June 2, 2016 By: Karine Dion

Contract law at its most basic involves an offer, an acceptance of that offer, and consideration that must flow both ways.

For example, when you start a new job, you’re generally provided with either an offer letter or an employment contract to sign. This letter/contract is the offer. Your signature at the bottom of that document signifies your acceptance of that offer. The job and the responsibilities you will be performing, in exchange for your salary and other benefits to which you may be entitled, is the consideration that flows between you and your new employer. But what happens when you have already started working and your employer provides you with a new contract to sign? Can they rely on this new contract?

This question was examined by the Ontario Court of Appeal in the 2015 case of Holland v. Hostopia.com Inc.. Mr. Holland signed an Offer Letter, thereby accepting its terms, at the commencement of his employment. This Offer Letter clearly stated that he would be required to sign an Employment Agreement, but he wasn’t provided with this document until nine months after having started in his position. Nevertheless, he signed it. Seven years later, his employment was terminated without cause and he was paid his statutory minimums according to the Employment Standards Act, 2000 (“ESA”), in addition to his commissions and accrued vacation, all in accordance with his Employment Agreement. But could his employer rely on this agreement? No.

Mr. Holland’s Offer Letter described the essential terms of his employment, such as salary, commissions, benefits and vacation. Once accepted, Mr. Holland’s offer letter constituted a complete contract of employment. This letter said nothing about notice of termination; therefore, it was an implied term of this letter that, should Mr. Holland be terminated without cause, he would be entitled to reasonable notice (which is much more generous than ESA minimums). This must be compared with his subsequent Employment Agreement, which limited him to his minimum entitlements under the ESA. 

By limiting Mr. Holland to his ESA minimums, the Employment Agreement introduced a new, very material term into the existing contract of employment. There was no evidence that Mr. Holland had previously agreed to this term or that it was ever discussed prior to him being presented with his Employment Agreement. Therefore, without fresh consideration flowing to Mr. Holland, his Employment Agreement could not displace the implied term of reasonable notice contained in his Offer Letter.

The Court of Appeal held that this was the proper conclusion, even though Mr. Holland read the Employment Agreement, understood its terms, was under no duress when he signed, and knew he could discuss this agreement with a lawyer prior to signing it.

This is not an unusual circumstance. If you have already agreed to terms of employment and/or have already signed an offer letter or employment contract, and your employer is asking you to sign another such document, you should consult an employment lawyer to know whether this new document will be deemed binding, because in some circumstances, unlike the above case, it will be.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2018 Nelligan O’Brien Payne LLP.

Service: Employment Law