First Published in the OBA Labour & Employment Law
The recent judgment of the Ontario Court of Appeal in
Holland v. Hostopia.com Inc., 2015 ONCA 762, sheds light
on the (in)ability of employers to alter employment contracts after
an employee has already commenced employment.
In this case, the appellant Sean Holland commenced employment
with the respondent Hostopia.com Inc. on June 9, 2003 after signing
a two page Employment Offer. The offer letter described the
essential terms of the employment and stated Mr. Holland would also
be required to sign an Employment Agreement. On the same date he
signed a Code of Business Conduct and a Proprietary Rights
agreement. None of the documents presented to Mr. Holland at the
time he started working dealt with termination or notice
Nine months later, Mr. Holland was presented with a six page
employment agreement (the "Agreement") which he signed on
March 8, 2004. The Agreement included a provision allowing for the
employer to terminate Mr. Holland's employment without cause or
notice, provided it paid him in lieu of notice in accordance with
the Employment Standards Act ("ESA"). The
Agreement included an acknowledgement that Mr. Holland had read the
agreement, understood it, and was under no duress to sign it.
Mr. Holland's employment was terminated by his employer
almost six years later on February 28, 2010. On termination, he was
paid accrued vacation pay, commissions for the months of January to
March 2010 and $40,756.81 as payment in lieu of notice. It was
agreed that this amount was at least the minimum that Mr. Holland
was entitled to under the ESA.
Mr. Holland argued at trial that the Agreement was void because
there was a lack of 'fresh consideration' and therefore, he
ought to be entitled to reasonable notice at common law (rather
than the less generous notice period under the ESA). The trial
judge rejected Mr. Holland's argument, finding that the
Employment Offer and Agreement were related documents that together
constituted one contract. The trial judge further found that the
two parts of the contract did not contradict one another. The trial
judge therefore upheld the validity of the Agreement and determined
that the employer had paid Mr. Holland what he was entitled to
under the ESA.
On November 10, 2015, Strathy C.J.O. for a unanimous Court of
Appeal overturned the trial judge on this key issue. The Court of
Appeal found that the Employment Offer acted as a complete
stand-alone contract of employment, and the plaintiff was in fact
employed under the terms of that contract for nine months prior to
signing the Agreement. Since the initial Employment Offer did not
expressly touch upon the issue of reasonable notice for termination
without cause, it was an implied term of the contract that the
plaintiff was entitled to the common law standard of reasonable
notice. The Court of Appeal noted that the common law entitlement
to reasonable notice of termination is a "necessary
consideration" of an employment relationship, and therefore,
the subsequent term of the Agreement providing for notice under the
ESA constituted a "tremendously significant
Given that the Agreement contained a significant modification to
which the plaintiff had not previously consented to, the Court of
Appeal ruled that fresh consideration was required. It was
determined that no fresh consideration was provided to Mr. Holland
and therefore, the Agreement was unenforceable.
What Does This Mean for Employers?
Holland v. Hostopia.com Inc. is a cautionary tale for
employers. If employers intend to alter employment contracts after
an employee has commenced employment, it is imperative to provide
fresh consideration for any "significant modifications".
Simply altering the contract to ensure it is compliant with the ESA
without providing new consideration gives rise to a risk of a court
finding the modification unenforceable.
Consideration can be in the form of a raise or promotion, among
other things. However, what is clear (and what the Court of Appeal
once again highlighted in this case), is that a promise to perform
an existing contract is not fresh consideration.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).