turns out, that the two parties had already agreed the terms of employment prior to him signing the employment agreement.

He insisted the discussions during the hiring process about the employee's terms of employment – salary, vacation, position, probation, benefits – were agreed-upon and then confirmed in the e-mail and offer letter.

The court agreed and held that when the e-mail with the offer letter was sent, a contract had been formed – in other words, the employee already secured the job for the terms in the offer letter.

What HR needs to know

“This case is a good reminder to employers that they need to be careful during the hiring process,” said Toronto-based labour and employment lawyer Dan Pugen.

“Specifically, they should be careful about what is communicated to applicants,” he continued. “In this case, the court found that an oral agreement was reached between the parties which was confirmed by the e-mail and offer letter.”

Pugen also urged employers to be unambiguous and open with job applicants during the entire recruitment process.

“Employers should be transparent with applicants during the hiring process,” he stressed. “While terms such as salary, benefits and vacation will naturally be the main focus, employers should be very clear, including in any e-mail communications or offer letters, that employment is conditional on signing an employment agreement prior to starting work.”

He also advised employers not to present applicants with an offer letter with "bare bones" terms of employment to then be followed up with a more thorough employment agreement.

“All of the hiring documents should be presented at the same time and in advance of starting the job so that there is no confusion as to the contract being entered into between the parties,” he said, adding that an enforceable employment agreement would have dramatically reduced the employer’s liability in this particular case.

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  • Isabella on 2016-01-19 9:52:49 AM

    Employment contracts that deny employees a fair compensation on dismissal through no fault of their own make me sick. It is so unfair to expect someone to join a company in good faith, work hard, contribute and then get tossed out with nothing like an old used tissue. Oh.. And then they have to be motivated and engaged too! It is so hypocritical.
    I think HR professionals who support and further this type of usury should be ashamed of themselves for contributing to this unfairness.

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