The Law of Work
  • Home
  • About
  • Professor David Doorey
  • Osgoode Hall LLM
  • Books
  • Guest Contributors
  • Useful Links
    • Archive
  • Home
  • About
  • Professor David Doorey
  • Osgoode Hall LLM
  • Books
  • Guest Contributors
  • Useful Links
    • Archive
The Law of Work
Common Law of EmploymentWrongful Dismissal

How to Amend an Employment Contract … Lawfully

by David Doorey September 28, 2021
written by David Doorey September 28, 2021

By David Doorey, York University

Classes in Employment Law that use my text The Law of Work are probably close to exploring how employment contracts can be amended under the Common Law model (Chapter 7, Requirements to Create and Modify Employment Contracts).  We discuss in that chapter a variety of scenarios including (1) the situation in which the employer proposes an amendment and the employee agrees to the change, and (2) the situation in which the employee does not agree to the proposed amendment.

The first lesson is that an employer cannot just unilaterally modify the terms of an employment contract without the employee’s agreement.  To amend an employment contract, there needs to be Offer, Acceptance, and Mutual Consideration.

Amending Employment Contracts When the Employee “Agrees” to the Change: Mutual Consideration

In most of the cases that deal with the legality of contract amendments, the employer has attempted to change the contract in a manner that benefits the employer, such as by reducing the amount of notice that is required to terminate the employee or by reducing the employee’s compensation, for example.  Frequently, the employer drafts up a new revised contract and presents it to the employee for their signature (i.e. “acceptance”).  The employee usually signs the revised contract because they don’t want to piss off their employer and maybe they are concerned that if they don’t sign, the employer will just fire them.

In these cases, when the employee agrees to the modification, the main legal question becomes whether both sides received fresh consideration.  That means that both sides, the employer and the employee, receive something new of value that they were not already entitled to before the modification.  So, for example, if the employer is modifying the contract to reduce the amount of notice of termination required, that is a benefit to the employer. However, if that is the only change made, then that change will not be legal enforceable, even if the employee signs the change. Acceptance cannot cure a lack of mutual consideration.  The problem in that scenario is the modification is entirely one-sided in the employer’s favour.  What new benefit the employee receive?  Nothing.  Years later, when the employer attempts to rely upon the written notice of termination clause in the modification that the employee signed, the employee can simply say, “sorry, but that amendment I signed is unenforceable because I received no “fresh” consideration when I signed it. This is the lesson from cases like Francis v. CIBC,  Redjak v. The Fight Network, discussed in the textbook,  and many other similar cases.

If the employer wants to make a change that benefits the employer, even if it obtains the employee’s agreement, that change still needs to be supported by mutual consideration.  What does that mean?  If I were the employer, I would simply offer the employee a signing bonus of some sort. “In consideration” for the employee agreeing to this change that benefits the employer, the employer will pay the employee a one-time bonus of $500, for example.  Now you have offer, acceptance, and mutual consideration to support the amendment.

But What if the Employee Doesn’t Agree to the Change?

Now imagine that the employer approaches the employee and says, “we’d like to amend your contract in the following manner that benefits the employer” and the employee says, “no thanks”.  In this scenario, there is no acceptance of the employer’s offer to modify the contract.

The employer then has a choice to make.  It can drop the proposed change.  But if it insists on making the change, then it needs to lawfully terminate the employment contract (Contract 1) by providing the employee with whatever notice the contract requires.  Once that notice period expires, Contract 1 comes to a lawful end.  At that point, the employer can offer a new contract (Contract 2) on whatever terms it wants.

For example, if Contract 1 requires 8 weeks’ notice of termination, then the employer can inform the employee that “we are hereby giving you notice that we are terminating your employment contract effective 8 weeks today…”.  Then, the employee works out the 8 weeks at which point Contract 1 ends.  The employer can then offer a new contract.  To an alien looking down at the workplace, it might look like nothing has changed, but legally speaking, Contract 1 ends on Friday and Contract 2 begins on Monday.  This is the lesson of cases like Wronko v. Western Inventory (LOVE this case) and Hill v. Gorman, and others like this.

