Friday, December 30, 2011

Manager fired for just cause after sleeping with administrative assistant

Romantic and/or sexual workplace relationships are nothing new, and they're difficult for employers to deal with, in part because they're so prolific.  Employees spend an extremely large proportion of their waking hours in the workplace, and it's to be expected that many will develop strong emotions towards each other, whether in the nature of friendship, hatred, love, or lust.

A relationship can be quite benign when between two single people in different departments, and will have little impact on the employer, provided they remain discrete and professional in the workplace.  However, when people who are emotionally involved must work closely together, or are in a reporting relationship, it is more concerning to the employer:  It is more difficult for the employees involved to be discrete, and almost inevitable that others on the team will become aware of it.  This can cause uncomfortable situations, perceptions of favouritism, and increases office politics and drama, and that's unpleasant enough...but what happens if they have a bad break-up?  Suddenly, the employer is dealing with major conflict in the workplace.

There are also Human Rights Code concerns about intra-office flirtation.  Unwelcome advances by a person in a position to confer a benefit on the other in the workplace are Code violations, and while that's ordinarily viewed as a supervisor/subordinate matter, it may also apply to peers not in a reporting relationship, in the "I can move your vacation request to the top of the manager's pile" sort of sense.  (I'm not familiar with any cases concerning a strictly work-related benefit, where the person making the advance is in a position to make the other person's job easier, but that would be a trickier case.)

For an employer to hire the spouse of an existing employee often doesn't create the same issues, when done carefully, because the employer defines the working relationship of the couple (instead of the couple defining themselves regardless of working relationship) and moreover there is less chance of a break-up (though you never know).

But the real issues occur where you have a clear power imbalance.  When a manager engages in a relationship with a non-managerial employee, an employer should worry.  This remains true, if less so, even where the employee is not a direct report of the manager.  Concerns about favouritism are more severe at that level.  If the manager crosses the line in terms of the above-noted Code concerns, the employer is likely directly liable for that.

Thus, even employers who don't feel that they need a nepotism policy (i.e. family members working together) should always have a good fraternization policy.

And there's good news for employers dealing with managers who violate fraternization policies, in the form of the recent case in Reichard v. Kuntz Electroplating Inc.

The Case

Mr. Reichard was a manager of Kuntz, having worked there since 1984, and at age 41 began an extramarital affair with Ms. Thompson, an administrative assistant who at the time was, to use the words of the trial judge, "not directly under Reichard".  In 2005, Kuntz introduced a non-fraternization policy, as a mechanism to carry out its obligations to ensure that its workplace is free from sexual harassment.  The policy is not reproduced in the decision, but it appears that it may not have an absolute prohibition on romantic relationships, but requires disclosure to the employer of any romantic relationships.
8.  The policy was not introduced for moral reasons.  It was introduced to protect both employees of Kuntz and Kuntz.  Kuntz has a vested interest in not having any of its employees harassed sexually or otherwise.  It also wants to guard against any favouritism or perceived favouritism between employees.  In particular, the reporting provision would allow Kuntz to make arrangements to eliminate or mitigate a conflict of interest if there was a romantic relationship between two employees.
Under the policy, Reichard was required to disclose his ongoing romantic relationship with Ms. Thompson.  There were many rumours about the relationship, and Reichard's superiors asked him about it on multiple occasions, and he denied it.  (One has to wonder if these suspicions prompted the implementation of the policy in the first place.)

In 2006, on Reichard's suggestion, Thompson was transferred into his department over two other candidates, and he gave her "glowing" reviews.  There was evidence of favouritism, making other subordinates uncomfortable, and Reichard routinely took extended lunches with Thompson.

Finally, in 2008, Reichard confided about his troubled personal life, including that he had fathered Thompson's infant son, in another employee, who reported it to the employer.  Reichard then finally admitted the affair to the employer, and was suspended and told that he was on suspension and could not return until called by someone from the company.  The employer's evidence was that they were leaning towards discipline short of dismissal, but then discovered that in the days following the suspension he returned twice to the office despite the suspension.

The employer then concluded that it was unable to trust Reichard as his position required, and so terminated him for just cause.  The judge agreed with the decision, and dismissed Reichard's action.  It all turns not so much on the relationship itself, but on his continued deception about the relationship, breaching the non-fraternization policy.

