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Ontario Employers Cannot Unilaterally Change Employment Contracts
May 30, 2008

An Ontario employer was recently ordered to pay an employee two years’ salary after giving him an ultimatum to accept changes to his employment contract or be terminated.

Two years into his employment, the employee refused to sign a new contract which would have reduced his severance entitlement from two years to 30 weeks salary. After a further two years, the employer declared that if he did not agree to the new term he would be terminated. The employee stopped working and sued for wrongful dismissal.

Most of the employee’s claim was dismissed at trial, but the Ontario Court of Appeal reversed the trial decision, finding that the ultimatum amounted to termination. The employee was awarded the severance pay to which he was entitled under the original contract.

As a result, if an employer in Ontario wishes to change an employment contract without the employee’s agreement, the employer must dismiss the employee without cause, give him common law notice of termination or pay in lieu thereof, and then offer him re-employment on the new terms. If the employee is simply allowed to continue working after he rejects the amended term, the original contract will remain in force and the amendment will have no effect.

In BC, the practice of giving an employee notice of a significant contract amendment that is equal to his common law notice entitlement remains intact. It remains to be seen whether BC courts will adopt the new approach established by the Ontario Court of Appeal.

Wronko v. Western Inventory Service Ltd., 2008 ONCA 327