Navigating employment contract changes

Our reason to be All Worked Up this week? When employers change or implement new contract for their current employees. Are you feeling blindsided by your employer changing your contract while you’re already on the job? Don’t let contract changes catch you off guard! Dana and Jill share tips on navigating this tricky situation, from negotiation tactics to legal options, we’ve got you covered.


Dana DuPerron: Welcome to All Worked Up, the podcast where two employment lawyers break down real-life workplace issues that affect real people.

Jill Lewis: And we’re super excited to bring you this podcast aimed at making employment issues interesting, accessible for employees and employers.

Dana DuPerron: Welcome to All Worked Up. I’m Dana …

Jill Lewis: I’m Jill.

Dana DuPerron: Jill, what’s got you all worked up today?

Jill Lewis: OK. I am really worked up about this one. This episode we’re going to talk about your employer changing or implementing a new contract while you are working. So while you are an employee maybe changing your previous contract or introducing a new one. So we really briefly touched on this when we talked about contracts just in general but, you know, we’ve seen this quite a bit in the last year because there have been a lot of changes in the law.

Dana DuPerron: Why are they doing this [laughs]? Tell me, there’s usually one reason.

Jill Lewis: To reduce the termination entitlements that you would be owed upon termination.

Dana DuPerron: Close those loopholes.

Jill Lewis: Yes, tight. You’re just going to –

Dana DuPerron: Tighten it [laughs].

Jill Lewis: – tighten, we’re just going to tighten that, can we just tighten that contract as much as possible and this is stuff to be aware of, right, for any employee. You know, we’ve said this so many times, don’t sign anything without having it reviewed by a lawyer and, you know, I’ve seen some messages that come from HR and I guess I’ve just never seen one that has been very specific to say that the purpose of this contract is –

Dana DuPerron: To drastically reduce your termination entitlements to your bare minimums instead of their common law entitlements.

Jill Lewis: I haven’t seen that one yet. Instead we see these messages from HR that says, “Hey, there’s a new contract. We’re just bringing the language in line with the ESA” –

Dana DuPerron: OK. I would probably just say, “We are streamlining our contracts,” right, “We’re putting them all in the same – like we’re getting everything” –

Jill Lewis: Yes, yes.

Dana DuPerron: Because if you say we’re just bringing it in line with the ESA, I start to get that’s walking into some misleading territory as an employer.

Jill Lewis: I think so.

Dana DuPerron: I would be mindful of that.

Jill Lewis: Yes. I think regardless, like some of these messages can be misleading and I mean I would run this argument – it’s never been done but I would run an argument –

Dana DuPerron: It’s coming. I think that that is coming because like courts want to keep those loopholes there and invalidate clauses that limit people to very sort of restricted entitlements, but –

Jill Lewis: And it comes back down to like the meeting of the minds, right.

Dana DuPerron: Yes.

Jill Lewis: Like back to like contract 101 theory that like you enter into a contract, both parties have to have – there has to be a meeting of the minds, you both have to agree and understand the terms.

Dana DuPerron: Yes.

Jill Lewis: So if you are an employee, you’re just like working away and have been there for like five years, maybe I have like a really old contract, maybe it was just like offer –

Dana DuPerron: Or no contract.

Jill Lewis: No contract which some people always think like, “Oh no, I don’t have a contract” but it’s –

Dana DuPerron: That’s fine.

Jill Lewis: – it’s fine, it’s –

Dana DuPerron: There are terms. There are terms out there.

Jill Lewis: – usually a good thing.

Dana DuPerron: Yes.

Jill Lewis: So, you know, and I’m just like working away, I’m doing my thing and then HR sends an email to everybody that says, “We’re streamlining our contracts” or, “We have a new contract for everyone to sign. Please see attached and let us know if you have any questions” and, you know, “Sign by Friday” –

Dana DuPerron: I have a question, not that question [laughs].

Jill Lewis: Yes, but not that one.

Dana DuPerron: Yes.

Jill Lewis: OK. So I open up the contract and it’s either – you know, sometimes it’s the same as my previous one with a few changes or it’s like completely different and confusing, so a lot of legalese and you ask HR like, “So what am I signing” and it just says, “Yes, we’re just making sure that everything’s in line with the ESA,” the Employment Standards Act, and that sounds like it’s been written in your favour.

Dana DuPerron: Like you’re compiling with the law.

Jill Lewis: Yes, like, “We’re a cool employer and we just want to make sure everything’s fair.”

Dana DuPerron: Yes. Is it fair, Jill [laughs]?

