Employment contracts are organic, evolving arrangements

Unlike many business agreements, changes need not be in writing

Employment contracts are not like other contracts.

Most people in the commercial sphere have had exposure to different types of commercial agreements, and are aware of their basic forms. Typically, a commercial agreement is a written one, often formulated after negotiation between relative equals, and the full terms are there in black and white. Often within the terms there is wording that indicates that amendments cannot be made to the written agreement unless in writing and consented to by both parties.

Commercial agreements of this type are meant to fully delineate and regulate the arrangement, and to eliminate the confusion that could arise from subsequent conduct between the parties in the performance of the agreement. Such arrangements can be relatively inflexible, and this inflexibility is said to provide commercial certainty.

Employment contracts, on the other hand, are also regulated by contract law, but they are much more flexible, organic and adaptive to the various input and output of the employer and employee during the performance of the contract. Employment contracts are, in some senses, like living documents. Of course, the reason for this distinction between commercial and employment contracts stems from the nature of the relationship between the employer and each employee.

Amendments show how employment contracts differ from other contracts. It is settled law that employment contracts can be oral, written, or part oral and part written. But it is also settled law that employment contracts, in addition to being oral and written, can be based on conduct over time between the employer and the employee. The conduct between the parties can amend one or more terms of the employment contract.

In some cases, conduct can virtually rewrite the original employment contract, or supercede an earlier written contract and replace it with new terms. Therefore, conduct is a very important part of any employment contract, whether written, oral or both. And because conduct is such an important force in employment contracts, it is important to understand how this force works.

All contracts have terms, or important points that make up the agreement.

Amendments to the terms of a contract require mutual agreement. Without mutual agreement, there will not be an amendment. The parties must be ad idem, or of the same mind, regarding the amendment. The most certain way to obtain agreement on any point is to get written agreement from both parties spelling out the change. But employment is usually less formal and more organic than this.

Conduct will provide the necessary evidence that the parties are of the same mind with respect to any given amendment only with the passage of sufficient time.

The passage of time must be accompanied by behaviour that points relatively unequivocally to the parties accepting the change or amendment.

Whether any given term can be implied by conduct is a question of fact, and can be answered only through reference to the history of the employment relationship.

Finally, and this is most intriguing, a term may be amended by conduct between employer A and employee B, but because the question is one of relationship between that employer and that individual employee, the same term may not be amended by conduct between employer A and employee C.

A classic case involving amendment of a term by conduct involved a 26-year employment that reflected numerous positions and a number of geographic transfers for the employee, some of which the employee did not want. The final position change imposed by employer was viewed by the employee as a constructive dismissal. The facts indicated that the new position required a learning curve, but was not a demotion. The judge hearing the wrongful dismissal claim held that there was no dismissal or breach of the employment contract, because the employee had through past conduct showed that he agreed that transfers and position changes were terms of his employment contract. In other words, conduct created the amendment to the employment contract that allowed the employer to determine transfers and assignment changes.

However, it can work the other way as well. When an employer, after the date of hire, introduces into the employment arrangement employer-paid benefits such as for instance extended dental coverage, or automobile allowance, understandably the employee accepts such new terms without protest. These benefits become terms implied into the employment contract by that conduct. Because these amendments by conduct become terms of the employment contract, the employee is entitled to demand they be retained without change, unless the employee consents otherwise.

Employment contracts ebb and flow, expand and sometimes contract, and evolve over time to become something possibly much different that the original arrangement.

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