My Thoughts

The Court's reasoning is a little thin on a couple of points.  Firstly, Reichard argued that the non-fraternization policy didn't apply to the relationship, because it pre-dated the implementation of the policy.  I'm not sure this should hold much sway, but I'm not comfortable with the way the judge disposed of it, either, being because Reichard had simply denied the affair rather than asserting that the policy didn't apply to him.

If one assumes that there wasn't a free-standing obligation on Reichard to disclose the relationship upon request (which may not be the case) and that the policy either did not or could not apply to pre-existing relationships (albeit doubtful), then Reichard would have been entitled to conclude that the relationship was none of the employer's business, and that he had no obligation to disclose.  To refute the applicability of the policy would have entailed telling the employer (at least impliedly) that the relationship predated the policy, which would in effect disclose the relationship and comply with the policy.  Therefore, the judge's conclusion that the policy applied because he didn't refute it has the effect of saying that disclosure was  necessary to preserve his entitlement to not disclose.  Incoherent.

Next, I'm concerned with the absence of any indication as to why Reichard returned to the office while on suspension.  If it was to talk to Thompson, then that's clearly aggravating.  If it was for some other reason - say, picking up the heart medication he forgot - then maybe not so much.

Third, the details of the suspension are thin, as well.  There's a line of case law suggesting that you can't discipline twice for the same offence (meaning that a suspension pending a final determination must be very carefully implemented, and it isn't clear that this happened in this case), and that, in the absence of contractual language to the contrary, an employer cannot suspend an employee unless just cause already exists.

The judge looked at everything in its totality and found that Reichard's misconduct was sufficient to justify termination, and that the return to the workplace was the straw that broke the camel's back, so to speak.  But if you suppose that just cause wouldn't have existed without the returns to the workplace, it isn't clear that the employer was entitled to tell Reichard to stay away (without entirely repudiating the employment contract), which would obviously impact the extent to which his returns can be seen as misconduct.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Wednesday, December 28, 2011

Discharged Richmond Hill bargaining unit member can't sue in wrongful dismissal

I've mentioned this before:  Members of bargaining units cannot sue their employers in Court for matters related to their employment.  This is a rule that is very firmly entrenched in the law, and there has been no sign of budging, yet we keep seeing cases crashing against this wall.

In the recent case of Doobay v. Town of Richmond Hill, Cyril Doobay became the most recent plaintiff whose case fell on jurisdictional bases, suing his employer for firing him in 2003 because he was drunk on the job.

He grieved the termination, and CUPE argued that the penalty should be reduced to accommodate his disability - alcoholism.  The arbitrator dismissed the grievance on August 24, 2004.  The arbitrator acknowledged the alcoholism as an issue (as well as the fact that the grievor had sought treatment), but found that reinstatement was impossible without the grievor taking full responsibility for his misconduct, which he had not.

Then, more recently, on November 4, 2010, he issued a statement of claim.

There are a lot of big problems here.

Firstly, there's the problem of delay.  For claims discovered before January 1, 2004, there was a six year limitations period.  For claims discovered since then, we have had a 2 year limitations period.  Disability issues (probably including alcoholism) can, in some circumstances, push back limitations periods...but in this case, that wouldn't really help Mr. Doobay, because if the claim was discoverable in 2003, then he had until 2009 to bring an action (which he did not), whereas if the discoverability date was pushed to 2004, that would only give him to 2006 anyways.  Limitations periods are fairly difficult to get around, in most cases.  The logic is that the limitations periods usually give a person *lots* of time to initiate a legal action, so if someone misses the deadline, there had better be a really good reason for it.  So this wall is pretty tough to get over.  If you can't do it, the action gets dismissed.

