Three people around desk, hands only, gesturing over a contract

What 2020 Taught Us About Employment Contracts

  • December 04, 2020
  • Anna Lindgren-Tanga, LL.B./B.C.L.

This year, as Ontarians strove to overcome the unprecedented circumstances of the COVID-19 pandemic, employers and employees alike found themselves re-examining their employment contracts to determine their enforceability. To help lawyers counsel clients confidently amid ongoing change and increased urgency in this area, the OBA’s Labour and Employment Law Section, under the direction of program chair Jeff Hopkins of Grosman Gale Fletcher Hopkins LLP, brought together a panel of experts to share valuable employment-contract lessons learned in a period of upheaval.

Be explicit about layoff provisions

The program began with an overview of the legislative framework for employee layoffs, as outlined in section 56 of the Employment Standards Act (“ESA”). As Hena Singh, of Singh Lamarche LLP, explained, many employees in Ontario were placed on temporary layoffs at the beginning of the pandemic, as employers sought to avoid outright termination. However, if an employment contract does not contain specific layoff provisions, there is a risk that a court would find a unilateral layoff to be tantamount to constructive dismissal. To avoid risks of this nature, it is prudent for employment contracts to explicitly state that the employer reserves the right to place the employee on a temporary layoff in accordance with the ESA.

Pay attention to arbitration clauses

Rich Appiah, of Appiah Law, outlined other major lessons from this year that came from the SCC decision in Uber v Heller. In this case, the contract contained an arbitration clause that required Mr. Heller to resolve all disputes with Uber through an expensive mediation and arbitration process in the Netherlands. Due to the inequality of bargaining power between Mr. Heller and Uber, the SCC majority held that the arbitration agreement was invalid, as it was “a classic case of unconscionability.” Accordingly, Appiah mentioned that to avoid the spectre of unconscionability in the future, it may be advisable for employment contracts to specify that the employer will be responsible for all initial arbitration filing fees, and that the arbitration process will be held in the jurisdiction where the services were rendered.  

Beware of potential frustration

Daryl Cukierman, of Blake, Cassels & Graydon LLP, closed out the program with a presentation on the frustration of contract that occurs when unforeseen circumstances make it impossible to perform contractual obligations. If an employment contract does not have express force majeure provisions, employers may try to rely on the doctrine of frustration in order to be relieved of their obligations to provide employees with reasonable notice and/or termination pay, and severance pay in accordance with the ESA. Although the COVID-19 pandemic is an unprecedented circumstance, it is perhaps too soon tell how courts will deal with the issue of frustration in the context of employment contracts – the OBA will monitor this issue as it may evolve in the coming year ahead.

About the author

Anna Lindgren-TangaAnna Lindgren-Tanga is a recent graduate of McGill University (B.C.L./LL.B., 2019). She was called to the Bar of Ontario in 2020 and works with the OBA’s policy and professional development team.