To appreciate the dangers of varying employment terms, we must
start with the foundations of contract law. First, a contract
requires that each party receive a benefit (consideration). Second,
if the parties agree to a variation of contract, but consideration
is not received by both parties, Courts will consider the new
contract an "unenforceable unilateral variation".
Third, it is not normally considered a benefit to tell your
employee "if you agree to this, you get to keep your
job." That is a benefit your employee was already
entitled to under the original terms of employment, and therefore,
does not constitute "fresh" consideration.
What happens if both parties do not receive a benefit?
A variation to a contract without fresh consideration renders
the agreement invalid. Following are situations where Courts
have determined that a contract has been unilaterally varied:
The employer reduced an employee's commission rate.The
Court determined that the variation was unenforceable because the
employee did not receive a benefit. The employer was then ordered
to pay their employee commission according to the original
contract; totalling over $50,000 (Hobbs v. TDI Canada
Ltd., 2004 CarswellOnt 4989).
The employer promised a new employee a two-year contract and
wrote out the compensation scheme in a letter. Five months after
the employee began his duties, the employer asked him to sign a
more substantial contract that included a termination clause. The
court determined that the initial letter was an interim contract,
and that the more detailed contract was a contract
variation. Because the employee did not receive a benefit
for agreeing to the new termination clause, the contract was
unenforceable. Thus, dismissing the employee according to the newly
added termination clause constituted a wrongful dismissal
(Singh v. Empire Life Insurance
Co., 2002 CarswellBC
The employer asked an existing employee to take on new
responsibilities, which expanded the scope of her work in a
substantial way. Eventually the employee resigned due to
difficulties learning the software programs required for her new
role. She then claimed that she had been constructively dismissed
when her employer changed the scope of her duties (without
reasonable notice of the change). The Court found that the employer
had repudiated the initial contract by imposing a unilateral change
without consideration or notice and ordered the employer to pay
damages equivalent to 10 months' pay (Fisher v.
Lakeland Mills Ltd., 2008 CarswellBC).
What is beneficial enough to be fresh consideration?
Fresh consideration requires that your employee receive an
"additional advantage beyond continued employment" for
agreeing to the new terms (Krieser v. Active Chemicals
Ltd., 2005 CarswellBC 2241). An additional
advantage is obvious where the employee receives increased
benefits such as vacation pay or health benefits, increased pay, or
an increased notice period prior to termination. The consideration
must be real, or sufficient, in the sense that it has a legal
value. The court is not, however, as concerned with the
adequacy of the benefit, which is usually left up to the private
A more ambiguous situation arises when an employer tries to vary
the terms of employment in exchange for a promise not to terminate
the employee. Generally speaking the law does not permit
employers to present employees 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 variation. Only in certain instances where the employee
gains increased security of employment for agreeing to the
variation will such a promise be viewed as consideration
(Techform Products Ltd. v. Wolda, 2001
Lessons for Employers
When an employee is asked to change the scope of his or her
duties, compensation, benefits or termination provisions, it must
be recognized that this request could amount to a unilateral change
of contract rendering the agreement unenforceable. It must
also be recognized that even in employment relationships where no
written contract exists, the parties are subject to an implied
contract and the same principles apply as if there were a written
To vary an employment contact you must ensure that both parties
receive a benefit in the new agreement. If your employee
refuses the variation, you cannot unilaterally change the existing
contract. You can either (a) continue to negotiate until they
consent to a variation where you both receive new benefits, or (b)
give notice to terminate providing reasonable notice or pay in lieu
Written with contributions by Randy Campbell, summer student.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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