The second problem is what we call "res judicata" - the issue has been decided before, by the arbitrator.  Justice Lauwers found that this issue was res judicata (which in almost all cases results in dismissal of the action), but this wall was perhaps not so high, for a couple of reasons:
  1. Mr. Doobay's lawyer was arguing that the arbitration process was tainted by a lack of appreciation of the nature of the disability and the availability of accommodation programs in the Town.  Now, I'm not sure that this argument rightly could have succeeded, because it doesn't really address the test for res judicata, and moreover it asks the Court to evaluate the results of the arbitration process...which might not be so bad, but for a couple of problems:This was an action, not a judicial review application; and Mr. Doobay probably wouldn't have had standing to seek judicial review.  (The judge notes that Mr. Doobay did not seek judicial review, which is "the customary way in which such decisions are challenged".  This may gloss over the fact that it is the union, not the grievor, with standing to seek judicial review, which fact the judge does not appear to bear in mind.) So the fact that this isn't a judicial review application isn't just a wrong choice of venue; Mr. Doobay probably could not have chosen a different venue, outside of asking CUPE to do so.
  2. All that being said, the finding that this is res judicata is, strictly speaking, wrong.  One of the essential elements of the test of res judicata is that the parties involved must be the same.  The reason Mr. Doobay would not have had standing to apply for judicial review is that he was not a party to the proceeding, in the strictest sense.  Not being a party, the doctrine of res judicata could not block him from seeking remedies elsewhere.  Of course, other doctrines would block just about every other type of remedy conceivable based on facts that had formed the subject matter of an unsuccessful grievance arbitration.
The third problem, and the highest wall of all, is what I noted above, that a bargaining unit member cannot sue his employer in Court.  This is a jurisdictional point - the Courts have absolutely no discretion to relieve against the rule.  For that reason alone, this action was pretty much dead in the water from the outset.

But what becomes more interesting is the costs analysis.  You see, counsel for the Town sent a detailed letter to Mr. Doobay's lawyer explaining why the action was doomed to fail, and tried to use that letter to justify seeking substantial indemnity costs - i.e. costs on an elevated scale - in the amount of nearly $15,000.  There was some discussion as to whether the letter constituted an offer to settle; the judge found that it did not, as there was no real offer to compromise, and in any event the rules regarding offers to settle (Rule 49) don't really speak to outright dismissals of actions in any event, and don't entitle a successful defendant to substantial indemnity costs.

So Rule 49 really wasn't the way to go on that.  But the Court retains discretion to award substantial indemnity costs in any event, so one might have thought that the judge would have appreciated the fact that the defendant had tried to avoid the necessity of a motion by pointing out to the plaintiff the incontrovertible case law that would certainly lead to the dismissal of the action.  I don't know what led to the issuance of a statement of claim in the face of that doctrine, and I'm not going to speculate, but there doesn't seem to be any reason why the plaintiff should have forced the Town to incur the legal fees of bringing the motion, once it had full particulars of the Town's position.

No such luck - ultimately, the judge fixed costs at $3500, in the event that Richmond Hill demands them.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Thursday, December 15, 2011

Covelli v. Sears update

The inaugural post for this blog, back in March, dealt with a decision in Covelli v. Sears Canada Inc.  Find my full post here.

Put briefly, Mr. Covelli had pleaded that Sears had "adopted a corporate policy or practice of terminating employees for just cause, notwithstanding that it knows or ought to know that no just cause at law exists, as a means of unlawfully evading its statutory and common law obligation to provide employees with notice of termination, or compensation in lieu of notice."  Sears brought a motion to strike these portions of the pleadings, and was unsuccessful.

Today, the Divisional Court released its decision on Sears' motion for leave to appeal.  (For a motion in the middle of proceedings like that one, there is no appeal as of right - the party wanting to appeal has to make a motion to get the Court to agree to hear the appeal.)  The Divisional Court refused the motion for leave, and so Sears is pretty much out of options - the pleadings of systemic practices are in, and the plaintiff is entitled to production of all relevant documents.  According to Master Sproat's original decision on the motion, that means "fewer than 200 file reviews".

We're easily talking tens of thousands of dollars for Sears' counsel to look through 200 files and determine what needs to be disclosed.  But worse than that, if there is any merit whatsoever to the allegations of systemic practices, then disclosing the necessary documents would be lethal.  The plaintiff (actually, plaintiffs) are suddenly in a very good bargaining position.

That being said, it still seems half likely to me that there may be some more motions to be fought over productions, if Sears wants to play hardball.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Settlement Privilege...or Not

It's often said that lawyers slap "Without Prejudice" on the top of just about any correspondence, where it isn't usually necessary.

It's true, technically, but not a bad practice generally.  What "Without Prejudice" means is that any offers in the letter are not binding if the terms of the offer are not accepted.  So if I'm suing you for $250, and I offer to settle for $200 on a "without prejudice" basis, and we still end up going to trial, you can't say, "Wait a second, I thought you were only going after $200 now."  In fact, you can't even show that offer to the Court before the decision is made on the merits - it's a privileged document, subject to what we call "settlement privilege".  The legal system wants settlements.  Settlements are cost-effective for the parties and for the system, and so we don't want parties to have to worry about what they're saying in settlement discussions, concerned that it will be thrown back against them in Court.  We want full and frank conversations toward settlements, so we protect settlement discussions from disclosure.


