Contracting Out of the Common Law

There are many instances where employers may try to have an employee sign a contract that attempts to reduce their rights under the common law.

In cases involving contract interpretation the Court analyzes the document and may disqualify some clauses or the entire contract. The doctrine of contra preferendum is typically applied, meaning that any ambiguity or uncertainty in the contract is interpreted against the person drafting the contract.

This is why if you are an employer it is very important to have legal advice when drafting the contracts of employees. A contract cannot be illegal. If a contract template is used for the many employees, any error or weakness in the contract against the employer will be multiplied accordingly.

Employees must ensure they understand the contract they are signing. Although certain interpretation rules work in favour of the employee, ultimately a Court may find that the employee had a responsibility to get legal advice with respect to the agreement he or she has entered into.

One of the most common items that employers attempt to have their employees contract out of is their right to reasonable notice under the common law. In Ontario, an employee who is terminated is entitled to reasonable notice or pay in lieu of notice.

This notice period under the common law is longer than the statutory minimum under the Employment Standards Act. Although an employee may agree to contract out of the right to common law notice, he or she cannot be asked to waive his or her minimum entitlements under the Employment Standards Act.

The following are some factors to consider when an employee is being asked to contract out of common law notice:

1. The language must be clear and concise to interpret the agreement as one intended to contract out of common law notice. For example the standard of just cause and/or willful misconduct must be properly defined in the contract or else the termination clause may be void.

2. There is some debate whether the agreement should explicitly state that the termination provision is meant to avoid the commonlaw claim, althought it would be wise to do so. The question is whether the language shows that the parties intended the agreement to contract out of the common law claim.

3. An ambiguity will be read against the drafting party, typically the employer.

4. An interpretation that favours the rentention of common law entitlement will be preferred over the converse. This may not exactly duplicate point 2 above, although it is certainly close.

5. The law is controverisal on the issue of a potential as opposed to an actual violation of a statutory term.

If you believe you are being asked to contract out of certain common law rights, but are unsure what you should, you should obtain legal advice.

Ken has co-authored a book on employment contracts called The Written Contract of Employment. To learn more click here.

“Whether you are just beginning your career in workplace law; practise it day in, day out, or only summarily; or are responsible for managing human resources for your employer, it is critically important that your strategy be guided by Harris and Alexander’s Written Contract of Employment.”

– Peter Israel, B.A., L.L.B.

The information on this website is for informative purposes only. It is not legal advice. A lawyer can only be retained after a consultation. If you need a wrongful dismissal lawyer or if you have any other employment law issues, call Ken at: 416 323 3614