Instituting or Changing an Employment Contract

Is your company trying to get you to sign an employment agreement? or Is your Company attempting to change the terms of your employment contract?

Our advice is to seek legal advice before signing anything!

A contract requires that each party receive a benefit that they did not have before (which in law is called consideration) for it to be valid. If the parties agree to a variation of contract, but a new benefit is not received by both parties, Courts will consider the new contract an “unenforceable unilateral variation”.

Usually, it is not considered a benefit if your Company says: “if you agree to this, you get to keep your job.”  That is something an employee is already entitled to under the original terms of employment, and therefore, this does not usually constitute the “fresh” benefit or consideration that makes such a “contract” valid in law.

 

What happens if both parties do not receive a benefit?

Here are some situations where Courts have determined that a contract has been unilaterally varied and is therefore NOT a contract at all:

• The employer reduced an employee’s commission rate that he normally enjoyed. This variation was determined to be unenforceable because the employee did not receive a benefit. The employer was then ordered to pay their employee commission according to the original contract;


• The employer promised a new employee a two-year contract and wrote out its pay proposal in a letter. Five months after the employee began his duties, the employer asked him to sign a more substantial contract that included a termination clause. The court determined that the initial letter was an interim contract, and that the more detailed contract was a variation in this contract. Because the employee did not receive a benefit for agreeing to the new termination clause, the contract was unenforceable;


• The employer asked an existing employee to take on new responsibilities, which expanded the scope of her work in a substantial way. Eventually the employee resigned due to difficulties learning the software programs required for her new role. She then claimed that she had been constructively dismissed when her employer changed the scope of her duties (without reasonable notice of the change). The Court found that the employer had repudiated the initial contract by imposing a unilateral change without consideration or notice and ordered the employer to pay damages equivalent to 10 months’ pay

 

What is beneficial enough to be fresh consideration?

See a lawyer to determine with a contract provided to you in the midst of employment or an amendment of contract will hold up under law. Continued employment is generally not sufficient!