15 April 2016

WHY EMPLOYERS AND EMPLOYEES ALIKE SHOULD AVOID GARBAGE EMPLOYMENT CONTRACTS

Demanding that even lower or mid-level employees sign written employment contracts seems to have become all the rage over the last few years. In the past, such agreements were usually limited to senior managers or executives. 

In theory, there's nothing wrong with employment agreements for everyone at a business if they helpfully clarify the mutual obligations for both parties. Certainly specifying pay levels, hours and duties of work is always helpful in avoiding misunderstandings. But what isn't helpful is inserting abusive and legally defective non-competition clauses that seek to prevent a departing employee from earning a living in his or her field for the foreseeable future. 

I write this as a lawyer who more often acts for employers, rather than employees. I tell my employer clients that it's pointless to pay a lawyer to draft up an employment agreement which no court in Canada will ever enforce because of its abusive terms. 

The difficulty with a lot of these agreements is that the valid clauses state the obvious that doesn't really need to be stated - like don't steal our intellectual property - and the parts that aren't obvious - like you can't effectively work in your field anywhere in Canada (or anywhere within 100km) for the next year (or two years or three years) - are so abusive that they might invalidate the entire agreement, especially if they're combined with other abusive clauses. As an advisor to employers, the last thing a company wants is a court binning the entire agreement. 

For instance, I recently came across an agreement with wording similar to the following: "You agree that during the term of this Agreement and for a period of one (1) [why do lawyers so love to repeat words with numbers?] year after any termination of this Agreement, whether voluntary or involuntary, you will not, directly or indirectly, for your own account or on behalf of any other party, solicit, contact, contract with, supply, provide services for, do business with, or take any other action designed to procure business from any person, business or company who you solicited on behalf of ...., or with whom you did business on behalf of ...."

So what does a clause like that mean? I have no clue, and probably a court won't either. Is it a non-solicitation clause? Is it a non-competition clause? The sentence structure is so tortured, replete with so many commas, it's hard to know what it means. And I do spend a lot of time thinking about these things. Can a new employee really be expected to voluntarily consent to a clause like that in an informed way? 

How about this even more outrageous clause: "You have carefully considered the nature and extent of the restrictions upon you and the rights and remedies conferred upon ... by this Article, and you hereby acknowledge and agree that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to ... and are fully required to protect the legitimate interest of ... and do not confer a benefit upon ... disproportionate to the detriment to you." 

Really? The drafting lawyer actually expected a reviewing court to buy that "carefully considered" crap? This clause seems to suggest the earlier clause really is a non-compete, and not a non-solicitation. And how are we to believe that a little competition would be "unfair"?

You sell a business to someone for a million dollars, it's an agreement between equals. And it's completely fair for the buyer to demand a non-compete for a set time and territory to ensure you won't simply set up the same business across the street. 

Occasionally senior executives execute non-compete clauses in exchange for multi-million dollar golden parachutes. Nothing wrong with that. 

But to say to a mid-level employee: "we can fire you any time we like, and you won't be able to work for anyone else in your field," is ridiculous. 

I'll give you one last example of the most ridiculous, wordy clause of all: "You agree that the remedy at law for your breach of the foregoing provisions will be inadequate, and ... shall be entitled to both temporary and permanent injunctive relief (without notice or bond) enforcing such provisions, in additional to any other remedy it may have at law or in equity."

What does this mean? That they can throw you in jail for earning a living? Take away your birthday? And not give you notice of doing so? 

The moral here is for employers to closely question their lawyers when they ask for employment agreements to be drafted. Can you guarantee me that a court will uphold this agreement? If you have doubts, why? Are there ways we can improve our agreements that will make them more defensible, and easier to enforce, in court. 

The message for employees is that I know you're going to keep signing these kinds of abusive agreements because you need a job. Take some comfort in the fact that the more abusive the agreement, the more impossible it will be to enforce late. But do get some legal advice before you part ways with your employer, in case there is a chance some of the agreement might stick. 

