Negotiating a deal within earshot of the officious bystander

Contracts can be revised after the fact to contain terms that should have been there, but weren’t

Contracts of employment are a beautiful and dynamic thing.

Each employment contract stands on its own and is constituted and made up of its own facts. Some employment contracts are written, some are oral, some are a combination of written and oral. Notwithstanding that employment contracts are treated under employment law as a special subset of contract because of their unique significance to the employee’s lives, all employment contracts are subject to common law rules that apply to the general law of contract.

A general rule of contract law is that once a written agreement comes into existence that both parties agree is the definitive statement of their agreement, it replaces or supercedes all past negotiation, discussion, even past agreements.

In other words, elements x, y and z could have been negotiated, discussed or even formed part of a past agreement, but if elements x, y or z do not appear in the new agreement, then the rule will bar their use to challenge the new agreement’s contents. So the first caution arises: be careful of what you are signing.

But what happens when the parties have failed to include in the employment contract what turns out later to be an important term?

In cases dealing with employment contracts, the courts have repeatedly found terms to exist within employment contracts that are not spelled out in the agreement itself, but are instead implied to exist.

For instance, the courts have found the following terms to be implied into employment contracts that otherwise make no mention of these points:

A duty upon the employee to act generally with fidelity and provide faithful service to the employer. The employee owes the employer a duty during the employment to act toward the employer in a faithful manner.

A duty on the employer to give its best efforts toward the overall welfare of the employee. This sort of duty is most common in situations where the employee is vulnerable to action at the hands of the employer, which the employer can generally be seen to have undertaken for the benefit of the employee.

A duty on the employee called a fiduciary duty which goes beyond the duty of fidelity and faithful service. A fiduciary duty can be implied into a contract of employment, but there are very stringent tests in the law for such.

A duty on the employer that, during the course of dismissal, the employer act toward the employee in good faith and in fair dealing, or perhaps not in bad faith. The employer’s conduct during the course of dismissal is subject to objective standards of behaviour.

A duty that the employer will treat the employee with civility during the employment.

A duty that the employer provide the employee with a reasonably safe workplace.

The ability of the employer, in certain situations, to impose a temporary probation or even a demotion without constructively dismissing that employee.

That each party must give reasonable notice of termination of the contract to the other.

That the employer may not make unilateral substantial changes to the terms of the employment contract.

There are numerous other potential terms that can be implied into employment agreements.

Where an employment agreement specifically deals with any of the above or other potentially implied terms, the legal result as to whether such term can be implied into the contract is muddied and must be looked at closely.

How does the court imply terms into employment contracts?

The device used is known as the “officious bystander” test. The officious bystander is a judicial fiction, a device used by the law to bring enlightenment to an incomplete contract. The officious bystander is not a lawyer or a judge, but simply a nosy person with average knowledge and good timing, who happens to be in the right place at the right time.

The test goes something like this. If, at the time the parties were making their bargain, an officious bystander overhearing the exchange interjected some provision the parties had forgotten or overlooked, would the parties instantly agree that such forms part of the contract?

One can instantly see that certain types of terms, such as pay, vacation, days or hours of work, title, job duties and such, are terms that are core to every employment.

Implied terms under the officious bystander test are terms that are core-like and are needed to give efficacy to the contract, but that never came up in discussion or negotiation.

The power of the officious bystander is that employment contracts can be revised after the fact to contain terms that should have been there, but weren’t.

The result? You can’t always believe what you read. You may be surprised by what terms actually exist in any given contract of employment.

Recent Posts

Not every employee has a written employment contract as proof of their employment. In fact, the opposite is more commonplace than most people would guess. Many employees are hired verbally, without any physical documentation outlining the terms of their employment. This is fine if everything runs smoothly in the workplace. But if it doesn’t, it […]
It’s a hotly debated and highly complicated situation when interpreting the differences between the independent contractor and the employee. They’re often swimming around in the same waters, especially in long-term arrangements where services are provided in the workplace.  On the other hand, from a legal point of view, they couldn’t be more different.   “Although […]
As mentioned in the previous article about  employment contracts and independent workers, there are many misconceptions regarding what it is that defines an independent contractor from an employee.  If your employment arrangement comes to an unhappy end and you wind up in court, the legal status of your agreement will be in question.   Employment […]