In many instances, when a person receives an employment offer it’s a take it or leave it proposition. Often, there are no negotiations.
Courts tend to recognize that individuals are highly disadvantaged in this arrangement due to a power imbalance. If employers abuse this power, courts can refuse to enforce contractual terms on the grounds that they are “unconscionable” or against public policy. However, what happens when an individual changes that power imbalance by negotiating with a prospective employer?
In Kielb v. National Money Mart Company, the Ontario Superior Court of Justice held that those who negotiate the terms of their employment contract cannot later argue that they are contrary to public policy, and consequently should not apply to them. In that case, Jonathan Kielb, a lawyer, was convinced by a recruiter to consider a position at Money Mart. Money Mart sent him a contract, but Kielb had some concerns with it. He told Money Mart that he was uncomfortable with the base salary, the severance, as well as the non-competition clause. In response, Money Mart agreed to revise the document, but left in a term that limited his bonus if he was dismissed: he could lose his entire bonus for the year, depending on the timing of his dismissal by Money Mart. Kielb was given 3 days to sign the document. He ultimately accepted the revised offer.
After commencing work at Money Mart, Kielb was dismissed. Due to the timing of his dismissal, he lost his entire bonus for the year. This was a problem for Kielb particularly because the bonus was worth over half of his base salary. In court, Kielb argued that since he was only given three days to accept the revised contract he had “no choice” but to accept it, and he should get his bonus.
The court disagreed with Kielb. It held that even though the bonus was an integral part of his compensation, the contract’s clear language meant Kielb could not receive the disputed bonus. The deciding factor was the fact that Kielb participated in the negotiation of his employment contract and successfully obtained advantageous changes before signing it. Even though the clause was harsh, the court concluded that Kielb could have bargained for a better deal.
The court’s decision in Kielb should not discourage individuals from negotiating the terms of an employment offer. Rather, it highlights the importance of understanding all of the contractual terms before signing off on a legally binding document, especially if a negotiation has taken place. As a general rule, it is always best to consult with an employment lawyer prior to entering into an employment contract, as this should alleviate any doubt regarding the effect of the contract, if accepted. Based on the decision in Klieb, if a negotiation has taken place and some provisions appear unfair, unreasonable or confusing, the individual should proactively address them before signing the dotted line.
The employment lawyers at Singh Lamarche LLP frequently advise employees and employers on all matters of employment law, including negotiating and drafting employment agreements.