Jill Lewis: But the Employment Standards Act – actually I’m going to go back. There is a presumption that when we are terminated, we are entitled to a common law notice period and a statutory notice period. So the statutory notice period is the Employment Standards Act and we are all entitled to that, those bare minimums, you know, as long as you’re not unionized and you live in Ontario blah-blah-blah and that can’t be contracted out of, so that’s all fine.

But there’s also a presumption that we’re going to be entitled to a common law notice period and that’s something that employees don’t understand. We’ve got like written laws in Canada that are just like written down in statutes and they can be changed every few years by politicians and –

Dana DuPerron: The legislature writes them.

Jill Lewis: The legislature.

Dana DuPerron: Yes.

Jill Lewis: But then there’s judge-made law –

Dana DuPerron: Yes.

Jill Lewis: – and we’re also entitled to that.

Dana DuPerron: Yes.

Jill Lewis: It’s actually presumed that we are, and those termination entitlements can be significant; it can be, you know, like one month per year. Like go back to our previous episodes on common law notice period to sort of understand those factors.

Dana DuPerron: And it comes from this whole history of judicial decisions where like any time there was a dispute between an employee and employer, a master and servant going back hundreds of years in England they would go before the judge, the judge would say, “Hear ye, hear ye. This is how long it shall take you to find other work” –

Jill Lewis: [Unintelligible 00:05:22] [laughs].

Dana DuPerron: Yes, exactly. It’ll take you this long. And then when they did the ESA, they said, “Here’s the minimums –

Jill Lewis: Minimums.

Dana DuPerron: – you have to provide at least this.”

Jill Lewis: That’s at least, that means there is more.

Dana DuPerron: And there’s a term in the ESA that says this does not limit any other common law or civil remedy that you could have.

Jill Lewis: Right.

Dana DuPerron: So the fact that the ESA has this minimum –

Jill Lewis: Yes.

Dana DuPerron: – does not mean that you are not entitled to more and I cannot tell you how many times I have spoken to someone who said, “I thought I was getting what I was entitled to under the law” –

Jill Lewis: Right.

Dana DuPerron: – and this judge-made common law is the law too.

Jill Lewis: Is also the law.

Dana DuPerron: But you can limit someone to those minimums and what we do as employment lawyers so often when we have an employee come to see us is try to poke holes in any of those contracts to get out more, to get back to say, “No, no, you didn’t properly limit them. They’re entitled to their common law reasonable notice period.”

And courts have, especially in recent years, been very employee friendly because they realize that it takes longer than those minimum period provided to find another job. They try to invalidate those termination clauses, probably because they also want to keep having their power of getting to say how long it’s going to take someone to find another job –

Jill Lewis: That’s true, yes.

Dana DuPerron: – which is valid and good, but like they poke holes. So then the employer keeps trying to close those holes and that’s where the new contract comes from.

Jill Lewis: That’s where it’s coming from. So a few years we had a Waksdale case – and maybe we’ll do like a whole episode on that, it was big.

Dana DuPerron: Everybody can’t wait to hear that.

Jill Lewis: It was big. I mean yes, so we were pretty jazzed about it. You know, we do represent employers but mainly employees and what it said is if you have an invalid for cause provision your whole termination clause was invalid. And that was huge because it just seemed like everyone had an unenforceable for cause provision. We won’t get into that nitty-gritty but essentially any possible way, the resignation clause possibly if that breached the ESA, that could also be –

Dana DuPerron: Provision clauses I’m looking at you.

Jill Lewis: Provision clauses. So a lot of employers had to go back to their lawyers and lawyers had to redraft these provisions. Another example though can be just really generous termination clauses that an employer had. You know, who knows what somebody was doing five years ago in HR or when they got advice they decided to offer their employees, you know, three weeks per year. And then, you know, you’ve got a mass termination, you know, due to like the recession or whatnot. Maybe you had to –

Dana DuPerron: Or just looked at it and goes, “Ooh yuck” [laughs].

Jill Lewis: – yes, maybe five years later you had to fire like 25 people and then you looked at the contract and went, “Oh crap, like we owe all these people quite a bit. We better tighten that. Let’s just tighten that. Let’s just get that tighter.”

Dana DuPerron: Like reduce that by 20.

Jill Lewis: Yes, “Let’s take that severance number and reduce it by 20.” So that could also trigger like this need to change a termination clause. So these new contracts get written, they get sent out to employees who are currently working. OK, so pop quiz. What do you need to sign – what do you need in order for a contract to be valid?

