My new employer wants me to sign an employment agreement that would limit my severance to the bare minimum in the Employment Standards Act, should I ever be laid off. This has been the company’s policy for the past few years. If I do get laid off, how binding or enforceable would such an employment agreement be?
THE FIRST ANSWER
Bruce Sandy Principal of Pathfinder Coaching & Consulting, Vancouver
Have you already signed an agreement with this employer? It sounds as if you may have, since you refer to them as your new employer. If you have, then you have already accepted the terms of the agreement and your new employer will hold you to it if they lay you off. I recommend that you consult with an employment lawyer for an expert legal opinion.
How badly do you want to work for this employer? Have you checked with other, similar employers to see whether they offer better employment (and severance) conditions? If this company treats their staff like this from the outset, then I wonder what they will be like to work for on an ongoing basis.
How much an employer values their employees is reflected in how they support their employees (monetarily and otherwise) from the outset of the employment relationship. The best employers offer fair and competitive compensation and benefit packages. They may offer their employees other benefits, such as more vacation time or a larger bonus, to offset such a severance clause. Do you feel they were fair in the negotiating process for the position? If not, then you know what they will be like if they decide to lay you off.
THE SECOND ANSWER
Daniel Lublin Employment lawyer, Whitten & Lublin, Toronto
Severance-limiting agreements can be enforceable – but only under certain conditions. For your employer to rely on that agreement at the time of your termination, it has to first demonstrate that you received something of value in exchange for accepting the clause in the first place. This can be a bonus, promotion, pay raise or even an extra vacation day. Therefore, if you are not receiving anything of value that you do not already have in exchange for signing this agreement, it will be void.
Second, the employer also has to show that the clause was properly drafted in order to rely on it. A properly drafted clause is clearly written so it is easily understood and at all times complies with the applicable employment standards legislation. Surprisingly, many employers don’t get this part right.
Keep in mind a clause providing that you will receive only the “bare minimum” is reducing the value of your severance entitlement to something far less than you would otherwise receive. Therefore, you should seriously question whether you should sign this clause in the first place and what you are receiving in return.
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