An interesting example of all of this is the case I mention on page 107 of The Law of Work, called Lancia v. Park Dentistry .  In that case, the employer decided it wanted to make some changes to Lancia’s contract that benefitted the employer, including changing how vacation pay is calculated such that Lancia would receive less pay and reducing the amount of notice of termination required. On August 14, 2014, the employer informed Lancia in writing that it was giving her 18 month’s notice that it was terminating her existing employment contract (Contract 1). That period was assessed considering what a court would order as “reasonable notice” given Lancia’s service length, age, and consideration of other “Bardal Factors”.  Contract 1 would thereby terminate on February 12, 2016.

However, the employer also informed Lancia that she could also agree to the changes sooner, and if she did so the employer would pay her a $2000 signing bonus.  Lancia elected to take the signing bonus and she signed the new modified contract almost immediately.  Two years later, Lancia quit and sued the employer for constructive dismissal on the basis of alleged harassment and also the changed contract terms that led to a cut in her compensation.

Lancia lost.  For our purposes, the key point is that the Court found that the employer had implemented the plan to modify Lancia’s contract properly.  It gave her proper notice that it was terminating Contract 1 in 18 months’ time.  However, it also provided Lancia with the option to accept the changes sooner and if so, she would receive fresh consideration in the form of a $2000 signing bonus.  This was clearly a bad deal for Lancia, because she lost more than $2000 in reduced compensation under the new terms than if she had simply worked out the 18 months notice period.  However, the Court noted the old rule that the mutual consideration need not be “equal”

Park Dentistry was not required to offset the reduction in compensation by providing monetary consideration of an equal amount.  Indeed, it is trite law that courts will not inquire into the adequacy of consideration – a “peppercorn” will do.  As long as there is consideration, contracts may be varied or superseded by new agreements. (para. 54)

Lots to consider in these contact amendment cases.  However, for employers and employees alike,  if you understand the basics of contract law, it makes it immeasurably easier to work your way through legal problems and to make informed decisions.

 

1 comment
0
FacebookTwitterLinkedinEmail
David Doorey

Professor Doorey is an Associate Professor of Work Law and Industrial Relations at York University. He is Academic Director of Osgoode Hall Law School’s executive LLM Program in Labour and Employment Law and a Senior Research Associate at Harvard Law School’s Labor and Worklife Program. Professor Doorey is a graduate of Osgoode Hall Law School (LL.B., Ph.D), London School of Economics (LLM Labour Law), and the University of Toronto (B.A., M.I.R.).

Leave a Comment Cancel Reply

You must be logged in to post a comment.

1 comment

Bill Sullivan December 8, 2021 - 2:39 pm

Hill v. Peter Gorman Limited 1957 393 (ONCA) page 132 and Wronko v. Western Inventory (para 41). I am not a lawyer , but these fine legal minds definitely got it right. The Law of Work Second Edition is a fantastic book!

Log in to Reply
previous post
Teamsters Apply to Represent Amazon Employees in Alberta. And What About this Raise?
next post
The National Basketball Association’s COVID Protocol and the Duty to Maintain a Safe Workplace

You may also like

Is Memorial University Illegally Preventing Workers from Joining...

February 2, 2023

Why Gig Workers Are NOT Independent Contractors: A...

September 19, 2022

Reforming Non-Compete Law: A Cross Border Perspective

March 3, 2022

Can Human Rights Law Help Workers Fired for...

February 18, 2022

Would the Recommendations in Ontario’s New Report on...

December 10, 2021

Uber and Lyft Suspended a Labour Activist from...

November 19, 2021

Ontario’s Bill 27: One Good Law, One Vacuous...

November 3, 2021

The “Changed Substratum Doctrine” in Employment Law

October 1, 2021

Ontario’s Infectious Disease Emergency Leave and the Common...