Dana DuPerron: There has to be an offer, that’s from the employer, there has to be acceptance when the employee signs off on it and there has to be consideration.

Jill Lewis: Which can be as small as a –

Dana DuPerron: It could be a peppercorn, “Here’s your peppercorn.” Consideration is just the term for you are given something to agree to this. So if you’re just working along and the employer’s like, “Here, sign this. Don’t worry about it, just sign it, it doesn’t matter” –

Jill Lewis: Yes, “Shush, shush, shush, just sign.”

Dana DuPerron: – and doesn’t give you anything, then it’s not enforceable.

Jill Lewis: Right.

Dana DuPerron: But if they say, “Here’s a dollar” and you sign it –

Jill Lewis: It’s enforceable.

Dana DuPerron: – it’s consideration.

Jill Lewis: Your employer is saying, “Here’s a signing bonus of a couple of hundred dollars,” like as nice as that looks, you got to take a look at that contract because you are signing – you are giving away something.

Dana DuPerron: Yes.

Jill Lewis: OK. So if you get one of these contracts, what do you do?

Dana DuPerron: Go see a lawyer.

Jill Lewis: Go see a lawyer.

Dana DuPerron: Like don’t just, “Let me just have a read through this” – I mean read it. Read it, absolutely read it and then go see a lawyer.

Jill Lewis: Yes. I’m going to tell you you’re going to read it and think, “Oh, I don’t know, that sounds right –

Dana DuPerron: Yes, “It seems fine, it seems legit.”

Jill Lewis: – it seems legit.”

Dana DuPerron: There’s either going to be – aside from the termination provision there might be a tighter non-solicit or like restrictive convenance post-employment, that’s what I’ve seen.

Jill Lewis: Yes.

Dana DuPerron: Sometimes they’re trying to fix the fact that non-competes are no longer allowed, so if you’re removing a non-compete. But at the same time like you don’t need to get into a whole big thing for that.

Jill Lewis: Whatever, those were unenforceable anyway.

Dana DuPerron: Yes. So –

Jill Lewis: Layoff provision, you’re likely going to see a layoff provision –

Dana DuPerron: Yes, yes.

Jill Lewis: – during COVID. Anyway, I think we have an episode on that. You can’t lay somebody off unless it says it in their contract, so you’re seeing a lot of contracts now with those –

Dana DuPerron: And layoff has a very specific meaning, that means that you’re temporarily out of work and called back.

Jill Lewis: It doesn’t mean you’re fired.

Dana DuPerron: Sorry to interrupt.

Jill Lewis: Yes. Yes, so you’re going to see some changes. So go see a lawyer. It doesn’t take us a ton of time to take a look at the contract and we’re going to flag that for you. So maybe you’re coming at this with no contract at all and you’ve been working at this company for 10 years and now they’re asking you to sign a contract and we take a look at and say, “This is a tight clause. You are going to be bound by it if you sign it and you’re only going to be entitled to your bare minimums,” and if the company’s not big that might just be 10 –

Dana DuPerron: Eight weeks.

Jill Lewis: – sorry, eight weeks. Eight weeks versus what you’re currently entitled to.

Dana DuPerron: Twelve months.

Jill Lewis: Right. And you have to think of it like that like, “When I’m coming into signing this, at this date and time I am entitled to a 10-to-12-month notice period upon termination.

Dana DuPerron: Yes.

Jill Lewis: “That’s mine, like I’ve got that and you’re asking me to sign something and waiving that, for what?”

Dana DuPerron: Yes. OK, so I’ve looked at it and I’ve told you, “Yuck, I don’t like the look of this,” now what?

Jill Lewis: I mean OK, there’s a few options is go back and talk to the employer about negotiating the clause. We always can provide some language, you know, sort of ghostwrite an email, something like that so you can go back and ask for three weeks per year actually, “You know what, I’d be more comfortable signing for three weeks per year,” and sometimes employers will do that.

A lot of times though I think when they’re done on these mass levels, when they’re just trying to get every employee on board, they’re going to say no. Like they’re just, “No, this is the clause” because they don’t want to sort of set a precedent for everybody to come to them, which is unfortunate.

Dana DuPerron: It depends on how much bargaining power you have though.

Jill Lewis: Yes, it is, it really –

Dana DuPerron: Because if you’re someone that they want to keep …

Jill Lewis: Yes. So then if they’re not willing to change the clause, you just don’t sign and then you risk that they will terminate your employment.

Dana DuPerron: Yes.

