employment contracts Waksdale review

A new year often means some level of house-cleaning by employers, including the updating of core workplace documents. SpringLaw has seen a spike in this work because many employers understand, now more than ever, the need to have their employment contracts reviewed, with a particular focus on termination provisions. This review should include any ancillary policies, Codes of Conduct, or plan documents referencing when and under what circumstances an immediate termination for cause can occur. We refer to this as a ‘Waksdale review’ because it is driven by the court’s reasoning in Waksdale v. Swegon North America. For legal nerds, our prior blog details why a Waksdale review is necessary.  

Existing Employees: New Employment Contracts or Status Quo

If no red flags are discovered in contracts or other core workplace documents through a Waksdale review, then HR can pat themselves on the back for keeping current and move on. Where a Waksdale update is required in employment contracts (or other documents), a strategic review of next steps is important. 

A termination cost analysis, risk assessment, and review of the makeup of the existing workforce are necessary to map out a plan. Next steps are also driven in part by the wording and enforceability of a contract’s termination language (i.e. how bad is it?). 

In some cases, proposing new contracts to existing employees can raise eyebrows and unnecessarily affect employee morale, especially without proper communication about the purpose of the amendments. Sometimes this tidying exercise is not worth the effort. Employers may instead decide to temporarily maintain the status quo with existing employees, and save their shiny new documents for their new hires. 

Consideration and Timing of Updated Contract Rollouts

If employers do decide to roll out updated contracts for existing employees, determining the appropriate ‘consideration’ is next. Consideration is the fancy legal term for ‘something of value’. For updated (i.e. amended) contracts and policies to be enforceable, employers must provide existing employees with ‘consideration’ in exchange for the employee’s agreement/signature.

A key preliminary step in this updating exercise is to plan ahead and assess when employees will next be offered a (more than nominal) enhancement to the existing terms of their employment (e.g. a bonus, salary increase, increased vacation or other paid time off, enhanced benefits coverage, introduction of an Employee Assistance Program (EAP), etc.). In most cases, these examples would be valid consideration, and prior to implementing these enhancements is a good time to roll out updated /amended contracts and/or material changes to policies. It is always an unfortunate missed opportunity (and more expensive) when an employer requests material contract or policy updates and advises that they just rolled out a new bonus plan, for example. 

Unless an employer’s contract and policies are entirely up to date and compliant (rare in our experience), in addition to predictability and enforceable termination provisions, a Waksdale review often leads to ditching old, out-of-date policies and material changes to the employer’s core documents and HR practices. Covid has led to many material changes in how and where we work, which need to be set out in employer policies. This in-with-the-new and out-with-the-old Marie Kondo-style tidying exercise can be quite a buzz for HR. 

Key Steps for Employers in a Waksdale Review:

  1. Have your employment contracts reviewed by an employment lawyer to ensure that they comply with the Ontario Employment Standards Act, 2000,  with a focus on all termination-related provisions;
  2. Ensure the review is broad and includes all employer policies, Codes of Conduct, plan documents, and contract appendices that state or imply that certain conduct or events may lead to a termination for cause, or immediate termination, without the employee receiving any entitlements beyond their last day of work – this content requires a careful Waksdale review;
  3. If the result of the review is that the employer’s contract and/or policies do have a Waksdale problem, assess with an employment lawyer when and how it should be fixed;
  4. Plan ahead and if future raises or enhanced employment terms are in the works, consider what contracts and policies need updating before employees receive what could be the necessary ‘consideration’ in exchange for their acceptance of updated/amended terms of employment;
  5. Take care in your communications with existing employees about any amendments, and provide time for them to obtain legal advice before signing;
  6. In many cases, fixing a Waksdale problem is a smooth process because employees are receiving the same entitlements on termination as they understood to be the case when they were hired, and they are (usually) being paid to sign an updated contract without a Waksdale problem; in these cases, clear communication helps employees understand that their amended contract is a result of evolving employment law, and part of a contract updating process. 

The best part of this tidying and discarding exercise is having new, updated and compliant core workplace documents. Talk about sparking joy…

If you need help with a Waksdale review, get in touch.