In Wronko1, the Ontario Court of Appeal
determined that an employee was not bound by two years' notice
of a fundamental change to his terms of employment.
The decision was based on the specific facts and the ongoing
interaction of employee and employer. The employee was an executive
with 17 years service who had negotiated an employment contract
with the president of the employer that provided two years'
salary on termination. A new president was appointed who attempted
to reduce the termination entitlement from two years' pay to 30
weeks' pay. The employee objected to the change and, on several
occasions, refused to sign an amended contract. Two years'
notice of a change to the termination entitlement was given. After
expiry of the two years' notice, the employee was again asked
to sign an amended contract and it was noted that if the employee
did not accept the amended terms "we do not have a job for
The court held that this amounted to termination and the two
years' notice of the amendment did not, in the circumstances,
constitute notice of termination or an effective amendment to the
terms of employment. Hence the employee had been terminated without
notice and was entitled to two years' pay in accordance with
the original terms of employment, less amounts actually earned by
the employee during the two years following termination.
The court reviewed the options available to an employee when an
employer attempts a unilateral amendment to a fundamental term of a
contract of employment:
The employee may accept the change, either expressly or
implicitly through apparent acquiescence.
The employee may reject the change and, if the employer
persists in treating the change as effective, sue for constructive
The employee may make it clear that he or she rejects the
change. The employer may respond by terminating the employee on
proper notice and offering re-employment on the amended terms.
Otherwise, if the employer permits the employee to continue in the
job the employee is entitled to insist that the original employment
terms continue to apply without change.
Two statements in the judgment raise particular concern for
changes to pensions and benefits. The court does not accept that an
employer has any unilateral right to change an employment contract
or that by attempting to make such a change it can force an
employee to either accept the change or quit. The court also noted
that the third situation described above may arise particularly
when the unilateral change does not have an immediate impact on the
employee, as in the Wronko case.
If an employer gives notice of a substantial change to pension
benefits or other post-employment benefits there will often be no
immediate impact on employees. In light of Wronko, if a
proposed change is announced and employees object, the
employer's response may be critical to the ability to impose
the change without being exposed to wrongful dismissal claims. Mere
notice of the change may not suffice, regardless of the length of
Of course, the legal result will also depend on whether the
proposed change constitutes a fundamental change to a term of
employment, which is not necessarily an easy matter to
The notice requirements under employment law are in addition to
statutory notice requirements regarding adverse pension
Based on Wronko, an employer enters a legal minefield
when announcing substantial changes to pensions or other
post-employment benefits. Legal advice regarding the applicable
notice requirements is recommended.
1. Wronko v. Western Inventory Service Ltd., (208) 90
O.R. (3d) 547, (Ont. C.A.), Application has been made for leave to
appeal to the Supreme Court of Canada.
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