WORKSTREAM INC
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v06829_ex10-1.txt
<TEXT>

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT is made as of the 13th day of September, 2004.

BETWEEN:
                           JAMES FANELLA
                           of the City of South Barrington,  Illinois
                           (hereinafter referred to as the "Employee")

AND:

                           WORKSTREAM INC.,
                           a corporation incorporated under the laws of  Canada
                           (hereinafter referred to as the "Employer")

WHEREAS:

A.    The Employer wishes to employ the Employee and the Employee wishes to
      serve the Employer upon the terms and subject to the conditions herein
      contained.

NOW THEREFORE in consideration of the premises and the mutual covenants herein
and other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged by each of the parties, the parties hereto covenant and
agree as follows:

1. DEFINITIONS

In this agreement, unless the context otherwise specifies or requires, the
following terms shall have the following meanings:

      1.1   "Agreement," "hereto," "herein," "hereof," "hereunder" and similar
            expressions refer to this Agreement and not to any particular
            section or any particular portion of this Agreement and includes all
            schedules attached to this Agreement;

      1.2   "Chief Operating Officer" shall mean the Chief Operating Officer of
            the Company;

      1.3   "Court" shall mean a Court of competent jurisdiction;

<PAGE>

      1.4   "Parties" shall mean the Parties to this Agreement and "Party" shall
            mean one of the Parties to this Agreement.

2. EMPLOYMENT

      2.1   The Employer agrees to employ the Employee and the Employee agrees
            to act as Chief Operating Officer or in such other employment as the
            Employer and the Employee may from time to time agree and the
            Employee agrees to serve the Employer upon the terms and subject to
            the conditions set out in this Agreement.

      2.2   The Employee specifically undertakes and agrees with the Employer
            that he shall be responsible for the following:

            2.1.1 for fulfilling the title and role of the Chief Operating
                  Officer of the Employer; and

            2.1.2 such other duties as required.

3. TERM

      3.1   The term of this Agreement shall be a period of two (2) years from
            the start date of employment. Unless written notice is given by
            either party at least ninety (90) days before the end of the initial
            two (2) year Term or any one (1) year extension hereof, that they
            wish this Agreement to terminate at the end of that Term, this
            Agreement will be automatically extended by successive one (1) year
            terms. In the event that such notice is given by the Employer and
            not by the Employee and the Employer does not offer the Employee
            continued employment on terms and conditions comparable to those
            contained herein following the termination of this Agreement, such
            notice shall be deemed termination of Employee's employment other
            than for cause and the provisions of section 10 shall thereupon be
            applicable.

4. REMUNERATION

      4.1   In consideration of the Employee's undertaking and the performance
            of the obligations contained in this Agreement, the Employer shall,
            unless otherwise agreed upon by all parties to this Agreement, pay
            and grant the following remuneration to the Employee:

<PAGE>

            4.1.1 Base Salary. The Employee shall be entitled to receive a
                  salary, not less than $200,000.00(U.S.) per year.

            1.1.2 Bonus. In addition to the base salary specified in section
                  4.1.1 the Employee shall be entitled to a bonus of up to
                  $200,000.00 based on certain targets being achieved. These
                  targets will be mutually agreed to by the Parties.

            4.1.3 Stock Options. In addition to the base salary outlined in
                  section 4.1.1 the employee shall be granted options to
                  purchase up to 200,000 common shares of Workstream (the
                  "Option Shares") at a price that is the closing price on the
                  NASDAQ market the date of this agreement. The options will
                  vest according to Workstream's 2002 Amended and Restated Stock
                  Option Plan.

            4.1.4 Sign on Bonus. Employer agrees to pay employee a sign-on
                  bonuses of $12,500.00 if, during the first ninety (90) days of
                  employment, employee actively participates in the closing of a
                  deal or transaction which generates a minimum of $500,000.00
                  in revenue to employer. Employer agrees to pay employee a
                  separate sign-on bonus of $12,500.00 if, during the first
                  ninety (90) days of employment, employee develops, a set of
                  success metrics which will be used as key indicators in
                  determining how to aggressively grow the company and results
                  in additional revenue of $250,000 or greater.

