The recent Ontario Court of Appeal decision in Holland
v. Hostopia. com confirms with authority that employment
contracts signed after commencement of employment will not be
binding against the employee in significant respects.
Holland was hired by Hostopia as National Account Manager
pursuant to a written offer of employment dated May 13, 2003. The
offer letter said nothing about notice of termination, but did
expressly require "the subsequent signing of an employment
Holland accepted the offer and commenced employment effective
May 9, 2003. Approximately nine months later, he was presented with
the (6 page) employment contract referred to in the original offer.
Significantly, the contract permitted Hostopia to terminate
Holland's employment on only the minimum notice required by the
Employment Standards Act ("ESA").
Holland signed the contract, acknowledging that he understood
its terms, that he was not under duress and that he had reasonable
opportunity to obtain independent legal advice.
Some seven years later, Hostopia terminated Holland's
employment without cause, providing him with only the minimum ESA
termination payments, consistent with the contract.
Holland sued for wrongful dismissal, arguing that there was no
consideration for the contract, that the contract was therefore not
binding on him and that he was entitled to reasonable notice or pay
instead at common law.
The trial Judge disagreed with Holland, finding that the offer
letter and contract constituted one document in respect of which
Holland received adequate consideration when he got the job.
On appeal, the Court reversed the trial decision, finding that
the offer letter, once accepted, constituted a complete contract of
employment. The contract signed nine months later contained a new
termination provision (in the Court's view, a
"material" new term) limiting Holland's rights. There
was no "new" consideration given to Holland in respect of
this new term, rendering it invalid. Accordingly, the Court awarded
Holland 8 months' pay instead of notice.
Employers who are hiring must have their contracts of employment
fully ready, in the employee's hands and signed prior to the
employee's start date. Any delay beyond the date of
commencement of employment creates a significant risk that the
contract will not be enforceable and that the employer will be
exposed to unwanted termination (and possibly litigation)
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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