Court of Appeal Says ‘No’ to Unilateral Changes to Employment Contracts
In its decision, Wronko v. Western Inventory Service Ltd., [2008] O.J. No. 1589 (Ont. C.A.), released April 29, 2008, the Ontario Court of Appeal upheld employees’ rights to refuse unilaterally imposed contractual changes.
The case involved an employee, Mr. Wronko, who was presented with an amendment to the termination provisions of his employment contract, which reduced his notice entitlement from two years’ pay to 30 weeks’ pay. Mr. Wronko refused to sign the new contract. The company took the position that the amendment would take effect after two years. Mr. Wronko maintained his objection to the new terms. After two years, the company presented an ultimatum that he must either accept the change or that they “did not have a job for [him]”. He responded with his understanding that he was terminated, and did not return to work.
The trial judge concluded that the employer was entitled to unilaterally amend the employment contract with sufficient notice, and that Mr. Wronko had ended the employment relationship by refusing to continue work under the new terms.
The Court of Appeal disagreed, and focused on the question of whether Mr. Wronko had accepted the amended terms by continuing his employment through the notice provided by the employer. The court stated at paragraph 32, “…[M]ere continuance by an employee in employment does not amount in law to an acceptance by an employee of a unilateral variation of his contract by his employer. The employee is entitled to insist on the employer’s adherence to the [original] terms of the contract.”
An employee therefore has three options available when presented with a unilateral amendment to the employment contract:
- The employee may accept the new terms and employment will continue under the new terms.
- The employee may reject the change and claim constructive dismissal if the employer insists on enforcing the new terms.
- The employee may make it clear that he/she is rejecting the new terms. The employer may respond by terminating the employee at this time, provided sufficient notice under the original contract is provided. However, if the employer permits the employee to continue under the original contract, then the employee is entitled to insist on the original terms of contract.
The court determined that it was reasonable for Mr. Wronko to view his employer’s ultimatum – that if he did not accept the new terms, “then we do not have a job for you” – as a termination. Therefore, Mr. Wronko was entitled to damages under the original contract, as he had rejected the new terms and had continued his employment under the original contract.
Consequently, neither the employee nor employer has a right to unilaterally change a significant term of the employment contract. Importantly, an employee cannot be forced by his/her employer to accept such a change. Unless the employer is willing to terminate the employee’s employment, and commence a new employment relationship under new terms, an employee is entitled to continue working under the terms of the original contract.