Work constantly changes. Markets shift, businesses adapt, and employee roles evolve. Documenting this last facet—role evolution—can sometimes get lost in the shuffle, to the potential detriment of an employer. A recent Ontario appellate court decision has cast renewed focus on the need for diligent employment contract updates, especially when material changes to an employee’s role occur.
In Celestini v. Shoplogix Inc. (“Celestini”), the Ontario Court of Appeal applied the “changed substratum” doctrine to invalidate the termination provision in an employment agreement. Centering around a long-time Chief Technology Officer’s wrongful dismissal claim, the Celestini decision contained key takeaways employers—even employers here in BC—should keep in mind.
Take the Time to Write it Down
As stated above, work constantly changes. If these changes impact the material terms and conditions of an employee’s role—such as responsibilities, compensation, and/or duties—the original written contract may no longer be enforceable. An employer could have the most finely crafted employment contract that money can buy and still wind up with little but an expensive piece of paper.
An employee’s role evolution could may necessitate a revised employment contract. Failing that, an employer could seek a minor addendum to the contract or a written acknowledgment confirming an employee is still bound by the original contract. The minor administrative burden of taking this step could save the employer from major liability down the road.
Employers also should remember that fresh consideration may also be necessary when implementing a revised contract – legal advice should be sought to assess this issue.
The potential impact of not having an up-to-date contract could be significant—the Celestini case saw a $400,000 judgement against the employer. It is therefore advised that employers review employment contracts at least every few years (particularly for senior employees and those with long service time) to ensure they still accurately reflect an employee’s current role.
Contract Details Count
In Celestini, the Court specifically noted the original employment contract lacked a common contractual provision stipulating that existing terms and conditions will continue to apply throughout the employment relationship, notwithstanding changes to the employee’s title, duties or other employment terms (“a Changes Clause”). The addition of a Changes Clause, according to the Court, may have “averted the application” of the “changed substratum” doctrine.
It’s tempting to think of provisions like a Changes Clause as boring boilerplate things that we see at the end of contracts and kind of glaze over. Of course there is no guarantee that a Changes Clause will save a contract in every similar situation but as this case shows, the details can make a big difference.
For more information on these and other employment matters, please contact Matthew E. McCarthy of our employment group.