Post-termination obligations: Why HR needs to think strategically

If this pandemic has taught us anything, it's that employers need to be ready for any eventuality

Post-termination obligations: Why HR needs to think strategically

COVID-19 has changed the way we all think about work. Between lockdowns and remote work, economic downturns, and mass redundancies – 2020 has been a year of cataclysmic change.

If this pandemic has taught us anything, it’s that employers need to be ready for any eventuality. With all the changes impacting the workforce, now’s the time to review current employment contracts and policies.

Read more: UKG's chief people officer: Building a culture through COVID-19

It’s no longer simply an issue of being compliant – it’s about using your employment contracts and HR policies strategically to realign, and potentially save, your business.

HRD Canada spoke to Stuart Rudner, founder of Rudner Law and speaker at UKG’s upcoming webinar, “Strategic Use of Contracts and Policies.”

We wanted to know what the impact would be on an employer if they didn’t have detailed clauses in their contracts for post-employment obligations.

“Many people will be shocked to learn that in the absence of a comprehensive contract, the law there are almost no post-employment restrictions on the worker,” explained Rudner.

“For example, most employees are free to resign, join a competitor and begin soliciting customers of their former employer. That’s the default – but you can protect yourself with strategic contracts.”

Therefore, it’s incumbent on employers to have restrictive covenants in place. However, as Rudner pointed out, it’s important to remember that these contracts must be drafted strategically.

“Courts don’t like to limit an employee’s ability to earn a living any more than is objectively necessary,” he told HRD.

Read more: Canadians reluctant to return to the workplace

“As such, they’ll be reluctant to enforce non-competition clauses. They’ll be more open to enforcing non-solicitation clauses, provided the terms are reasonable. So, for example, if you say the clause will be applied for 10 years after employment, it’s extremely unlikely to be upheld by a court. They will deem 10 years to be an unreasonable restriction.”

What’s also important to remember is that if you ask for too much, you will end up with nothing; the courts won’t “fix” the contract or wording for you. For instance, if you try to apply a non-competition order for five years, and the court believes that six months is more appropriate, it won’t award in your favour for the revised timeframe – it’ll simply strike the contract down.

 “You’ve got to be prepared to justify whatever restrictions you include in the employment contract. If you can show that it’s necessary to protect legitimate business interests, then a court is more likely to enforce it.”

And remember, reinforcing strategic employee contracts isn’t just for the benefit of the employer – it’s important that workers have clarity too.

“I think a lot of people just assume that the employer has the right to terminate employment or act as they wish,” added Rudner. “Some employees just assume their employer knows exactly what they’re doing – which isn’t always the case. Or it is, but what they are doing is for their benefit and not the employee’s.”

Rudner explained that, back in March and April, he received many calls from employees questioning whether or not their employer had a right to terminate them or if they were entitled to severance pay. 

“At that time,” Rudner added, “the mood was very collegial and cooperative. There was the sense that everyone was in this together, so people didn’t really want to rock the boat.

“However, I think that, the longer the pandemic persists, and the longer people are out of work or on reduced hours, the more that’s going to change.

“We’re going to see more employees start to question whether they have more rights than they previously thought – and they’ll be looking to enforce them.”

To hear more from Rudner on how to use your employment contracts and HR policies strategically, sign up for UKG’s upcoming webinar.

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