Fresh Consideration Needed to Vary Contract

A recent decision from the Ontario Superior Court serves as a good reminder that employers need to offer fresh consideration to employees before varying the terms of an existing employment contract. Further, the case highlights the importance of identifying when an employment contract may be formed.

In Buaron v. AcuityAds Inc., the plaintiff was employed at EQ, Inc. as an information technology senior system administrator. As the defendant was looking to hire for such a position, they contacted the plaintiff to see if he would be interested in working for them. The parties met to discuss terms the next day.

At the meeting, the parties agreed on compensation, benefits and a three-month probation period. However, the plaintiff refused to accept the terms until the defendant sent him a formal letter. The defendant did so two days later but summarized the detailed discussion the parties had in only two lines.

After the plaintiff received the offer letter he resigned from his position at EQ. The defendant then sent the plaintiff a “comprehensive agreement” containing a termination clause limiting him to the statutory minimums, which the plaintiff signed on his first day.

When the plaintiff was terminated nine months later, the Court had to determine whether the email offer to the plaintiff formed the initial employment contract.

The Court found that while the defendant’s email was ambiguous, it formed the initial employment contract. The comprehensive agreement varied the employment contract without providing fresh consideration to the plaintiff and the notice clause was deemed unenforceable. As a result, instead of being limited to the statutory minimums, the Court awarded the plaintiff four months notice.

A copy of this decision can be found here.

Questions relating to the content of the article may be directed to Scott McCann.