When someone is hired, there is an agreement between the employer and the employee. This agreement sets out the terms and conditions of employment. In simple terms, it outlines the services the employee will provide the employer, and the compensation the employee will receive for providing those services.
The general rule for employers changing the employment contract is if there is a unilateral amendment made, there must be new consideration offered to the employee. This means the employer must give an additional benefit (ex. more money) to the employee for the change.
If an employer changes a fundamental aspect of the employee’s job without the consent of the employee, this can constitute a constructive dismissal. A constructive dismissal entitles an employee to their termination rights, including notice pay.
An employer cannot change the employment duties without the employee having a right to a constructive dismissal claim if:
- The changes were significant;
- Changes not agreed upon by the employee;
- The employer knew the changes would push the employee to quit their job;
- There were no valid business reasons for the change in role; or
- The changes were not explained to the employee.
When an employee faces a situation like the above, they have the following options:
- The employee can consent to the changes explicitly or implicitly by continuing in the role;
- The employee can reject the changes by leaving, and file a constructive dismissal claim; or
- The employee can reject the changes and continue in their current role but risk termination if the changes were mandatory for the business.
What if the Employment Contract Allows for the Employer to Make a Unilateral Change?
In the Farber Supreme Court of Canada (SCC) decision, the court dealt with the issue of whether the employer can make a unilateral change to terms of employment if the employment contract language allows for it. Employment contracts are presumed to be between parties with unequal bargaining power. Highly unreasonable contractual terms may be unenforceable as a result. However, the SCC decided that unilateral changes to the terms of employment will not be a change to the contract itself, but rather an application of the contract. The extent of what the employer can change without the employee’s consent will depend on the language of the provision in the employment contract.
In both the Bond and Churchill cases, the court ruled in favour of the employer unilaterally changing the commission structure because the employment agreement permitted adjustments to the employee’s compensation. However, an employer cannot always rely on the language of the employment contract to make fundamental changes to the terms of employment. In the Belton decision, the Ontario Court of Appeal decided on the basis of policy reasons that the employer could not unilaterally change the terms of employment despite the existence of explicit language allowing for it. The court reasoned that the bargaining power between the employee and employer is inherently imbalanced, unlike a commercial agreement, for example.
Main Takeaway
Unless the employment contract states otherwise, an employer cannot unilaterally change the employee’s terms of employment without providing fresh consideration (ex. compensation, reduced hours, new benefits, etc.). If the employee does not accept the unilateral changes, a constructive dismissal claim is possible.
Even if the employment agreement does explicitly provide the employer with the power to unilaterally change the terms of employment, a court may find the clause to be unenforceable if it is too broad in scope. The narrower the clause is, the more likely it is a court will enforce it. The court will consider the nature of the employment relationship, the specific language in the contract, and the significance of the unilateral change in deciding whether the provision is enforceable.