The funny thing about the words "Without Prejudice" is that settlement discussions are presumptively privileged, so the addition of the phrase does nothing.  Documents to which the privilege doesn't properly apply will not be privileged despite the use of the words.  Still, we use them to make the point clearer.  Sometimes, even when the whole letter is marked "without prejudice", I'll still highlight that a particular concession is being offered on a strictly "without prejudice" basis, so that there can be absolutely no confusion on the point - I'm not necessarily agreeing with you about this, but let's put that disagreement aside for now.

And sometimes, even documents which would normally be privileged can still be relevant.  This was a dispute in a recent Galea v. Wal-Mart Canada Corp. decision.  Ms. Galea is suing Wal-Mart for wrongful dismissal, and her pleadings essentially argued the following:  Before Ms. Galea's employment was terminated, there were a series of discussions, including letters marked "without prejudice", in which the employer gave her ultimatums, that she could accept a different position, or could accept a particular severance package.  Ms. Galea is claiming bad faith damages, based in part upon these discussions.

Wal-Mart brought a motion to strike these portions of her pleadings, because of settlement privilege.  The Court does not fully decide the dimensions of privilege, and appears to leave that for the trial judge, finding that the pleadings can be amended to omit the details of the settlement offers which would be privileged.

Bad faith is often a point where settlement privilege can come into controversy.  It is not unusual for bad faith to be alleged regarding matters relating to offers to settle, and one can easily imagine cases in which this is accurate.  I once had an employee consult me on a release her employer was asking her to sign, offering to pay her an amount which I determined was exactly the statutory minimum.  The release was asked to be returned no later than the day before the employer was legally obligated to pay the stat minimum.  I can't believe that's a coincidence - that could potentially have created a bad faith argument.  On the other hand, in cases where an offer is a reasonable approximation of the employee's entitlements, it is hard to imagine a successful bad faith argument being made based on an offer to settle.

One thing that I see quite frequently, which is absurd almost to the point of humour, is a "without prejudice" termination letter.  Basically, the employer calls in the employee to the termination meeting, advises them that they're being terminated, and hands them the termination letter which is marked "without prejudice" because it contains a proposal to satisfy the employee's entitlements.

It's the termination letter(!).  You can't fire somebody on a "without prejudice" basis, so it could be difficult to keep that letter out of evidence.  No, far better practice is to provide a termination letter telling the employee what is happening, regardless of all else - they're fired, they're getting their stat minimums, etc. - and then provide a supplementary document, marked "without prejudice", containing the proposal for a full and final resolution of all matters outstanding.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Wednesday, December 14, 2011

Layoffs in Non-Union Contexts

An unusual case came out from the Ontario Superior Court of Justice recently, McLean v. The Raywal Limited Partnership, where the core question, as the Court puts it, is "whether the plaintiff was laid off or dismissed".

This is strange, and rare, because the terminology of a "layoff" doesn't usually properly apply outside of union settings.  Yes, people will often use the term "layoff" to describe a dismissal due to reasons of business restructuring, thinking that "fired" or "dismissed" implies that there was misconduct, but that's not really a fair distinction where there are no unions.  People are fired for just cause, or not for cause.

At law, the best way of seeing the distinction between a layoff and a dismissal is that a layoff contemplates the recall of the employee.  And, in fact, the Employment Standards Act, 2000 has provisions dealing with temporary layoffs of limited durations, but that doesn't mean that they're available in every employment situation.  The employer needs to reserve the right in an employment contract.  As the judge put it in McLean, "In the absence of a contractual basis for layoff, the device of layoff does not exist at common law and any purported layoff will be, in fact, a dismissal."

In this case, in 1998 Natalie McLean was hired by Raywal.  Raywal had an employee handbook which included layoff provisions, but it was not integrated into her written offer of employment.  It was not referred to in the offer of employment, nor was she required to acknowledge in writing that it formed part of her contract.

I've talked about this before, usually in context of termination provisions:  Even if she received the handbook the day after accepting the offer of employment and read it and signed it, there would be a 'consideration' problem.  She wouldn't be contractually bound to it unless there's something of value passing in exchange for her agreeing to it.  (Other policies in an employee handbook are trickier - an employer has some rights to change the conditions of the work environment.  Hours of work, absenteeism and discipline policies, dress codes and decorum, use of office equipment...these are all things that the employer will be entitled to amend, within certain limits, unilaterally and on a regular basis.  The employee never really has a choice but to comply with these directions, and won't often be successful in arguing constructive dismissal on such bases.  But something permitting the employer to send the employee home without pay...that goes to the heart of the employment contract, and is not something that the employer will really be entitled to implement unilaterally.)

