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Two-step job offer approach can be costly upon termination

During the hiring process, it is not uncommon for employers to take a two-step approach to job offers: First, they will send a potential new hire an initial job offer. Second, after such an offer is accepted, the employer will subsequently send over the intended formal employment contract. The formal contract will usually contain more comprehensive terms of employment, including specific termination provisions or non-competition and non-solicitation provisions.

However, proceeding in this manner is very risky for employers, as a court may determine the formal employment contract is unenforceable due to lack of consideration, as demonstrated in Adams v Thinkific Labs Inc., 2024 BCSC 1129.

Background

In Adams v Thinkific Labs Inc., the employee began working for the employer in September 2021 and was terminated in May 2023.

During the hiring process, the employer sent the employee an emailed job offer that included details regarding compensation, stock options, bonus entitlements, vacation and leave entitlements, work schedule details, and group benefits. This emailed job offer did not address termination or a non-competition agreement.

However, the emailed job offer did request the employee’s full name, desired start date, and also indicated that an official employment contract would be sent to her after she provided the requested information.

The same day the employee accepted the emailed job offer and provided the requested information, the employer sent her the additional written contract. The additional contract contained fewer details about the terms of employment than the emailed offer, but it did include several new limitations and obligations that were imposed on the employee, including a termination provision and non-competition provision.

The employee signed and returned the additional contract prior to beginning work for the employer.

Following her termination, the employee claimed wrongful dismissal, taking the position that the initial emailed job offer and her emailed acceptance of such offer constituted a full and binding employment contract. As the emailed job offer did not contain a termination clause, the employee argued she would be entitled to common law reasonable notice upon termination.

The employer argued that the initial email offer did not constitute a contract of employment, and that the employee knew and confirmed during examinations for discovery (a step in the litigation process where a party is asked questions by the opposing party about the issue in dispute) that she knew she was expected to sign a formal employment contract to work for the employer. The employer also argued that there were some uncertainties (for example, the start date), that meant there was no actual contract until the formal contract was signed.

The court’s decision

In this case, the court determined that the formal written contract lacked consideration (i.e., a critical element to the formation of a contract, which is something of benefit that each party will receive in exchange for entering into the contract) and was therefore unenforceable – meaning that the employer could not rely upon the termination provision contained within the written agreement. Accordingly, the employee was entitled to common law reasonable notice upon termination.

In coming to this decision, the court noted the initial email offer was extensive and detailed, containing all the information regarding the benefits the employee would have derived from her employment (including compensation, bonus information, vacation, etc.). In contrast, the additional written contract was much less comprehensive and only addressed new restrictive terms with respect to termination, intellectual property, and non-competition clauses without providing any new benefit for the employee.

The court further noted that the email offer was not simply general notes about discussion points; it was a comprehensive, detailed, and clear presentation of the terms of employment. There was nothing within these terms that indicated new terms would be added later on.

Accordingly, the court found there had been an offer and acceptance in connection to the initial emailed job offer and that there was no consideration for the subsequent written contract.

The court then determined that the employee was entitled to damages for a reasonable notice period of five (5) months, less the three weeks of pay she had already received.

Lessons for employers

For employers, this case highlights the need to be cautious in how a job offer is presented to a potential new hire – particularly how the terms of employment are communicated.

While it may be tempting to send an initial job offer that contains the barebone terms of employment with the intention of a more detailed agreement being entered into later, doing so risks that the detailed agreement will be unenforceable due to a lack of consideration.

There are ways for employers to protect themselves if they are in such a situation. The employer would need to ensure there is new consideration for the subsequent detailed contract, such as an additional one-time payment, a boost to the compensation, or some other benefit to the employee.

However, it is usually better practice to present all of the terms of employment to the prospective candidate at the same time, usually in a properly drafted offer of employment letter – i.e., to take a “one-step” approach rather than a “two-step” approach.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.