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Can I be forced to sign a new employment contract?
An employment contract in Ontario defines the legal relationship between an employer and an employee, outlining rights, responsibilities, and entitlements. As workplaces evolve particularly with remote and flexible arrangements, many employers are re-evaluating and replacing existing agreements. Understanding what can and cannot be changed in an employment contract is essential for both parties.
What is an Employment Contract?
In Ontario, an employment contract is a binding agreement that sets out the terms of employment. This includes compensation, hours of work, job duties, and termination terms. Courts rely on this contract when resolving disputes.
While the Employment Standards Act, 2000 (ESA) sets out minimum employment standards in Ontario, it does not mandate a fixed format for employment contracts.
Common Terms in Employment Contracts
Typical terms include:
- Minimum wage
- Overtime pay
- Public holidays
- Vacation with pay
- Notice of termination or termination pay
Employers have broad discretion to draft contracts that fit their business needs so long as the terms do not conflict with ESA minimums.
While written contracts are strongly advised, verbal agreements are also recognized under Ontario law. However, proving the terms of a verbal contract in a dispute can be difficult.
Can an Employer Change an Employment Contract?
Yes, but with limitations. Employees are not legally required to sign a new contract, and significant changes to essential terms can create legal issues.
When an employer changes a core term of the agreement (e.g., job title, pay, or location), it can nullify the existing contract and create a new one. This means:
- Employers must offer “fresh consideration” (e.g., a raise, bonus, promotion) when changing terms for existing employees.
- Employees should be cautious when presented with a new contract and are encouraged to seek legal advice.
The Ontario Court of Appeal’s decision in Wronko v Western Inventory Service Ltd. outlines the risks of unilaterally imposing new terms.
As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:
“Employment contracts shape the foundation of workplace relationships so whether you’re revising terms or being asked to sign a new agreement, it’s crucial to get it right. Our team helps both employers and employees navigate contract changes, ensuring compliance with the ESA and avoiding costly legal disputes.”
What Are the Options When Presented with a New Employment Contract?
1. Acceptance: The employee reviews, agrees to, and signs the new contract. The revised agreement now governs the employment relationship.
2. Rejection with Employer Persistence: If the employee rejects the new contract and the employer insists on enforcing it, a constructive dismissal may occur. The employee may sue for breach of contract.
3. Rejection with Status Quo Maintained: If the employee rejects the new terms and the employer allows the employee to continue under the original contract, the existing agreement remains in force.
4. Termination and Rehire: If the employer wants the new contract enforced, they may terminate the employee with proper ESA-compliant notice or pay in lieu, and rehire the employee under the new agreement. Skipping this step risks constructive dismissal claims.
Common Misconceptions
Some employers believe that after a set amount of time (such as two years on long-term disability), the employment contract is automatically frustrated. This is incorrect.
Courts consider several factors:
- Duration and severity of the illness
- Possibility of return to work
- Nature of the role
- Supporting medical evidence
There is no set timeline. Employers must act cautiously and consult legal counsel before taking action.
Probationary and Fixed-Term Contracts
Employers should also be mindful of probationary and fixed-term contracts. Poorly drafted or incorrectly applied probation clauses can lead to unexpected liabilities. These terms should be reviewed regularly and updated to reflect business needs and legal developments.
Legal Doctrine of Freedom of Contract
Ontario law upholds the freedom of contract, meaning no party can be forced into a contract. However, employment contracts must comply with ESA standards and not violate human rights protections.
How an Employment Lawyer Can Help
An employment lawyer can:
- Review or draft enforceable contracts that meet ESA requirements
- Provide legal advice on contract changes or employee terminations
- Assist with constructive dismissal claims
- Ensure proper consideration is offered when modifying contracts
Conclusion
Employment contracts are fundamental to workplace relationships in Ontario. Whether you’re updating agreements to reflect new working conditions or introducing changes to employee roles, it’s critical to follow legal procedures.
Employers must ensure:
- The ESA is respected
- Changes are supported by consideration
- Employees are given notice when required
Don’t wait for a dispute to arise.
Contact Achkar Law
If you are unsure about the legality of terms in an employment contract, our team of experienced employment lawyers at Achkar Law can help.
Call us today at 1-800-771-7882 or email [email protected]
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©
Workplace Law Topics
Employees: Constructive Dismissal, Termination With Cause, Wrongful Dismissal, Employee Contracts, Employment Disputes and Litigation
Employers: Employment Agreements, Employee Terminations and Layoffs, Labour and Employment Compliance