This recent decision of the British Columbia Supreme Court touches on a fundamental principle of contract law: that a contract is not enforceable unless consideration (i.e. something of value, including promises to do something) has been given in exchange. Where there is an agreement between two parties and one of those parties is offering nothing to the other, then there is no enforceable agreement. In Matijczak v. Homewood Health Inc. (“Matijczak”), the issue was whether or not amendments to an employment contract made without consideration could be enforceable against the employee.
Ms. Matijczak was an employee of Homehood Health Inc. until her termination in 2020. She signed her first contract with Homewood in 2008. This contract provided Ms. Matijczak with pay at a rate of $60 per hour.
In 2012, Ms. Matijczak was told that she would be required to sign a new contract. This new contract provided Ms. Matijczak with pay at a rate of $50 per hour. Ms. Matijczak signed.
Then, in 2015, Ms. Matijczak was required to sign a second new contract. She signed this one, as well. She received no legal advice and was given no opportunity to negotiate the terms of the agreement. She was not even directed to the change the new contract made, which was actually quite significant. This new contract purported to take away Ms. Matijczak’s right to litigate matters related to her employment in British Columbia, instead requiring her to do so in Ontrio. Homewood argued that consideration was provided for this new contract because it enabled Ms. Matijczak to provide new services at a potentially higher pay rate.
Given the above, was there consideration sufficient to make the 2015 contract enforceable?
The Enforceability of the Contracts
Ms. Matijczak argued that the 2015 contract failed to provide sufficient consideration to support its amendments. Ultimately, the trial judge agreed, noting that the law in British Columbia requires consideration where an employer seeks to impose an amended employment contract with significant changes which are detrimental to the employee. The trial judge further noted that this principle is especially important in the employment law context given the typical inequality of bargaining power that exists between an employer and employee. This is further exacerbated in circumstances where the contract at issue involves an amendment to a pre-existing agreement. In that context, the employee is likely already dependent on the pay from their continued employment and is therefore more vulnerable. The trial judge further suggested that:
“… where the employer imposes an amended agreement on the employee, detrimental to the employee, without providing any actual benefit to the employee in the amended contract, the amendment likely does not reflect a true mutual bargain between them.”
There was no doubt, therefore, that Homewood was required to offer consideration to make their 2015 contract enforceable. They argued that they had. Unfortunately, the trial judge disagreed again. The fact that Ms. Matijczak could have potentially earned higher pay by providing the new services allowed under the 2015 contract, Homewood offered no actual promise that Ms. Matijczak would ever be assigned to this additional work and therefore no promise that she would ever earn any additional pay – there was only the possibility for this to happen, but no guarantee. This is not enough. As a result, the 2015 contract was unenforceable
Takeaway for Employers
This case stands as a reminder to employers that, when having employees sign an updated or amended contract, adequate consideration must be given in order to make that contract and its amendments enforceable. That fresh consideration must be more than the mere possibility that something new might be provided to the employee.