Howard Levitt: Why many new employment contracts are just as unenforceable as the old ones — via financialpost
One of the biggest defects in these new contracts is a lack of what is called “consideration.”
It is because of the need for consideration that smart employers have employees sign new contracts at raise time or in return for a bonus. But the mistake they make is not making clear that that bonus or salary increase is in return or in exchange for the new onerous provisions, such as a termination clause or a clause eliminating stock options or bonuses from an employee’s dismissal entitlements.
Lack of consideration in employment contracts often arises when an employee receives and signs an employment contract on their first day of work with onerous provisions never previously agreed to, such as termination or non-competition provisions. They are always unenforceable because there is no consideration for them, i.e. the employee has received nothing new in return. After all, they would not have commenced employment without already having agreed to the terms of that employment.
In this new decision, the company put in a new provision with obligatory mediation, an arbitration clause and a change from Connecticut to Ontario as the law of the contract. The employer argued that these changes provided the employee with consideration in return for a new onerous termination clause.
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