5. BENEFITS

      5.1.  In consideration of the Employee's undertaking and the performance
            of the obligations contained in this Agreement, the Employer shall,
            unless otherwise agreed upon by all parties to this Agreement, pay
            and grant the following benefits to the Employee:

            5.1.1 Vacation. The Employee shall be entitled to vacation time of
                  three weeks. Such vacation time shall be used at times
                  mutually agreeable to the Employee and the Employer.

            5.1.2 Other Benefits. The Employee shall be entitled to participate
                  in all benefit plans that the Employer provides including
                  retirement, disability insurance, life insurance, health and
                  dental insurance. The Employer shall pay for family coverage
                  for the Employee and the coverage will be effective upon the
                  Employee's start date.

            5.1.3 Expenses. The Employer shall reimburse the Employee for all
                  reasonable and necessary business expenses, including but not
                  limited to cellular phone expenses, upon the presentation to
                  the Employer of appropriate written documentation and
                  receipts.

<PAGE>

6. ATTENTION TO DUTIES

The Employee shall devote his whole working time and attention to the Employer
during the Term of this Agreement and will not engage in any other capacity or
activity which, in the sole opinion of the Employer acting reasonably, would
hinder or interfere with the performance of the duties of the Employee.

7. CONFIDENTIALITY

The parties acknowledge that in carrying out his duties under this Agreement,
the Employee will have access to and become entrusted with confidential
information regarding the business plans and operations of the Employer,
computer systems and technology, unique methodology and other proprietary
information. The Employee acknowledges that the right to maintain such detailed
confidential information constitutes a proprietary right, which the Employer is
entitled to protect. Accordingly, the Employee shall not, during the Term of
this Agreement, or at any time thereafter, disclose any of such detailed
confidential information, trade secrets or other private affairs of the Employer
to any person or persons, firm, association or corporation, nor shall the
Employee use the same for any purpose other than on behalf of the Employer.

8. OWNERSHIP OF INVENTIONS

      8.1   The Employee shall promptly communicate and disclose to the Employer
            all inventions, improvements, modifications, discoveries, designs,
            formulae, methods and processes made, discovered or conceived by the
            Employee either alone or jointly with others, during the period of
            his employment with the Employer, providing the same relate to or
            are capable of being used by the corporation or any affiliate
            thereof in the normal course of their businesses.

      8.2   The Employee acknowledges and declares that all inventions,
            improvements, modifications, discoveries, designs, formulae,
            methods, processes, as are described in section 8.1 hereof, and all
            patents and patent applications relating thereto are the property of
            the Employer and hereby assigns to the Employer all of the right,
            title and interest of the Employee in any such inventions,
            improvements, modifications, discoveries, designs, formulae, methods
            and processes, and in any patents or patent applications relating
            thereto. The Employee shall execute all instruments and documents
            and do all such further acts and things as may be necessary or
            desirable, in the Employer's opinion to carry out the provisions of
            this section.

<PAGE>

9. NON-COMPETITION

The Employee shall not, without prior written consent of the Employer for the
period of his employment hereunder or for a period of one (1) year following the
termination of this Agreement or any renewal hereof, for any reason be it for
cause or not, either alone or in conjunction with any individual, firm,
corporation, association or any entity, except for the Employer, whether as
principal, agent, shareholder, employee or in any other capacity whatsoever,
perform the duties of or provide the services as are described in section 2.2
hereof in a business which competes with the Employer, within any geographical
location where the Employer has carried on business or expended time and
personnel and financial resources or been involved in any capacity in any
business. Furthermore, the Employee also agrees that upon the termination of his
employment he will not attempt to hire or encourage to leave their employ, any
of the Employer's other employees, provided, however, that the Employee shall
not be precluded from competing with the business of the Employer in the event
of a termination of Employee's employment as a result of a material breach by
the Employer of the provisions of this Agreement or in the event that Employee's
employment is terminated by the Employer other than for cause, unless the
Employer provides the applicable compensation and benefits set out in section 10
hereof in which case, the Employee shall be precluded from competing until such
time as such compensation and benefits are terminated.

