Recent Case Highlights Concerns with Employment Agreement Enforceability

by: Chris Monfette

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Employers like written employment agreements, because they can set out defined employment terms for things such as compensation, benefits, and termination notice.    

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However, unenforceable employment agreements may not be worth anything more than the paper they’re written on. To ensure enforceability, employers must provide employees with something new of value in exchange for the employee’s signature on the employment agreement. In legal terms, the new value flowing to the employee is called “consideration”.  

A recent British Columbia Supreme Court decision reminds employers of the importance of providing consideration to employees who sign employment agreements.

In Adams v Thinkific Labs Inc., [2024] BCJ No 1173, the employer offered the plaintiff a job in an initial offer email (the “Offer Email”). The Offer Email set out some basic terms of the job, including compensation.

The plaintiff communicated to the employer that she accepted the job, and then the employer sent a more formal employment agreement to the plaintiff for execution (the “Formal Agreement”). The Formal Agreement included a termination provision and a non-competition clause, among other employment terms not set out in the Offer Email. The plaintiff signed the Formal Agreement and returned it to the employer.

The employer ended the plaintiff’s employment two years later and attempted to rely on the termination provision in the Formal Agreement. The plaintiff argued the termination provision was unenforceable, because the plaintiff did not receive consideration for signing the Formal Agreement after she had already accepted the terms set out in the Offer Email.

The Court found the Offer Email was a complete agreement between the parties, the employee had not received consideration in exchange for signing the Formal Agreement, and, therefore, the termination provision in the Formal Agreement was deemed unenforceable. As a result, the plaintiff was entitled to common law reasonable notice, which was greater than the notice entitlement set out in the termination provision.

This type of scenario is not uncommon — employers send out an initial, congratulatory job offer, advising an employee of some key details of the position, and then send a more formal agreement for execution. This approach has risks, as identified in the BC decision. However, there are some strategies employers can adopt to ensure they avoid these risks:

·        If an employer wants to send an initial email highlighting some key terms of the job, always make sure to identify the job is subject to the prospective employee’s subsequent execution of a written employment contract;

·        Make sure the employment agreement is executed before the employee starts work; and

·        For employers utilizing recruiting agencies, make sure the recruiter and the employee are notified in writing that the execution of a written employment agreement is a condition of the employee’s acceptance of the job.

By following these simple steps, employers can lessen the risk that a Court may determine their employment agreements are unenforceable. 

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This information is not provided as legal opinion or advice. For further information or assistance with regard to any labour and employment matters, please contact Chris Monfette or any of the lawyers at Neuman Thompson.

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