Whether you are asked to sign your first employment agreement with a new employer, or an amended or new agreement with the same employer, sufficient consideration, which can be anything of value, is required. “The requirement of consideration to support an amended agreement is especially important in the employment context where, generally, there is inequality of bargaining power between employees and employers.” (Hobbs)
While your employment, along with all other terms included in your employment agreement, will be the consideration flowing to you in return for you signing the original agreement, any significant terms that your employer seeks to either amend or add will only be enforceable if there is additional valid consideration flowing to you. This is because your employer is already bound by the terms of your original agreement, and will only be able to rely on the new or amended terms if you received something of value in exchange for agreeing to being bound by these new terms.
As stated by the Ontario Court of Appeal in Hobbs v. TDI Canada Ltd., an employer is not permitted to present an employee with changed terms of employment, threaten to fire them if they do not agree to them, and then rely on the continued employment relationship as the consideration for the new terms. An employee is already entitled to employment under the original agreement. However, continued employment could be deemed sufficient consideration if, for example, your employer promises not to terminate you for a reasonable period of time, as this enhances your job security and is therefore something of value that is beyond what you had been promised under your original agreement.
Examples of clauses an employer may want to amend or add to an existing agreement is a termination clause or a layoff provision. The addition of a termination clause is “a tremendously significant modification of the implied term of reasonable notice” says the Ontario Court of Appeal. The same is true for the addition of a layoff provision, as layoffs, which do not exist at common law, require some contractual basis for their existence. If you have signed an amended or new employment contract, which added either a termination clause or a layoff provision, your employer may not be entitled to rely on this new term.
An example of why you may be presented with an amended or new agreement is where there will be substantial changes to your duties or position. Consider the situation where you have worked for your employer for many years. Throughout your employment, your duties or position may very well have changed since you signed your initial employment agreement.
As explained by the Ontario Superior Court in MacGregor v. National Home Services, the ‘change of substratum’ doctrine specifies that a contract will not be upheld or enforced unless it reflects the reality of the employment relationship. This means that if your duties or position have changed significantly over the years, your original contract of employment may no longer be enforceable by your employer, the reason being that what was fair at the outset of your employment may no longer be fair after you have developed new skills, acquired a new position or have taken on additional responsibilities.
Therefore, if you have not signed a new employment agreement with every significant change, the question is: are you still bound by the terms of your original contract? Probably not. If you have signed a new employment agreement since being hired, the question becomes: are you bound by the terms as set out in this new agreement? Most likely yes, but you must have been presented with fresh consideration, for example a signing bonus or the addition of benefits, in exchange for your signature.
Your employer should always provide you with an employment contract prior to you beginning your work, in order to give you time to consider its terms prior to signing. If your employer wants you to sign an amended version of your contract, or a brand new contract altogether, again, you should be allowed the time to consider its terms prior to signing. If this did not happen and your employer is now trying to rely on a term of the amended or new agreement, or if your employer is seeking to rely on a term of your original agreement after your duties or position have substantially changed, you may benefit from some legal advice.