Many employers know the importance of getting their new employees to sign a written employment agreement, but it may come as a surprise that when the employment agreement is signed is just as important as whether it is signed at all.
The basic principles of contract law say that for a contract to be valid there must be an offer, acceptance, and “consideration.” A contract has “consideration” when each party is promised to receive something in exchange for giving something else. This is sometimes referred to as “quid pro quo.” In the employment context, this generally means that the employee will receive a new job and compensation for their work, and the employer will receive the benefit of the work being completed.
If a written employment agreement is signed before the employment relationship begins, that agreement has consideration.
However, issues can arise when employers want an employee to sign a new or updated employment contract after they have already started working.
In these cases, new or revised employment agreements will not be valid without “fresh consideration.” Employers cannot simply rely on continued employment as sufficient consideration for new or revised terms.
The good news is that employers who find themselves in situations where employees have started working without signing the agreement can rectify the situation by providing “fresh consideration” in exchange for signing a new contract. This fresh consideration must be something of value to the employee and will often come in the form of a signing bonus, a pay increase, greater benefits, or extra paid vacation days.
While it can be tempting to think a signature is the golden ticket to an enforceable employment agreement, much more needs to be considered in the employment context!
If you’d like to learn more about consideration and employment contracts, please reach out to Claire MacLeod at [email protected] or Leah Sorge at [email protected].