HOW TO GET YOUR MONEY BACK THAT WAS SEIZED BY THE GOVERNMENT

Property rights likely come a close second behind physical liberty rights in the pantheon of fundamental human rights classes that the law is sworn to uphold. Neither property nor liberty in Canada are absolutes: the state can take away either after complying with procedural fairness and natural justice. For seized property, the state (or the courts) must offer seized property owners some kind of mechanism to contest the validity of seizure, detention or forfeiture of property. The key takeaway here is that any time the government seizes your property, you have rights to contest that seizure!

The reason you might unfortunately need to get a lawyer involved in contesting any seizure is that the best means through which to contest the seizure are often not readily apparent. Those means depend on which part of the government seized the property, the statutory or other authority the government relied upon for the seizure, what kind of property was seized, and what the government ultimately plans to do with the property.

The byzantine legal road network for recovering seized property can be much more complicated than the well understood procedures involved in contesting a criminal charge (plead not guilty, then go to trial) or making a civil damages claim against someone (start a civil action, and then proceed towards trial). Contesting property seizures could involve applying to the government department who made the seizure, applying to an independent tribunal established by government, applying to the Superior Court of your province, or applying to the Federal Court. You'll also need to clarify under what statutory or other authority the (1) seizure, (2) detention, or (3) forfeiture is being justified by the government (believe it or not, different authorities might be claimed for each of the them).

Your best remedies to pursue in response to government asset seizure will largely depend on the reasons for the seizure.

1. Seized Due to Unpaid Taxes. Tax seizures are amongst the easiest to remedy. Contrary to popular opinion, the Canada Revenue Agency can be very open to negotiating the return of seized property upon taxpayers complying with the tax rules. Sometimes, the CRA might even return more money to you than it originally seized!

For some of my clients, the problem might not be actual taxes owing, but just that for one reason or another they haven't filed tax returns in a few years. The CRA might have thus issued "arbitrary" assessments where they guessed at the tax owing, heaped on some interest and penalties, and then proceeded to seize banks accounts or real estate in order to pay those arbitrary tax debts. The fix is to bring your tax return filing up to date, which might show you owe far less than the CRA seized. You can then follow that with a "Fairness Application" to the CRA requesting that interest and penalties be reduced or eliminated if you have an explanation as to why your returns weren't filed on time.

For other clients, they really do owe some taxes, but need to avoid ongoing CRA seizures of all funds deposited into their bank accounts, and ongoing liens continuing on their real property. The fix is to pay a reasonable portion of the balance owing to the CRA, establish and adhere to a payment schedule for the remainder of the balance owing, and bring your other tax filings into compliance with the law. This will make the CRA happier than you might think. You don't need to fix 100% of your tax problems overnight for the CRA to back off.

The CRA's goal is not to punish (that's the goal of the criminal law), but rather to encourage people to come into compliance. Thus they use both a carrot and stick approach. Much can be accomplished through an ongoing dialogue with the CRA. Harsh treatment is usually only meted out to those who ignore all CRA communications, and stick their heads in the sand. If you're intimidated in dealing with the CRA, hire a lawyer or accountant to do your talking for you - it might not even take much legal or accounting work to sort out your tax situation to the CRA's satisfaction.

2. Seized Due to a Third-Party Debt. Generally the government isn't in the habit of using its resources to assist in the collection of private debts. However, there are exceptions for existing for family law debts. But even then, large scale property seizures are usually not facilitated (this is left to the creditor party to privately enforce). Garnishment of employment wages and government benefit payments like pensions are the most common form of government seizure due to a family law debt. The remedy here may be to retain counsel to bring a change of circumstances motion before the appropriate court, which might be able to retroactively cancel all or much of the accumulated debt, or at least reduce or eliminate future debt liability.

3. Seized Due to Allegations of Proceeds or Instruments of Crime. Alleged proceeds or instruments of crime seizures are the most complex of the getting your money back from the government situations to deal with because government authorities for the seizure, detention and forfeiture for your property can be murky at best, and courts have been inconsistent in they ways they have permitted property owners to challenge these seizures.

