Nelligan O’Brien Payne gratefully acknowledges the contribution of Denise Deschênes, Student-at-Law in writing this blog post.
We all expect our work responsibilities to evolve over time. For example, many employees expect to “climb the ladder” in the workplace by getting promoted and by taking on new challenges.
However, what happens if your responsibilities and remuneration change so dramatically over the years that the fundamental nature of your employment is no longer the same? Are you still tied to your initial employment contract, including whatever notice and severance is found within, or do your entitlements change?
A legal concept that helps answer these questions is known as the “changed substratum doctrine”.
What is the changed substratum doctrine?
An Ontario Court of Appeal decision entitled Irrcher v MI Developments explained how “changed substratum” occurs when an original employment contract is no longer applicable at the termination of employment. This can occur because the job you originally signed on for, as in this case, is “simply not the same job”. If you are no longer fundamentally doing the same or similar work, and in fact have taken on significantly more responsibilities, you would (with good reason) expect an increase in notice. An employee is deemed to only intend to agree to notice according to the circumstances at play when entering into their initial contract. It would be unfair to expect that person to be bound by their initial contract if there has been a substantial degree of change to their employment position.
That said, for the changed substratum doctrine to apply, there must be a fundamental change during the course of a person’s employment. This means that the change needs to go to the core of the employment contract. The changed substratum doctrine does not apply to inconsequential, unsurprising and unexceptional changes.
What happens to my initial employment contract?
The changed substratum doctrine is triggered when all of the important terms of the written contract remain the same, but all of the important responsibilities of the agreement change, often also accompanied by changes to salary and other benefits. This can make the contract ineffective in law, especially in the context of a termination clause, because the court will accept that the employee did not intend to be bound by that clause given the changed circumstances.
The court will in essence find that the initial employment contract is unenforceable because the substratum of the employment contract, or the underlying substance, is so different. As a result, the terms that limit the amount of notice and severance to which you are entitled as set out in your initial contract will have no contractual force, and you will instead be entitled to reasonable notice at common law.
In Rasanen v Lisle-Metrix Ltd., Justice Dambrot explained that the changed substratum doctrine will only permit the nullification of the termination clause when “the employee’s level of responsibility and corresponding status has escalated significantly since the time of the employee’s original hiring.”
A word of caution, however: there could be language in the original contract that suggests that it will continue to apply to any promoted position. Depending upon all of the circumstances, such language may make it more difficult to apply the changed substratum doctrine.
Does the changed substratum doctrine still apply if I get demoted?
It has previously been suggested that the changed substratum doctrine should apply to promoted and demoted employees alike. Generally speaking, however, when faced with a demotion, the more relevant argument becomes breach of contract, and not the changed substratum doctrine. Therefore, this doctrine will normally only be applied to provide relief to an employee who has been promoted over the course of their employment.
Does this mean that I need not pay any attention to my contract if I am promoted?
Not at all! While the changed substratum doctrine can provide useful relief to an employee with an out-of-date employment contract, a promotion is an excellent time to review your contract and ensure that changes shouldn’t be made. Your employer may even present you with a new contract including certain changes. Before signing any new contract, it is critical to get advice on what your entitlements might otherwise be. Depending on what the employer is offering, you might be better off without a contract but with the protection of the common law.
Employers sometimes use a promotion or a salary increase to introduce new and more restrictive employment contracts. This is another reason to make sure you get advice prior to signing, so that you understand the broader legal context to what you are being asked to sign.
If you are being presented with a new contract, or think you would like to have one, or if you have been terminated and your employer is trying to enforce an employment contract entered into at a time when your responsibilities and/or remuneration were very different, we encourage you to speak with one of our lawyers in our Employment Law Group.