Canada: Good News/Old News: Why Wood v Deeley Is Nothing (New) For Employers To Sweat

Last Updated: April 12 2017
Article by Paul Boshyk and Shahram Khalili, Student-at-Law

Much has been said about the impact of the Ontario Court of Appeal's decision in Wood v Fred Deeley Imports Ltd.1 since its release in February 2017. Some commentators have even hailed it as a major victory for dismissed employees. However, a sober second reading of the Court's decision suggests that the news may not be so bad for employers after all.


Ms. Wood was dismissed from her employment with Fred Deeley Imports ("Deeley") on a without cause basis after eight years of service. In terminating Ms. Wood's employment, Deeley purported to rely on the following "all-inclusive" termination clause in her employment contract:

The Company is entitled to terminate your employment at any time without cause by providing you with 2 weeks' notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph [...] The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000.

In fact, Deeley provided Ms. Wood with entitlements in excess of those set out in her contract, namely: 13 weeks' working notice plus a lump sum payment equal to eight weeks' pay. Nevertheless, Ms. Wood sued Deeley for wrongful dismissal on the grounds that (1) the contract was unenforceable because it was signed after she started working for Deeley, and (2) the termination clause was void because it contravened the Employment Standards Act, 2000 (the "ESA").

The "Good News" for Employers

Ms. Wood's first argument was based on the legal doctrine of consideration.

In employment law, the doctrine of consideration requires that an employer provide something new and of value to an employee (e.g., a bonus) if the employer wishes to obtain a new contract or term from an employee that negatively affects his or her interests (e.g., a termination clause). Where an employee has already started working for the employer, he or she can take the position that an unwritten contract has already been formed and that no "fresh" consideration was provided in exchange for the new contract or term. Absent fresh consideration, the new contract or term is likely unenforceable.

In this case, Ms. Wood was offered and accepted a job with Deeley during a phone call on April 17, 2007. A representative of Deeley then sent her an email outlining the terms of her employment (including the termination clause). Ms. Wood started working for Deeley on April 23, 2007. The following day, she met with a human resources representative and finally signed the contract. Therefore, Ms. Wood argued that the contract was unenforceable for lack of fresh consideration.

Surprisingly, the Court disagreed with Ms. Wood. According to the Court, a written contract is not unenforceable merely because the employee signs it after he or she starts work – provided that the material terms in the contract were part of the "original employment relationship" (e.g., the key terms were communicated prior to the commencement of employment). The fact that Ms. Wood signed the contract after she started working for Deeley was a matter of administrative convenience. As such, fresh consideration was not required.

The "Old News" for Employers

Ms. Wood's second argument was that even if the contract was enforceable, the termination clause in it was still void.

In particular, Ms. Wood argued that the termination clause improperly excluded Deeley's statutory obligation to make benefit contributions during the notice period (contrary to ss. 60 and 61 of the ESA) and pay severance pay (contrary to ss. 64 and 65 of the ESA). In its defence, Deeley argued that the word "pay" in the phrase "two weeks' notice of termination or pay in lieu thereof" was broad enough to include both wages and benefits. It also argued that the 21 weeks of combined notice and pay in lieu of notice actually provided to Ms. Wood exceeded her entitlements under the ESA.

The Court agreed with Ms. Wood that Deeley had improperly tried to contract out of the ESA.

According to the Court, the word "pay" was, at best, ambiguous. Adopting the interpretation most favourable to Ms. Wood, the Court concluded that "pay" referred only to wages, not to benefits. The termination clause was also deficient because Deeley had unwisely combined its separate obligations to give notice and pay severance pay. In the result, the clause permitted Deeley to discharge all of its statutory obligations to Ms. Wood by way of working notice. Under this scenario, Ms. Wood would have received more notice than she was entitled to under the ESA, but she would not have received any severance pay.

By reason of the foregoing, the Court held that the termination clause was void. The Court added that Deeley's actual compliance with the ESA did not cure the clause's deficiencies because "illegal" termination clauses cannot be remedied after the fact. Therefore, Deeley was ordered to pay damages equal to nine months of reasonable notice at common law.

What Employers Should Know

In the well-known cases of Wright v The Young and Rubicam Group of Companies2 and Stevens v Sifton Properties Ltd.,3 the Ontario Superior Court of Justice held that all-inclusive termination provisions that could result in an employee receiving less than his or her statutory entitlements notice, severance pay or benefits continuation are void and unenforceable. Wood v Fred Deeley Imports Ltd. effectively confirms these lower court decisions. It does not create new law.

Meanwhile, the Court's decision to uphold Ms. Wood's contract – notwithstanding the fact that it was signed after she started working for Deeley – is significant. Historically, the courts have struck down written contracts that were signed after the employee started working for the employer, even if the key terms were communicated prior to the commencement of employment. It is apparent that the Court in Wood v Fred Deeley Imports Ltd. favoured a more practical and business-minded approach.

That said, employers are still cautioned to ensure that employment contracts are signed by new hires before they start working. This "best practice" remains the most effective way to avoid disputes about whether or not employees received sufficient consideration for their new contracts.


1. 2017 ONCA 158.

2. 2011 ONSC 4720.

3. 2012 ONSC 5508.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2017

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Paul Boshyk
Shahram Khalili, Student-at-Law
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions