In the recent decision of Matijczack v. Homewood Health Inc., 2021 BCSC 1658 (Homewood Health), the BC Supreme Court confirmed that employers must provide consideration to make amendments to existing employment agreements enforceable.
Following a 2018 decision from the BC Court of Appeal (Rosas v. Toca, 2018 BCCA 191), the law relating to consideration for contractual amendments has been in flux. The Homewood Health decision makes it clear that consideration is required in the employment context:
"The requirement of consideration to support an amended agreement is especially important in the employment context, where there is an inequality of bargaining power, and particularly in the circumstances of an amendment to an existing contract, where the employee is more vulnerable, due to being dependent on the pay from their continued employment."
By way of background, the employee in Homewood Health was a BC-based counsellor who performed various services at different hourly rates. The employer required the employee to enter into a new employment agreement during her employment. The new agreement contained a governing law clause which provided that the agreement was governed by the laws of Ontario and that Ontario courts had jurisdiction over any contractual disputes. The new employment agreement also contained the possibility that the employee may be engaged to provide new services at higher rates.
The court held that the possibility of additional work was not sufficient consideration.
In addition, the court found the governing law clause unconscionable. Unconscionability arises where there is "inequity of bargaining power and a resulting improvident bargain." The inequity of bargaining power between employer and employee and the significant negative consequences for a BC based employee if the governing law was Ontario met the test for unconscionability.
Take Aways for Employers
This decision is an important reminder to ensure that sufficient consideration is provided for all employment agreement amendments. When amending employment contracts:
- Document the consideration in the contract;
- Provide employees with time to consider the new offer. If the amendments are significant, consider including language that the employee may wish to consult a lawyer;
- Keep a record of the consideration paid, ideally as a separate line item on a pay statement or a separate payment; and
- Ensure sufficient consideration is provided. Continued employment, normal annual wage increases and/or bonuses and the possibility of earning additional income are not sufficient consideration.
Our Labour, Employment & Human Rights Group would be pleased to assist you in drafting enforceable employment agreement amendments.
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.