Passage of time and changes in circumstances can render old employment contracts obsolete.
A properly written employment contract helps employers and employees clearly set out the boundaries of their employment relationships. The employee benefits from knowing their rights and having them protected by the contract. The employer benefits from being able to adjust their obligations to suit their business needs. What neither party may realize is that the contract may change, or even expire, as time carries on and the circumstances of the relationship change.
Imagine an employment of 20 years. At the outset, the employee signed a contract that included terms relating to pay and notice of termination – maybe even a statutory notice clause, that referred to the BC Employment Standards Act and effectively capped notice at eight weeks. Over the years, the employee is promoted a few times so that the circumstances of the employment after 20 years look nothing like they did at the outset: the employee is paid more, and has greater responsibilities and better benefits. If the contract has not been updated to reflect these changes, important parts of it can become obsolete.
Lawyers call this the “changed substratum” scenario. The foundational level, or “substratum”, of the written contract has changed. It no longer applies. Something else will be implied in its place – the employer is no longer in control of the contract’s terms.
Now when the employer determines that this long employment needs to be terminated for some reason, their eight-week notice clause may no longer work. It may be that the employee is entitled to have reasonable notice, which for a mid-level managerial employee with 20 years of service is going to be significantly more than eight weeks! A dismissal on the old terms will likely be a wrongful dismissal. The whole value of having a written contract can be undone if the contract does not evolve with the employment relationship.
This was exactly what happened in Krieser v. Active Chemicals Ltd., where the dismissed employee sued and was awarded notice on the basis of the circumstances of his most current position, rather than those reflected in the old written contract. And in Dolden v. Clark Simpkins Ltd., the Court put responsibility squarely upon the employer to renegotiate the terms of the employment contract whenever the circumstances changed significantly, such as upon a promotion.
Takeaway: keep your employment contracts current, or risk them becoming irrelevant.
Need help managing your employment contracts? We’re here for you! Contact Yeager Employment Law at 604.988.1000.