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Introducing Employment Contracts – The Right Way

By May 24, 2018August 17th, 2020Employment Law

We are asked by Dentists across Ontario to come into their practices and implement new contracts.  What we tell them at the beginning of that process is that there is a right way, and a wrong way, to do it.

The wrong way is where the employer pushes a contract in front of an employee and tells them to sign it “or else.”. The right way is where we give reasonable notice of the transition to the new contract, and giving the employee a signing bonus in exchange for their signature.

This right way was recently considered by the Ontario Superior Court – involving a dentist! – and it was confirmed to be the right way.

The Lawsuit

In the case of Lancia v. Park Dentistry, a Restorative Hygienist sued her former dentist employer saying that she had been constructively dismissed after signing a new employment contract.

The employee worked for a predecessor employer and Park Dentistry for less than 19 years. While working for the dentist, the Hygienist was getting about $60 per hour and receiving 200 hours of vacation pay (which ended up being just over 10% of her actual earned wages, regardless of how much she actually worked [and she didn’t work 40 hours each week]). That is a lot of vacation pay!

In August 2014, the dentist decided to transition all team members to written employment contracts.  The employee (along with all of her colleagues) was given a new employment contract and a cover letter which explained that she had the option of signing the new Agreement in 1 month, or her employment would be terminated in 18 months (during a period of working notice of termination).

The new contract also specifically stated that employees would receive vacation pay as a percentage of the hours that they worked, and not a specific amount of guaranteed hours of vacation each year.  This was significant. The Hygienist had been earning a greater share of vacation pay (that was not proportionate to the hours she worked) which ended up being a significant bonus by the end of each year.  The dentist in this case decided to pay a proportionate amount of vacation pay based on hours worked (as the Employment Standards Act allows), which was kept at 10% – but 10% of the hours she worked, not 10% of 40 hours per week.

The contract also permitted the employer to give discretionary raises and set the vacation of the Hygienist.

Two days passed after the Hygienist received the new contract and she signed it and received a $2,000 signing bonus.

And all was well.

Until February 9, 2016, when the employee inexplicably resigned from her employment with the dentist in the following resignation letter (and didn’t even give the 2-week or 30 day resignation notice she promised to give in her contract she signed).

“I regretfully hand in my resignation. I feel that Dr. Park is done with his staff and especially with me.

Last year I had to pay back my vacation that was over paid to me the year before, which meant I only had 64 hours paid holidays for the entire year, for over 15 years I had 200 hours.  I have not had even a 2% cost of living increase in at least 5 years.   I think that when Dr. Park decided not to give anything to his staff over Christmas that made it clear to me that Dr. Park would like me to leave.  I’m sure it will be better for the practice if you can find someone to do my job with less pay.

I would appreciate an immediate start with Neve, it will be too emotional for me to work here for two weeks.

I wish you all the best in the new office!!

Kind regards,

Michele”

I will refrain from commenting on the reasons for the resignation (the Judge did that, below).

Thirteen (13) months after her resignation, the Hygienist sued her former employer, alleging that she was constructively dismissed from her employment due to a material change in the employment relationship (claiming that the new employment agreement was unenforceable for lack of consideration, and her vacation was improperly taken away), and alleging sexual harassment.

The Decision

The Ontario Superior Court of Justice found that the Hygienist was not constructively dismissed and there was no sexual harassment.  The Court specifically rejected the Hygienist’s argument that she did not receive a proper signing bonus or consideration, and also chided the Hygienist’s delay in bringing a claim for constructive dismissal and sexual harassment where there was no mention by the Hygienist of any wrongdoing or dissatisfaction while she was working.

Consideration

We have talked about consideration before on this blog. Essentially, if an employer wants to have an employee sign a new contract after they have started working, the employee needs to receive something extra, in addition to the terms in the contract.  A signing bonus, a day off, a new car, a peppercorn. Something that is not part of the promises of the contract.

So, in this case, the Hygienist gladly accepted consideration in exchange to sign a new employment contract: the $2000 signing bonus.  It was accepted by the employee without duress, and with enough time for the employee to talk to a lawyer (even though she did not).

And the Court went even further! The Court said, in any event, the Employer didn’t have to provide consideration to this particular employee because an employer has the right to transition an employee to a new contract without consideration as long as reasonable (common law) notice of the change is provided.  So, the way that this dentist (and DMC LLP) went about introducing its new employment contract was, in this case, completely appropriate, reasonable, and legal.

Delay by the Employee

I thought this was interesting.  The Court took some time to chide the Hygienist at paragraph 58 of the decision:

“Lancia’s delay in asserting her claim of constructive dismissal is illuminating.  Here, Lancia delayed advising or alleging constructive dismissal until some 13 months after she resigned.  Moreover, she failed to communicate to Park Dentistry in a reasonable time that she was treating the repayment of her vacation pay as a breach of the contract.  She never complained of any discomfort with her work environment – not to the office manager, not to Park, not even in her Resignation Letter.  Rather, the reasons she eventually gave for resigning were financial and related to her compensation.”

What the Court is reminding employees in Ontario is that, if you want to consider an alleged breach of contract as a constructive dismissal (as this Hygienist did), the employee must communicate that decision to the employer within a reasonable time. For this Judge, the employee’s delay of 13 months after her resignation was unreasonable and contributed to the rejection of her claim.

In the end, the Court held that the Hygienist had unilaterally terminated her employment contract with the dentist alone, and that her constructive dismissal claim had no merit.

Cost to Employee

Generally, the winner of a lawsuit gets some of their legal fees paid by the loser.

In this case, the employee lost on virtually all of her claims, and so the Court ordered the former employee to pay the employer’s legal fees in the amount of $52,351.08 (which did not even represent the full amount of the winner’s legal fees of a 2-day trial and everything that goes with it).

Discussion

The decision in Lancia v. Park Dentistry is an important case for dentists and all employers in Ontario.  The case summarizes the issues and principles for employers to consider when trying to bring in new employment agreements on existing employees. Luckily for this dentist, it may have been challenging to bring in new contracts (and cost a lot of money and probably caused a lot of headaches), it is completely reasonable, legal, and possible to introduce bran-new written employment agreements for long-term dental team members – as long as the proper process is followed.

In my previous blog post, the Ontario Court of Appeal told an employer that the process they followed was improper! And that employer had to pay.

Before you make any major decisions in your dental office, give us a call.  DMC helps dentists across Ontario to introduce written contracts to their team members and ensures a smooth transition to protection.

Give me a call or send me an email if you’d like to chat about your practice.

DMC