This case is a little more complicated than a simple consideration case, though, because McLean was laterally transferred to a different position in 2008, at which point she did sign a new contract which integrated the employee handbook.

In October 2010, McLean was told that she was being laid off, and given a recall date of June 27, 2011.  In late May, she was recalled, but she did not return to work.

So the question becomes whether or not the 2008 contract amendment was valid.  The judge found that there was no "obvious or certain improvement in compensation or terms of employment", and therefore no consideration.  (The employer argued that the provision of benefits through the layoff period was an improvement to her compensation package, but the judge understandably rejected that.  It would be a hard sell that saying "If we send you home temporarily, we'll leave your benefits in place" is a plus to somebody who is entitled not to be sent home.)

Therefore, McLean was dismissed and was entitled to pay in lieu of notice.  The judge found that no failure to mitigate was established, including by McLean not accepting an offer made on the eve of mediation in the litigation process, and awarded ten months' pay in lieu of notice.

My Thoughts

The decision largely makes sense to me, but I'm a little bit perplexed on the mitigation point.  It doesn't make clear when the litigation was commenced nor when, exactly, the offer on the eve of mediation was made, but while I can certainly understand the judge's reasoning dealing with the offer on the eve of mediation, I cannot understand how (or if) the judge dealt with the mitigation consequences of the original recall date or the notice of recall.

Given how the law of mitigation has developed, particularly after the Evans v. Teamsters case from the Supreme Court of Canada, failure to return following a recall notice, in most cases, would probably be considered a failure to mitigate.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Monday, December 5, 2011

Business Trips, Alcohol, and Criminal Charges

This weekend, when discussing current events, I had a question posed to me:  If two senior executives on a business trip get drunk on an airplane forcing the plane to make an unscheduled landing, resulting in criminal convictions and causing national embarrassment to the company, will they have any recourse if they are fired?

Of course, the question was a reference to this story.  Two employees of Research in Motion did exactly that, forcing an unscheduled landing in Vancouver en route to China.  They were charged with mischief, convicted (on guilty pleas), and sentenced to probation with restitution orders to the cumulative effect of over $70,000.  As far as I know, the employees haven't yet been fired, but they have been suspended pending further investigation.

So what's the answer?  My answer was that it will depend on the objective seriousness of the misconduct on the aircraft.  It sounds extremely serious, when the news reports are saying that it was necessary that they be physically restrained, and to land the aircraft at the nearest airport.  Certainly these are serious consequences, and such serious consequences will have a major impact on whether or not there is "just cause" for termination.  But if you read the news coverage carefully, you'll find scarce details as to what the employees actually did.  I often say that, when I read the news, I never assume I have all the relevant facts.  On what I have seen, even if it is all true, it still leaves open the possibility that the flight crew's reaction could have been an overreaction.

And really, there are two thoughts that might support such an inference:  Firstly, for the last decade in particular, airlines have been quite paranoid about security.  This is not a criticism; just an observation.  They will react harshly to any perceived security risk.  Secondly, the question arises as to how these two achieved such a state of intoxication aboard the aircraft?  Were they permitted to board already drunk?  Were they served the alcohol on the plane?  On the ground, we hold venues that serve alcohol to very strict standards - we expect a bartender, in a raucous and loud bar setting, to identify people who have had one too many and refuse to serve them more.  Is a flight crew not held to a similar standard?

One would also need to consider the objective seriousness of the conduct of each employee:  If one of them was acting in a way that caused a real threat to the safety and comfort of the other passengers, justifying the flight crew's response, but the other one was involved in less serious misconduct - say, egging him on - then it may well be that just cause may exist for one of them but not the other.

That being said, pleading guilty to the resulting offences might interfere with the employees' ability to successfully take such a position in subsequent civil proceedings.  To my mind, it is also an important factor that they were on a business trip.  Had it been two individuals on personal travel who happened to be employees of the same company, the analysis would be altogether different.  (Not to say that it couldn't constitute just cause, but the test would change.)


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Friday, December 2, 2011

Changing Existing Terms of Employment

I recently had a searcher find my blog a search term to the effect of "Can my employer change the termination clause in my contract?"