Back when I started working as a federal drug prosecutor, the days of proceeds of crime seizures and forfeitures were still in their infancy, and generally only the "biggest of fish" and clearest of cases were being pursued. But it appears federal government success on those early days cases encouraged the movement of provincial governments into the seizure and forfeiture realm, and also encouraged a variety of federal and provincial regulatory bodies to increasingly seek "no conviction" asset forfeiture.

For example, Ontario's Civil Remedies Act, 2001 is being increasingly used to seek the seizure, detention and forfeiture of private property, without any charges ever having been laid against anyone. Ontario sets out laudable goals for its civil remedies initiatives:https://www.attorneygeneral.jus.gov.on.ca/english/about/pubs/20070824_CRIA_Update.pdf . However, there has been increasing criticism of such initiatives as being essentially punitive in nature: http://news.nationalpost.com/full-comment/marni-soupcoff-ontarios-civil-forfeiture-racket. Academic concern has also been raised that civil forfeiture pursuit may divert resources away from productive private economic activity and more meritorious public resource expenditure on the pursuit of true criminal misconduct: http://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1125&context=uwojls.

You can no longer assume that the government department that seized your property is the one who is detaining it. And you can't assume that the department which is detaining your property is even the one which will seek its forfeiture. It can be like a shell game. You need to be prepared to go to court to stop the moving around of the shells, and to flip over the shell under which your property is being kept so that you can secure its return.

HOW TO "WRITE LIKE A LAWYER," AND WHY YOU DON'T WANT TO DO THAT, EVEN IF YOU'RE A LAWYER

1. Use "said" in the most superfluous ways possible. Bonus points if you can use "said" more than once in a sentence without talking about dialogue. As in: "The Plaintiff executed said contract by appending his usual and customary signature to said documentary exhibit, referred to hereinafter as the documentary exhibit." Using "said" many, many times will imbue your document with legal magic, letting you charge far more than is usual for this work of literary genius. Clients may assume that without the said "saids" the document might have been invalid, or at least be far less scholarly in nature.

2. Write out all numerical references in both words and numerals, so as to be as redundant as possible, and risk having the words and numbers not match, thus creating many subsequent work opportunities for solicitors to render legal opinions on those discrepancies, and barristers to seek judicial pronouncements on such discrepancies. As in: "The purchaser shall pay One Hundred and Twenty Seven Thousand Dollars ($1,270,000.00) in Canadian currency to the seller in exchange for title to said land."

3. Utilize as complicated word and sentence structures as possible, as clients will be impressed that you're able to figure out the meaning of the documents you're creating since they can't possibly follow the meanings themselves. As in: "The party of the first party, hereinafter the First Party, and hereforeto the sub-leasee, in the above-captioned matter..."

4. Write "WITHOUT PREJUDICE" at the top right of every letter or other document you create. This will imbue the document with magical qualities even greater than those created by the superfluous use of the word "said," so that you can say whatever you want, and it will never be held against you. It will be like the document is the Invisible Man, both there and not there. 

5. Write "DO GOVERN YOURSELF ACCORDINGLY" at the bottom left of every letter you create. Make sure it's always all in capitals and in bold. The capitals and bold are vital, otherwise it won't legally work like it's supposed to work. Closing your letters with this, instead of or in addition to the boring and prosaic "Sincerely" or "Your truly" will compel people to do whatever you're asking of them in the letter. Even if they don't want to do it, they'll feel unable to stop themselves. Demands for payments of money. Demands to do or not do something. They'll all be met with a cheerful smile if you use this age old legal phrase. 

As a longstanding teacher of legal writing, and fan of the plain language legal writing movement, it pains me that even new young law students continue to believe that the features I mention above make them sound more like a lawyer, or worse still that broadly using such words enhances legal results. It's been a long personal journey of recovery for me to rid myself of such habits, and it can still be a struggle to resist the impulse to sound lawyerly. 

We should all be asking ourselves in our lives, and in our writing: "do I really need this thing, and what purpose is it really serving?" If we can come up with a good answer, then by all means keep it. But if the answer is "I don't know," then some further reflection is clearly required.