Legal Aspect Of
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Transcript of Legal Aspect Of
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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