‘Entire Agreement’ Clauses: Usefulness and Precautions

| July 20th, 2017 | No Comments »

Implementing an entire agreement clauses is a useful way to ensure that no verbally expressed promises are contested by an employee for being unfulfilled. An entire agreement clause can eliminate dispute over the terms of employment that were not explicitly stated within the written employment contract. The clause specifically should state that all promises and terms of employment are sufficiently expressed within the written contract. The clause must also express that the contract supersedes all discussions, negotiations and documents prior to the signing of the contract, and that all agreed terms of employment are represented within the contract being signed. This may avoid unnecessary legal costs if any future challenges of unfulfilled promises are made by the employee.

Employers must be careful not to take advantage of an entire agreement clause because the courts will not be favourable to negligent misrepresentations made to the employee, regardless of what the employment agreement states. Employers must also ensure individuals placed in positions that represent the company accurately represent the position being offered. If promises made were a necessary condition to having the employee accept the offer of employment, it is likely the promises are fundamental to the employment agreement. If found to be untrue, such a promise would be considered negligent misrepresentation. An example may be an employee being promised long term employment based on the availability of future projects, only to be terminated shortly after due to there being no such work available.

Overall, an entire agreement clause offers employers peace of mind in knowing that costly litigation will be less likely in the event an employee claims a promise has not been fulfilled. This does not absolve employers, however, of their duty to fairly represent the position offered prior to an employment agreement being signed. Courts will never act favourable to entire agreement clauses when it is found that the employer was negligent in the representation of the position offered. When drafting entire agreement clauses, it is necessary to have a legal professional draft such clauses properly and to be advised of which promises must be honoured to avoid claims of negligent misrepresentation.

Is an Employee Obligated to Provide an Employer ‘Reasonable Notice’ of Resignation?

| November 23rd, 2016 | No Comments »

notice of resignationIt is well known that employers must give an employee ‘reasonable notice’ or pay in lieu upon termination when there is no just cause (i.e. the employee has not done anything wrong to be fired). Conversely, although rarely pursued, an employer has the right to receive ‘reasonable notice’ from an employee planning to resign. Below, the factors for determining ‘reasonable notice’ time for employees will be reviewed with reference to a relatively recent case by the Ontario Supreme Court case [Gagnon v. Jesso ONSC] (referred to as “Jesso”).

Reasonable Notice

For employees, ‘reasonable notice’ is the period of time an employee is required to give their employer before the date they wish to resign. The amount of ‘reasonable notice’ time required from an employee will vary with respect to the importance of the employee’s position and duties. The purpose of ‘reasonable notice’ is to grant the employer enough time to either replace the employee or to adjust in a way that would avoid substantial financial losses. In general, employees with managerial responsibilities are required to provide longer notice periods; however, employees in key non-managerial roles may also be require to provide comparable notice time. Jesso highlighted the relevant factors to consider, which include: the employee’s length of service and the difficulty the employer will face with replacing the employee’s skillset (i.e. the labour market conditions). If applicable, any unique circumstances that would result in the employer needing added time to adjust must also be factored into the notice time.

Jesso Example: 

To illustrate the factors considered in determining “reasonable notice”, consider the example of Jesso v. Gagnon. Gagnon is a heating and cooling company (owned by Pierre Gagnon), and Jesso was a salesperson for nearly 10 years with a mechanical engineering degree. Jesso and his sales partner were responsible for over 60% of the company’s sales, and ultimately, a significant source of Gagnon’s revenue. Jesso eventually resigned after strained relations with his employer. Further, Jesso knew that his sales partner was also planning to resign around the same time, since both were pursuing employment with the same competitor.

Initially, Jesso gave Gagnon 2 weeks of notice but the court ruled that reasonable notice in this case would be 2 months. This is not a trivial amount of notice time. Firstly, Jesso’s length of service with Gagnon did contribute to the 2-month required notice time. The most important factor, however, was his substantial skillset, which is indicated by Jesso’s sales performance. Gagnon could not quickly replace the performance gap that Jesso’s resignation would cause. This was due to Jesso’s skillset in itself, as well as the low availability of comparable employees within this industry – these factors contributed to the length of time Gagnon would need to replace or adjust to Jesso’s resignation. Lastly, there was the issue of Jesso knowing that his sales partner was also resigning near the same time. This was a special circumstance that would add to Gagnon’s difficulty in adjusting to this loss as Jesso and his sales partner contributed to over 60% of Gagnon’s sales.

It is important to understand that the above example is a simplified generalization used to apply the relevant factors for determining reasonable notice for employees. Each case will be influenced by the particulars of the employment relationship and surrounding circumstances. Jesso makes this point clear, as any unique circumstances that may create more difficult for the employer to adjust or replace the employee must be considered. Please seek the advice of an employment law professional if faced with a similar situation.