Most employees have a contract, whether they signed one or not
Most people in the workplace, from president to new trainee, are employed in some way or other. And this employment is probably central to their financial lives. Accordingly, one would think that employment contracts would generally be found in written form. Oddly, however, most people who become employees are hired verbally, that is, there is no actual single written agreement that they can dig out of their employee file, show to you or me, and claim it as their “contract.” Yet each day they show up for work, perform a defined set of duties within an orderly workplace hierarchy, and receive a bundle of benefits and pay in return.
This arrangement continues, and in many cases evolves and changes over time, until it eventually comes to an end. Only when the wheels fall off the arrangement somehow, such as during unwanted workplace changes or a dismissal, does the employee begin to worry about whether he or she actually has a “contract” of employment that defines his or her rights.
People who have been hired verbally and performed work without any single written agreement that one could point to and call a “contract,” do in fact have an enforceable employment contract, as well as a bundle of rights. The courts enforce verbal employment contracts all the time. The trick is in identifying and defining those rights.
A verbal employment contract is probably comprises three information sources: verbal, written and conduct-based elements.
The verbal and written elements are usually the most cut and dried. The verbal elements are usually comprised of the exchange between the employer and the employee at or around the time of the point of hire. The employer offers the employee employment, say, as the general manager, at such and such pay with such and such benefits, and the employee accepts and commences the work. That is the basis for a contract.
The written elements are also fairly straightforward, and usually comprise pay statements, benefits policies, the usual administrative documents one must sign at the point of hire for taxation and benefits programs, and such. This is further evidence of the contract. For more basic contracts, written basic elements setting out minimum requirements can be found in legislation such as the Employment Standards Act. Written elements can also include stock options grants, promotion letters, memoranda and e-mails pertaining to function and pay changes, and such.
Where things get really interesting is with the conduct-based elements of the employment contract. It is not generally known that conduct between the employer and employee over sufficient time can amend or alter the original employment contract. Yet this is in fact the case at law. The principle of amendment of the terms of the employment contract by conduct is found in the common law and allows that a contract of employment can be amended in the very midst of the employment, where factual events support such.
Simply put, employment arrangements can evolve over time when viewed through the conduct of the parties on any given point. Thus, amendment by conduct is often absolutely central to understanding precisely what a long-term verbal contract is between the employer and the employee.
Some simple examples. The employee was hired to work the sales floor and be paid by commission and was directed to work Mondays, Tuesdays and Wednesdays, but Thursdays, Fridays and Saturdays were where the big money was. Over time, the employee successfully positioned herself so that she only worked Thursdays, Fridays and Saturdays, and this was the case for years afterward. For example, in the unreported 2001 B.C. Supreme Court decision Perrett v. Harrison Galleries, the plaintiff argued successfully that the employment contract had been amended by this conduct such that the employee may demand the right (for example) to work Thursdays, Fridays and Saturdays, and the employer is unable to change this term without agreement or reasonable notice.
Another example involves something as simple as the method used for actually delivering the pay from the employer to the employee. In one case, the employer paid the employee by issuing a cheque. This was the conduct for years. Suddenly, the employer varied the conduct and began paying the same salary, but by electronic deposit to the account of the employee. The employee successfully argued that the employer was not at liberty to make such a change without his consent, because pay by paycheque had become a term of the employment contract, implied by conduct.
What can be gathered from all of this? A contract of employment arises for each true employment situation, and is a mysterious and wonderful thing that evolves over time in ways the employer cannot necessarily anticipate or control. A contract exists for each employee, whether written or not. It is a very dynamic device that can change and evolve during the employment relationship and become something quite different than it was. It is a source of many strengths and rights that the employee may not know he or she has, but has nonetheless.