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EMPLOYMENT CONTRACTS: WHAT

IS IMPLIED AND WHAT IS NOT?

RICHARD J. GILBORN, Q.C.,

April 30, 2004
http://www.caronpartners.com/Lawyers/gilborn_profile.htmhttp://www.caronpartners.com/Lawyers/gilborn_profile.htm


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1. Introduction

2. Employers Obligations by Legislation

3. The Employment Contract, What is

Implied at Common Law

4. Recent Developments in Alberta

5. Conclusion


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1. INTRODUCTION

Employers always in contractual relationshipswhether a written contract exists or not

Major sources of implied terms are legislationand common law

Judges use industry custom, public policy and

presumed intention of parties Judges will modify a contract if it is unclear,

unfair or does not comply with legislation


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Key Elements of an

Employment Contract The key principles of contract law apply to the

employment contract coreemployee agrees toperform labour in return for wage

Every contract (including fundamental changes tothe contract) must involve consideration

Considerationsomething that has value is being

exchanged Coercion or undue pressure may make an

employment contract unenforceable

The terms of a contract can be agreed upon orally


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Benefits of Written Employment Contracts

Written contracts provide certainty concerning therights and obligations of the parties

Common point of reference in case ofdisagreement

ButCourts will enforce implied as well asexpress terms of an employment contract

A Court will ensure the contract does not violatelegislation

Rarely can employers modify statutory obligationsby written contract


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2. EMPLOYERS OBLIGATIONS

BY LEGISLATIONPrimary Sources: Federal, Provincial and Municipal

Legislation

Employees of interprovincial undertakings governed

by federal legislation Income Tax Act, Employment Insurance Act and

Canada Pension Plan apply to all Alberta businesses

Provincial legislation that applies to most if not all

Alberta businessesEmployment Standards Code,Occupational Health and Safety Act, WorkersCompensation Act, Employment Pension Plans Act,Labour Relations Code, Human Rights, Citizenshipand Multiculturalism Act

Municipal Business Licensing Bylaws


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Employment Standards Code of Alberta

Sets minimum standards for virtually all Alberta employers

in respect of payment of earnings, employment record

keeping, hours of work, overtime and overtime pay,

holidays and holiday pay, maternity and parental leave,

termination of employment, layoff and recall, restriction of

employment of children and employment of persons with

disabilities

Generally the Code does not affect additional civil

remedies available to employee or employer

Directors of a corporation may be liable personally for up

to six months unpaid wages

Directors as well as the company may also be personally

liable in respect of Code violations


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3. THE EMPLOYMENT

CONTRACT AT COMMON LAW

Generally, employers and employees are free to contract

exceptioncollective agreements

Contractual terms which will be implied, if not expressed

job description, policies and procedures, loyalty,confidentiality, non-competition, remuneration and basis

for termination

In absence of specific terms, common law will apply right

to terminate for just cause or upon reasonable notice Partiesthe laws develop tests to classify employees

versus independent contractors

A person may be considered an employee of both a parent

and subsidiary corporation if not clearly defined


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The Term of the Contract

Indefinite hiring implied after three months inabsence of specific terms

Problem with renewal of fixed termsbecomes

indefinite term Termination of indefinite term requires just cause

or reasonable notice

Causerequires fundamental breach of the

relationship of trust, not minor problems withperformance

In absence of specific noticeCourts will implyreasonable notice based on number of factors


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Hiring and Reference Checks

Employers are largely unrestricted in their

selection of employees subject to prohibited

discrimination

Employers are at liberty to seek references

New privacy legislation restricts an employers

ability to give information about an employee

without consent or notice Requirement to provide reference may be an

implied term in contract


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Termination

Section 56 of Employment Standards Codeminimumnotice1 to 8 weeks

Duty of good faith may soon be an implied term ofemployment contract which may affect an employers right

to terminate without cause Bad behaviour will increase required noticeWallace case

Employer must be candid, reasonable and honest, notuntruthful, misleading or unduly insensitive at termination

Reasonable pay for services provided will be impliedquantum meruit

Reduction in pay may be constructive dismissal


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Probationary Employees and Policy and

Procedures Manual Legislation does not require minimum notice for

probationary employee

In absence of written terms, the first three months are

probationary Common law may require reasonable noticeparticularly

for luring from another job

Policy and procedures manuals may be incorporated into

an employment contract If policies affect fundamental nature of contractrequire

acknowledgment at commencement of employmentifafterwardsrequires new consideration


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4. RECENT DEVELOPMENTS

IN ALBERTA Vrana v. Procor Ltd. held that a temporary layoff

will not constitute wrongful dismissal

There was no written employment contract

Court held common law rule changed by

Employment Standards Code

Previous decisions have held the opposite Case under appeal


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5. CONCLUSION

Written employment contracts provide certainty inrespect of an employers obligations

Written employment contracts provide commonpoint of reference in case of disagreement

Written employment contracts must be properlydrafted so as not to clash with legislation

The Courts will imply the terms of employmentrelationships, some of which may be a surprise toan employer

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