Peter McSherry is an employment lawyer in Guelph who has saved clients a lot of grief simply by pointing out language in their employment contract that may be a sign that they shouldn’t get too comfortable in their new job.
A financial products sales representative, who couldn’t understand why he was being terminated every few years asked McSherry to assess his most recent employment contract. The salesperson was arranging large contracts that took time to put together, and when it came close to sealing the deal, the salesperson would be let go.
The red flag within the contract was the bonus and commission structure which indicated the employer was trying very hard to prevent the salesperson from receiving his commissions. Even though he worked long and hard for the sale, the employer had the option of terminating him before the commission was paid out. McSherry said, “Sometimes businesses will hire salespeople to drum up sales, fill up the pipeline and then get rid of them before paying the commission, so that the employee only receives the base rate.”
Warning signs in the employment contract:
The warning signs were written into the bonus and termination provisions of the contract. McSherry said, “A red flag is when commissions don’t become payable upon signing contracts, but rather much later, combined with language about commissions not being earned until they are actually paid out, or the revenue is received by the employer.” Also concerning, is the situation where there are convoluted calculations so that the employee has no idea what they are entitled to and when.
Does it help to have an employment contract?
Employment contracts are drafted by employers for their own benefit and often place limits on your implied employment rights. In the absence of a written agreement, employment law creates implied terms which are generally quite favourable to employees.
Termination of employment provision
Employment lawyers will always look for a “termination of employment” provision. This bit of legal language can have huge financial consequences.
The Employment Standards Act 2000 sets out the minimum amount of notice and severance that an employee is entitled to. McSherry said, “It’s the absolute bare minimum that an employer is required by law to give to an employee, even if an employment agreement says otherwise.”
Courts have overturned provisions that have given employees fewer entitlements than the ESA provides. Courts have also overturned clauses that disentitle employees to compensation where there is “just cause” for termination. McSherry pointed out clauses that said the employer only had to pay “notice or severance pay” but failed to mention other entitlements or benefits they were required to pay as well. McSherry said, “Contact an employment lawyer to have the contract reviewed before you sign it, to determine if the termination provision is enforceable and whether you should try to negotiate a better deal.”
Negotiating an employment contract
It’s possible the employer won’t move on the provisions, but they still want the right to terminate on minimum notice. McSherry suggested that if you’re a management position candidate, the employer may be testing you to find out if you can stand your ground in a dispute. He said, “It’s worth challenging that to find out if that’s true. If the employer won’t budge, the employee should realize the employer will terminate when it suits them, and the employee should be looking for another job.”
Very often, employees are so happy about getting a job that they give little thought to how the relationship could end. They don’t look closely at their job duties or consider that the company may be having financial troubles. McSherry said,
“People are optimistic and don’t pay as much attention to these details as they should.”
McSherry has assessed many employment contracts over the years, and in doing so he has saved clients misery and maybe even a marriage or two.
Contact Peter McSherry at (519) 821-5465 or visit: www.petermcsherry.ca