It is common practice for many employers to provide new hires
with an initial offer letter setting out only a summary of certain
key terms followed by a more detailed employment agreement to
govern the employee’s employment. This is not a practice that
we recommend, as demonstrated by a recent British Columbia
case.
The Supreme Court of British Columbia (the Court) in
Adams v. Thinkific Labs Inc., 2024 BCSC 1129
(Adams) confirmed that where an offer letter sets out the
substantial terms of employment and is accepted, the offer letter
will be a binding employment agreement. This means that any
subsequent employment agreement will require fresh consideration to
be enforceable.
In Adams, the employee accepted an initial offer which
set out certain terms of her employment, such as her compensation,
benefits and vacation entitlements (Offer Letter). The Offer Letter
did not include any provisions governing the employee’s
entitlements on termination of employment.
After accepting the Offer Letter, the employee was asked to sign
an employment agreement which included additional substantive
provisions that were not in the Offer Letter, including a
termination provision which purported to limit her severance
entitlements on termination to oust common law entitlements
(Employment Agreement). The employee signed the Employment
Agreement.
Approximately 20 months later, the plaintiff’s employment
was terminated, and she commenced a wrongful termination claim. The
plaintiff argued that the Offer Letter constituted a full and
binding employment agreement and since the Offer Letter did not
include language to oust her common law severance entitlements, she
was entitled to more severance because of her termination. The
employer resisted the wrongful termination claim by arguing that
the Employment Agreement was binding and had replaced the Offer
Letter. On that basis, the employer argued that the termination
provision in the Employment Agreement limited the amount of
severance that the plaintiff could claim to the statutory minimums
in employment standards legislation.
The Court confirmed that the Offer Letter constituted a binding
agreement and that the subsequent Employment Agreement was a
separate agreement which required fresh consideration to be
enforceable, especially since the terms of the Employment Agreement
were less favourable than those of the Offer Letter. Since the
employer did not provide fresh consideration for the Employment
Agreement, the Court held that it was not enforceable. The employer
therefore could not rely on the termination provision in the
Employment Agreement to limit the employee’s severance
entitlement on termination and the employee was accordingly
entitled to common law reasonable notice.
To avoid a situation like this one, employers should streamline
their offers of employment into one document. This document should
contain all terms of employment and most importantly, an
enforceable termination provision. We would be happy to assist
employers with this process to ensure that all terms of employment
are captured and enforceable.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
