Ontario Court of Appeal Re-Confirms that Employer Must Provide Fresh Consideration When Introducing New Term of Employment

In the recent decision Holland v. Hostopia.com Inc., 2015 ONCA 762 [Holland], the Ontario Court of Appeal reminded us that employers must provide fresh consideration for any new and material terms of contract agreed upon mid-employment.

In Holland, the plaintiff was hired by Hostopia.com Inc. (“Hostopia”) pursuant to an offer letter  (the “Offer Letter”) dated May 13, 2003. The Offer Letter outlined the general terms of Holland’s employment, including salary and benefits, but did not include a termination clause. The Offer Letter provided that Holland could accept the offer of employment by signing the letter and “the subsequent signing of an employment agreement.” Holland signed the Offer Letter and commenced his employment with Hostopia. Nine months later, Holland was presented with a six page employment contract (the “Employment Contract”), which he signed and returned to Hostopia. Unlike the Offer Letter, the Employment Contract contained a termination provision allowing Hostopia to terminate Holland’s employment on a without cause basis by providing him with pay in lieu of notice in accordance with the Employment Standards Act, 2000.

On February 28, 2010, Hostopia terminated Holland’s employment on a without cause basis. Relying on the Employment Contract, Hostopia provided Holland with his minimum statutory notice and severance entitlements. Holland subsequently initiated a claim, arguing that the Employment Contract was not enforceable due to lack of consideration.

Overturning the decision of the lower court, the Court of Appeal held that the Employment Contract, signed nine months after Holland started his job, introduced a new and material term into an already existing employment agreement. By including a termination provision in the Employment Contract, the Court of Appeal concluded that the employer was asking Holland to waive his right to reasonable notice of termination at common law. Chief Justice Strathy, writing for the Court of Appeal, also drew attention to the fact that there was no evidence that the employer and employee had discussed this new term of employment nor that Holland had agreed to waive his right to reasonable notice of termination. In the circumstances, the Court of Appeal held that the Employment Contract was unenforceable and Holland was entitled to eight months’ pay in lieu of notice.

To find out more about your rights upon wrongful dismissal, contact employment lawyer Peter McSherry online or at 519-821-5465.

To read the full decision, click here.