July 5, 2021

Dispelling Common Assumptions about Employees’ Legal Right to...

May 17, 2021

Follow Us On Social Media

Twitter

Latest Tweets

David J. Doorey🇨🇦 @TheLawofWork@mas.to Follow

Law Prof. Talking #labor & #employment #law to the masses. @YorkUniversity @OsgoodeNews @LSELaw @CLJEHarvard @Jacobin @OnLaborBlog https://t.co/5V9r8VPHsh

TheLawofWork
thelawofwork David J. Doorey🇨🇦 @TheLawofWork@mas.to @thelawofwork ·
10h

I can’t believe that Almost Famous came out 23 years ago.

Time is flying by.

Reply on Twitter 1622776388179705859 Retweet on Twitter 1622776388179705859 3 Like on Twitter 1622776388179705859 14 Twitter 1622776388179705859
thelawofwork David J. Doorey🇨🇦 @TheLawofWork@mas.to @thelawofwork ·
12h

I had an LLM student who had a part-time job phantom writing labor arbitration decisions based on arbitrator’s notes and instructions.

Like law clerks do for judges (except parties don’t know about the phantom arb writer).

Is using a machine different? Interesting debate.

Valerio De Stefano @valeriodeste

The crucial part starts on p. 5, where the Court reports the answers to the legal questions they posed to ChatGPT. Then, at the end of p. 6, the Court adopts the arguments given in these answers as grounds for its decision.

Reply on Twitter 1622759377944952834 Retweet on Twitter 1622759377944952834 5 Like on Twitter 1622759377944952834 8 Twitter 1622759377944952834
thelawofwork David J. Doorey🇨🇦 @TheLawofWork@mas.to @thelawofwork ·
13h

Quebec passed anti-scab legislation in 1977, BC in 1993, & Ontario 1993-95.

Hysterical claims that these laws cause job losses & loss of investment aren't supported by evidence. Businesses just don't like them.

Short 🧵

1/

Seamus O'Regan Jr @SeamusORegan

We’re banning replacement workers, as we said on Oct. 19th.

We’re working with unions and employers to get the balance right.

As agreed, government will introduce legislation by the end of this year.

Reply on Twitter 1622745098088861702 Retweet on Twitter 1622745098088861702 16 Like on Twitter 1622745098088861702 39 Twitter 1622745098088861702
Load More

Categories

  • Alberta
  • Artificial Intelligence
  • Australia
  • British Columbia
  • Charter of Rights and Freedoms
  • Childcare
  • Class Action
  • Climate and Just Transition
  • Collective Bargaining
  • Common Law of Employment
  • Comparative Work Law
  • competition law
  • construction
  • COVID-19
  • Diversity
  • Employee Classification
  • Employment Insurance
  • Employment Regulation
  • Europe
  • Financial Industry
  • Fissured Work
  • Freedom of Association
  • frustration of contract
  • Gig Work
  • Health and Safety
  • Health Care
  • Human Rights
  • Immigration
  • Interest Arbitration
  • International Law
  • Labour Arbitration
  • Labour Economics
  • Law of Work Archive
  • Legal Profession
  • Manitoba
  • Migrant Workers
  • Minimum Wage
  • Newfoundland
  • Nova Scotia
  • OLRB
  • Ontario
  • Pension Bankruptcy
  • Privacy
  • Public Sector
  • Quebec
  • Real Life Pleadings
  • Saskatchewan
  • Scholarship
  • Sports Labour
  • Strikes and Lockouts
  • Student Post
  • Supreme Court of Canada
  • technology
  • Transnational Law
  • Uncategorized
  • Unions and Collective Bargaining
  • United States
  • Videos
  • Women and Work
  • Wrongful Dismissal
  • Home
  • About
  • Guest Contributors
Menu
  • Home
  • About
  • Guest Contributors
  • Legal Scholarship
  • Useful Links
  • Archive
Menu
  • Legal Scholarship
  • Useful Links
  • Archive

2020. Canadian Law of Work Forum. All Rights Reserved.