Toronto Employment and Labour Law Blog: When is an Employment Contract not a Contract?

The Rabbi signed eleven employment contracts with the Synagogue over his 28 years of employment as their spiritual leader. These contracts provided two months salary on termination of employment, without cause. His testimony, at trial, was that he paid no attention to the terms. He trusted his employer who presented the contracts every couple of years as a formality and asked him to “sign here.” He was never advised to consult a lawyer and never did so. His compensation hardly changed over the years but the terms of the contracts did change from time to time. The court found that the manner in which the contracts were presented to the Rabbi and signed by him did not demonstrate a mutuality of intent or even a basic understanding of what exactly he was signing. Further, there was no evidence of "fresh consideration" for entering into a new contract during the currency of his employment. 

There was no benefit presented to the employee, therefore, no enforceable contract.  Since the court found that the contracts were not applicable the Rabbi had a common law entitlement to notice and severance on termination for just cause. The alleged just cause was, in essence, that his daughter was known to have dated a non-Jewish boy. The court found that justifiable cause had not been proven and the two months provided in the contracts was unenforceable. The court awarded the Rabbi 32 months salary and benefits, one of the highest awards for wrongful dismissal awarded by Ontario courts. 

Lessons learned; a contract must be mutually agreed to by the parties to it, not imposed by one party on the other. The employee must be given the time to understand the terms and given the opportunity to obtain legal advice if he or she wishes to do so. Employers cannot fundamentally change the terms of an ongoing employment agreement unless some tangible incentive is provided to the employee to cement the new or adjusted employment relationship.

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