In Braiden v. La-Z-Boy Canada Limited, 2008 ONCA 464 the Ontario Court of Appeal has ruled that an employer who wants to change the termination provision of a contract of employment (from reasonable notice to a fixed notice period) must provide some benefit to the employee in exchange for that change.
In that case, Gordon Braiden had worked for LaZ-Boy Canada Limited for almost 23 years when La-Z-Boy ended the employment relationship. He began without a contract, and then in 1997 was told to sign a contract with a 60-day notice period.
Mr. Braiden successfully sued La-Z-Boy for wrongful dismissal, and the Court of Appeal upheld that decision.
Braiden was an employee, not a contractor
The Court of Appeal stated that where an individual is providing services pursuant to an agreement, the fact that the individual is paid through his or her corporation is not determinative of whether an employment relationship exists with the individual. In light of the circumstances of Mr. Braiden’s activity with La-Z-Boy, he was an employee and not a contractor.
Enforceability of notice provision
Mr. Braiden thought that he needed to “sign or lose your job”. In 1997 the Court of Appeal concluded that this consideration did not mean that the new contract was valid. If an employer provides consideration beyond mere continued employment, the employee maybe bound by the modified terms of the agreement. That can include some assurance of enhanced security of employment. However, there was no evidence that Mr. Braiden received anything that might be considered to amount to “enhanced security of employment”. Mere continuance of employment is insufficient.
La-Z-Boy also argued that Mr. Braiden received beneficial tax treatment as a result of the 1997 change to his contract (that began paying him as a corporation). The Court of Appeal concluded that this benefit was also not consideration that would support a change to the contract. The benefit arose as a result of favourable tax treatment and was a collateral or incidental result of the Agreement. It was not consideration that flowed from La-Z-Boy to Mr. Braiden. Rather, it was a benefit that flowed from the tax authority as a result of the taxing statute.