Which is an interesting question, and covers a broader range of issues of contractual changes.

The first thing I want to highlight is that every employee has a contract.  Even if there isn't a written contract, the very nature of the employment relationship is contractual.  Without a written contract, there's an oral contract.  Where certain terms aren't expressly set out, the common law will often read in implied terms.  So when I talk about changing contractual terms, I am talking not only about modifying an existing written contract, but also about implementing a new written contract for an existing employee who didn't have to sign a contract in the first place.

I am often surprised by employers who come to me for advice on the dismissal of an employee, who never implemented a written contract with termination language.  For some smaller and midsize employers, it's almost expected - they often can't be expected to realize the consequences of not having one, while knowing that implementing employment contracts will require them to spend money on lawyers.  Small and mid-size employers often cut me off when I start talking about "notice" and say something to the effect of, "Yeah, we know all about that; we have to pay [up to] 8 weeks, right?"  They are quite chagrined when I tell them No, that without a written contract limiting notice, they'll have to pay out on the basis of "reasonable notice", which can range in some cases as high as two years' salary (and higher in exceptional cases).  But even larger employers often don't have such contracts, and these I would expect to know better.

This is why I say that "A stitch in time saves nine" is very true when dealing with employers and legal fees.  Paying a lawyer at the outset for assistance in developing contracts and policies can seriously limit liabilities down the road.  And legal fees - if you have to resist a wrongful dismissal action, you'll face the prospect of legal fees on such a scale that make the fees associated with contract drafting look like pocket change, even without considering the actual liabilities to the employee.

Can an Employer Unilaterally Change an Employment Contract?

Lawyers never give firm Yes or No answers.  Law is kind of like science:  "Yes, supposing that preconditions a, b, and c, are met, with a range of error of z%."  So to a simple Yes or No question, I'm going to say "Sort of, but only if it's done right."

Let's suppose that you have a job.  Maybe you started it twenty years ago, maybe you started last week, maybe you just accepted the offer and have a start date two weeks from now.  Then your employer comes to you and says "Sign this contract".  The contract affirms all of your other entitlements and responsibilities in all respects - salary, benefits, sick leave, job functions, reporting structure, etc. - and then you come to this "Termination" clause, saying that the employer is entitled to fire you on provision of x weeks notice (or maybe it's a formula, or maybe it's keyed to the Employment Standards Act minimums).  You've never before agreed to such a term.  Maybe you have an existing contract that doesn't have that term, or maybe you don't have an existing contract, and were never told that you'd be required to agree to such a term.

But your employer tells you to sign it, and you're worried about what might happen if you don't, so of course you sign it.

Then, six months later, your employer comes upon hard times, and fires you.  Can your employer rely on that termination clause?

The answer is "Probably not".  Such a contract runs into the problem of "lack of consideration" - you didn't get anything in return that you didn't already have for signing the contract, so it doesn't meet the legal definition of a contract.

But what if there is consideration?  A small raise, a nominal bonus, a guarantee of a Christmas gift with a value of at least a peppercorn.  Then that problem disappears.  So if the employee signs it, there's a good chance that the contract can be relied upon.

Though that isn't a 'unilateral' change to the contract.  The employee is agreeing to it.  Perhaps the agreement feels forced, because the employee expects they might be fired if they refuse to accept it, but unless the contract is unconscionable or can be voided through other doctrines, then their agreement to it is binding.

What happens if the employee refuses to sign?

Well, the employer continues to be entitle to terminate at any time on notice in accordance with the existing contractual terms.  Refusing to sign is not misconduct that will justify a termination for cause, but neither will it trigger any protection from termination.  An employer is perfectly entitled to terminate on provision of notice in response to a refusal to agree to new contractual terms.

An employer has a limited entitlement to unilaterally change terms of the employment contract, but when we're talking about a termination clause, or significant changes to remuneration or job duties, that will often be beyond that.  So strictly speaking, an employer isn't entitled to unilaterally impose new terms.

But the employer can give notice of termination, and offer new employment on different terms.  This has to be done carefully, and may trigger certain liabilities...and if it's done wrong, may not work.  In one case, an employer was trying to get out of a 'golden parachute' termination clause, and gave the employee two years notice that the clause was being changed, then fired the employee when he refused to accept the change two years later.  On the facts of that case, the employer was found to have breached the contract and was required to pay out pursuant to the golden parachute clause.  So it's tricky, and needs legal guidance to do properly.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.