The Ontario Court of Appeal, in Holland v. Hostopia.com Inc., 2015 ONCA
762 (CanLII) (Holland),
recently confirm its position on an issue that is frequently
brought to our attention: whether an employer can rely on the terms
of an employment agreement that is entered into mid-employment. The
answer, in short, is yes . . . but only if the employer provides
fresh consideration for any new and material terms of
Mr. Holland was hired by Hostopia.com
(Hostopia) pursuant to an offer letter dated May
13, 2003 (the Offer Letter). The Offer Letter
contained general terms of employment such as salary, benefits and
vacation but it did not include any termination provisions. The
Offer Letter also indicated that it could be accepted by Mr.
Holland’s signature and “the subsequent signing of an
employment agreement.” Mr. Holland signed and returned the
Offer Letter and commenced employment with Hostopia.
Nine months into his employment, Mr. Holland was presented with
a six-page employment agreement which he executed and returned (the
Employment Agreement). The Employment Agreement
indicated that it was being made “in consideration of [Mr.
Holland’s] employment by Hostopia and the compensation paid
to [him] from time to time while so employed.” The Employment
Agreement also contained a clause allowing Hostopia to terminate
Mr. Holland on a without cause basis by providing him with pay in
lieu of notice in accordance with the Employment
Standards Act, 2000 (the
On February 28, 2010 Hostopia terminated Mr. Holland’s
employment on a without cause basis. Relying on the Employment
Agreement, Hostopia provided Mr. Holland with his ESA minimum
entitlements. Mr. Holland subsequently initiated a claim, arguing
that the Employment Agreement was not enforceable due to a lack of
Mr. Holland was initially unsuccessful at trial on the issue of
the enforceability of the Employment Agreement. The trial judge
found that the Offer Letter and Employment Agreement were
“interrelated” and together constituted a single,
enforceable contract of employment in respect of which
consideration had been given when Mr. Holland accepted the Offer
Letter. The trial judge further concluded that both agreements were
consistent and that neither one negated the other. Mr. Holland
appealed this decision, along with several other issues that were
also raised in the claim.
Court of Appeal Decision
Chief Justice Strathy, writing for the Court of Appeal,
overturned the trial judge’s decision on the enforceability
of the Employment Agreement. He found that the Offer Letter and
Employment Agreement were not consistent. More
specifically, the Offer Letter was silent on Mr. Holland’s
termination entitlements and as such, contained an implied term
that he was entitled to reasonable notice of his termination at
common law. The Employment Agreement, in contrast, purported to
limit Mr. Holland’s entitlements upon to termination without
cause to the statutory minimums required to be provided in
accordance with the ESA. Chief Justice Strathy also drew attention
to the fact that prior to acceptance of the Offer Letter, there was
no evidence of any discussions between Hostopia and Mr. Holland as
to any new terms to be contained in the Employment Agreement. There
was also no evidence that at the time he executed the Offer Letter,
Mr. Holland agreed to waive his right to reasonable notice of
In light of the above, Chief Justice Strathy concluded that the
Employment Agreement introduced a new, “very material”
term into the existing contract of employment to which Mr. Holland
had not consented and with respect to which he did not receive
fresh consideration. In the circumstances, the Employment Agreement
was found to be unenforceable. Mr. Holland was ultimately found to
be entitled to eight months’ pay in lieu of notice at common
Circumstances in which an employer seeks to introduce new terms
and conditions of employment, particularly termination provisions
and restrictive covenants, often pose a challenge. This issue
frequently comes to our attention when, similar to the situation in
Holland, an employer has provided an employee with a short
form offer letter and wishes to follow up with a more fulsome
employment agreement. Holland underscores that fresh
consideration will be required in order to enforce an employment
agreement that is entered into mid-employment and contains new and
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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