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Court Rules on ‘Kitchen Sink Contracts’

Whitten and Lublin | Oct 05, 2011

Employers often draft overly broad and restrictive contracts that are applied unilaterally to employees.  The thought behind it is – bargain for more, and hope for the best.  In most cases this works, but recently two employers found out that playing it fast and loose has its repercussions.

Employment lawyer Daniel Lublin calls this the “kitchen sink approach to contracts” in his weekly column in the Metro.  One of the two cases he discusses in his most recent article could have some serious implications for Canadians.

In 1992, Tom Mason signed a contract that contained a provision restricting his ability to work with his company’s clients for a period of one year following his departure.  When Mason was fired 17 years later, he challenged the clause in court, and came up empty-handed.  As Mr. Lublin puts it, “Employers collectively sighed in relief since most court cases strike down these clauses based on the courts’ interpretation of what is fair, and not what the contract actually states.”  Thankfully for Mason, the Court of Appeal had a different opinion and declared the contract invalid.

Employers should take note that in cases of wrongful dismissal, the courts may side with the employee when deciding whether to uphold post employment restrictions.  Lublin says that this could result in employers paying out more in severance to avoid the negative fallout from a potentially void contract.  Hopefully, it will also lead to due consideration when drafting contracts to begin with.