10. TERMINATION

      10.1  The parties understand and agree that employment pursuant to this
            Agreement may be terminated during the Term in the following manner
            in the specified circumstances:

            10.1.1 by the Employee for any reason, on the giving of not less
                  than three (3) months prior written notice to the Employer,
                  which the Employer may waive, in whole or in part;

            10.1.2 by the Employer in its absolute discretion, on giving the
                  Employee payment of the equivalent of three (3) months salary,
                  benefits and entitlements in lieu thereof, along with all
                  salary or entitlements to which the Employee is entitled in
                  accordance with any relevant statute, or this Agreement,
                  whichever is greater, including termination pay, severance
                  pay, unpaid vacation pay, if applicable and all salary and
                  benefits due to that date. The payment representing this
                  amount shall be paid within thirty (30) days from notice
                  provided herein;

            10.1.3 It shall be considered a termination without cause if
                  employer demotes or modifies the duties of employee such that
                  the position is no longer that commonly known in the industry
                  as the COO. Termination without cause shall also include
                  termination or reduction in duties and responsibilities after
                  a change in control of the management of the Company. In
                  either of these circumstances, the provisions of section
                  10.1.2 shall apply.

<PAGE>

      10.1.4 by the Employer for cause on giving the Employee payment of the
            equivalent of one (1) months salary, benefits and entitlements. The
            parties agree that for the purposes of this Agreement, "cause" shall
            include, but shall not be limited to, the following, and that the
            Employee shall be terminated without notice or payment in lieu
            thereof for such cause and payment shall be limited as provided
            herein:

            10.1.4.1 any material breach of the provisions of this Agreement or
                  of the established policies of the Employer known to the
                  Employee in the performance of his duty under this Agreement;

            10.1.4.2 any intentional or negligent disclosure of any confidential
                  information as described in section 7 hereof, by the Employee;

            10.1.4.3 in carrying out his duties hereunder, the Employee; (i) has
                  been grossly negligent, or (ii) has committed willful gross
                  misconduct;

            10.1.4.4 personal conduct on the Employee's part which is of such a
                  serious and substantial nature that, as determined in the sole
                  discretion of the Employer, it would injure the reputation of
                  the Employer if the Employee is retained as an Employee.

      10.2  The Parties understand and agree that the giving of notice or the
            payment of termination pay, and severance pay, as required by the
            Employer to the Employee on termination shall not prevent the
            Employer from alleging cause for the termination.

      10.3  The Employee authorizes the Employer to deduct from any payment, any
            amounts properly owed to the Employer by the Employee by reason of
            advances, loans or in recommence for damages to or loss of the
            Employer's property and equipment, save only that this provision
            shall be applied so as not to conflict with any applicable
            legislation.

11. RESULTS OF TERMINATION

      11.1  If this Agreement is terminated for cause, as described in section
            10.1.4 hereof, the Employee shall be entitled to receive his
            remuneration to the date of such termination for cause, including
            any and all vacation pay earned to date, plus one (1) additional
            month's pay and benefits, as provided in section 10.4.

<PAGE>

      11.2  If this Agreement is terminated upon written notice as described in
            paragraphs 10.1.1, 10.1.2, 10.1.3 and 10.4 hereof, the Employer
            shall pay to the Employee to the end of the notice period his salary
            and at the end of the date terminating the notice provision, the
            Employer shall pay to the Employee vacation pay equivalent and any
            other monies due under applicable United States federal or state law
            and the provisions of this Agreement.

12. MEDIATION/ARBITRATION

      12.1  Should any dispute or disagreement of any kind arise at any time;
            (i) the rights and liabilities of the Parties hereof or with respect
            to the interpretation, validity, construction, meaning, performance,
            effect or application of this Agreement, as amended from time to
            time; or (ii) between the Employer and the Employee, the Parties
            agree that good faith negotiations shall take place between the
            Employer and the Employee. If such good faith negotiations have not
            resolved the dispute or disagreement within a reasonable period of
            time, either Party may request a mediation between the Parties, or
            either Party may refer the dispute or disagreement directly to
            arbitration without going to mediation.

      12.2  The mediator shall be agreed upon by the both Parties. In the event
            that the Parties are unable to agree upon the mediator, the dispute
            or disagreement shall be referred to arbitration in accordance with
            this clause.