Jill Lewis: But if they do and you have not signed a contract, your entitlements will be based on your common law.

Dana DuPerron: Yes.

Jill Lewis: But that’s a big question for people, that’s a big risk.

Dana DuPerron: Well it’s also another thing that the employer could do is say, “OK, you didn’t sign. These terms are coming into effect in” whatever your common law notice period would be.

Jill Lewis: Yes.

Dana DuPerron: And we’ve said this – but at that point, if you’re really not happy with it you can be looking for another job at that time, you’re getting paid.

Jill Lewis: All right, so they say, “You’ve got to sign by Friday. Sorry, we’re not changing the terms of it, sign or else” I guess. So you decide, “Well no thank you, I’d like to not sign” and, “See you Monday” and hope that they just, what, maintain your employment –

Dana DuPerron: Yes, just let –

Jill Lewis: – maybe they give you 10 months’ notice that those will be the new terms. They could be holding something over your head though like a bonus or something, that’s kind of another issue.

Dana DuPerron: That’s what I was going to say –

Jill Lewis: Yes, I knew it was there.

Dana DuPerron: – is that just keep talking, I’ll get there eventually, is that if you sign something you should assume it’s enforceable. Like don’t go into it thinking you’re going to be able to get out of it.

Jill Lewis: Yes.

Dana DuPerron: But as we said, the law keeps changing. So if you do sign the contract, go into it assuming, “OK, this has limited my entitlements,” but then if your employment does get terminated, go speak to a lawyer still because they still might be able to be like, “Boom, probation clause, this is a hole.”

Jill Lewis: Yes.

Dana DuPerron: Like, “There’s a problem with that” or, “There’s a problem with the resignation clause” or, “They didn’t fix it.” I have seen very recently employers who also very recently –

Jill Lewis: Yes, changed –

Dana DuPerron: – provided a new contract and that contract I still said, “No. No, no, no,” like after the fact. Like someone, you know, terminated within like a fairly short time from getting that contract and you go, “No, no, no, no, no.” And there could be other arguments that like HR was deliberately –

Jill Lewis: Misleading, yes.

Dana DuPerron: – misleading even if the contract itself looks OK in terms of what you are being required to sign. So always see someone on the front end, always see someone on the back end.

Jill Lewis: Absolutely, absolutely. There are so many arguments. We are very crafty and, you know, even if you’ve been terminated and the employer feels like pretty confident with their contract, sometimes you send a lawyer’s letter and they’re just willing to pay something to get you to sign a release, to know that you’re not going to get sued and that their contract is not – maybe they had a thousand of those contracts out there –

Dana DuPerron: Yes.

Jill Lewis: – well then maybe they don’t want that contract to be criticized by a judge because if it goes in front of a judge and they rip it apart then all those other contracts they know are unenforceable, so.

Dana DuPerron: Then you get another email from HR, “I’m going to need you to sign this” [laughs] –

Jill Lewis: Still read it.

Dana DuPerron: Yes, yes, just …

Jill Lewis: Yes, so –

Dana DuPerron: And then to employers we want to be saying be mindful of what you’re saying to employees, think about what you’re providing and why and like maybe consider something that is more generous than the ESA even if it’s less than common law –

Jill Lewis: Yes.

Dana DuPerron: – which I think judges are less likely to try to bend over backwards to invalidate.

Jill Lewis: If you’re going to provide something –

Dana DuPerron: Yes, because –

Jill Lewis: – or provide something that’s subject to mitigation.

Dana DuPerron: Yes, you just have to look for other – yes.

Jill Lewis: Like you don’t have to be bare minimums.

Dana DuPerron: Yes.

Jill Lewis: Or if you want to be bare minimums and you want to restrict somebody with 10 years service then like up the signing bonus because they are giving something away and that’s a fair transaction. And I think as soon as you shut that down and you tell somebody, “Sign or else,” what have you done to that relationship.

Dana DuPerron: Yes.

Jill Lewis: You know, like you’re not giving any sort of respect to their value and –

Dana DuPerron: Yes.

Jill Lewis: So that goes to like a whole – that’s just like a morale issue. But I think those are all really important things to consider.

Dana DuPerron: Yes. Things to keep in mind, yes.

Jill Lewis: Yes, so that’s got us worked up this week.

Dana DuPerron: All worked up, yes.

Jill Lewis: Thanks for listening. Like, subscribe, follow, comment –

Dana DuPerron: Share.

Jill Lewis: – share [laughs]. And we’ll see you next week. Bye.

Dana DuPerron: Bye.



This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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