Change often gives rise to a sense of excitement. Perhaps an employer is implementing a new vision statement, or implementing a new product or service. Expecting the employees to be equally excited, the employer changes the duties and expectations of its employees to remain consistent with that new vision, product or service. The sad reality is that the employer’s dream of moving its organization to a higher level may end up turning into a nightmare. It is not unusual for employers to have a clause in their employment contracts which purports to limit the amount of notice or pay in lieu of notice (that generally needs to be given to employees terminated without cause) to the minimum entitlements under the Employment Standards Act, 2002. If enforceable, such a clause can save the Employer from having to provide the much higher amount of notice or pay in lieu of notice required by the common law. Considerations of constructive dismissal aside, changes to the duties and expectations of employees might result in the employer vitiating such termination provisions with disastrous consequences.
An example of change going wrong can be seen in Schmidt v. AMEC Earth & Environmental. In that case, the terminated employee received numerous promotions during the course of his employment, which employment ended in 2003. During the course of about 16 years, the employer never made mention of, or sought to alter, the employment contract (signed by the employee in 1987) to reflect changes to the positions held by the employee or changes to the employer’s name.That employment agreement purported to limit the amount of notice to be given to the employee upon termination to 150 days. Citing the Ontario Court of Appeal decision in Irrcher v. MI Developments Inc., the Court ruled that the contract no longer applied, given the significant changes in the employment relationship which had occurred since the contract was signed. The employer was ordered to pay 22 month’s notice (which exceeded $200,000), plus costs.Aside from substantial changes to the employment relationship, there are many other ways by which employers can invalidate a contract that attempts to limit the notice or remuneration in lieu of notice that needs to be provided to an employee upon termination.The Schmidt case serves as a reminder to employers that they should, among other things, have their employment contracts reviewed by counsel prior to being signed and periodically afterwards (especially when changes are about to occur to the employment relationship) to ensure that they still accord with their expectations.
2 St Clair Ave West