      12.3  All discussions before the mediator shall be non-binding,
            confidential and without prejudice to the position of either Party.
            The Parties agree that if the mediation process does not result in a
            satisfactory solution of the dispute or disagreement after the
            lesser of either; (a) ten (10) hours of mediation, or (b) thirty
            (30) days from the commencement of the mediation, then either Party
            may refer the dispute or disagreement to arbitration pursuant to the
            provisions of the American Arbitration Association's National Rules
            for the Resolution of Employment Disputes in effect at the time of
            the arbitration demand, in accordance with the following:

            12.3.1 the reference to arbitration shall be to one (1) arbitrator.

            12.3.2 any such arbitration shall be held in the city of Ottawa. The
                  arbitration shall be completely private. The arbitrator shall
                  fix the appropriate procedures which may include an oral
                  hearing. The issue or issues to be decided by the arbitrator
                  shall be defined in an arbitration agreement filed on consent
                  by the aggrieved party. In the event the Parties to the
                  arbitration shall be unable to agree upon the issue or issues
                  to be decided by the arbitrator in any arbitration pursuant to
                  this paragraph, the arbitrator shall have jurisdiction to
                  determine the issue or issues to be so decided. The Parties
                  shall do all such acts and thing as are necessary to enable
                  the arbitrator to make a proper finding respecting the matters
                  in issue. The arbitrator may order interest on any award and
                  the arbitrator may award costs to either Party. In the absence
                  of any award of costs, each of the Parties shall bear their
                  own costs of any arbitration pursuant to this paragraph and
                  one-half of the cost of the arbitrator. The arbitrator shall
                  be strictly bound by legal principals and the general nature
                  of this Agreement in rendering his/her/its decision.

<PAGE>

            12.3.3 The Parties agree that good faith negotiations, mediation and
                  arbitration shall all be without recourse to the Courts. The
                  award of the arbitrators shall be final and binding, except
                  that either Party may appeal an arbitration award to the
                  Courts on a question of law. Judgment upon the award rendered
                  by the arbitrator may be entered in any Court having
                  jurisdiction.

13. RIGHT TO INJUNCTIVE RELIEF

As a violation by the Employee of the provisions of paragraphs 7 and 9 hereof
could cause irreparable injury to the Employer and there is no adequate remedy
at law for such violation, the Employer shall have the right, in addition to any
other remedies available to it at law or in equity, to enjoin the Employee in a
court of equity from violating such provisions. The provisions of paragraphs 7
and 9 hereof shall survive the termination of this Agreement.

14. ASSIGNMENT OF RIGHTS

The rights which accrue to the Employer under this Agreement shall pass to its
successors or assigns. The rights of the Employee under this Agreement are not
assignable or transferable in any manner., except that any accrued salary,
vested options or other benefits may be recovered by employee's estate or
trustee under any trust set up by and for employee.

15. CURRENCY

All dollar amounts referred to in this Agreement are in United States funds.

16. AMENDMENT OF AGREEMENT

This Agreement may be altered or amended at any time by the mutual consent in
writing of the parties hereto.

17. TIME OF ESSENCE

Time shall be of the essence hereof.

18. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario.

<PAGE>

19. HEADINGS

The headings appearing throughout this Agreement are inserted for convenience
only and form no part of the Agreement.

20. SEVERABILITY

The invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision hereof and any such
invalid or unenforceable provision will be deemed to be severable.

21. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties and
supersedes all prior and contemporaneous agreements, understandings and
discussions, whether oral or written, and there are no other warranties,
agreements or representations between the parties except as expressly set forth
herein.

22. AGREEMENT BINDING

This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective personal representatives, executors, administrators,
successors and assigns.

<PAGE>

23. INDEPENDENT LEGAL ADVICE

The Employee acknowledges that he has read and understands the Agreement and
acknowledges that he has had the opportunity to obtain independent legal advice
regarding the terms of the Agreement and their legal consequences.

IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
the date first set forth above.

SIGNED, SEALED & DELIVERED


/s/ David Polansky                                   /s/ James Fanella
------------------------                             ---------------------------
Witness: David Polansky                              James Fanella


                                           WORKSTREAM INC.

                                           Per:   /s/ Michael Mullarkey
                                                  ------------------------------
                                                  Michael Mullarkey
                                           Title: Chief Executive Officer



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</DOCUMENT>
