Can An Employment Contract be Unilaterally Altered During A Period Of Notice?

Written on behalf of Arbesman Hamilton LLP

Employment contracts are used to spell out the responsibilities of parties involved in an employment relationship, giving each party a clear understanding of what they are obligated to do and entitled to receive. However, what if one party wants to make unilateral changes to an employment contract? And what if the employee affected has been given notice of termination? This is a question the Court of Appeal for Ontario recently had to address.

A Lengthy Period Of Notice

The employee worked as a salesperson for home and auto insurance and had been working for the employer for over 22 years when he received notice on July 24, 2007 that his position would be terminated on September 1, 2009. The employee accepted the notice period and planned to retire at that time.

However, over a year later, in October 2008, the employer sought to impose immediate changes to the terms of employment. The employer requested that the appellant close his neighbourhood office and move to an office operated by the employer by November 1, 2008. He refused and was terminated on November 6, 2008.

Trial Judge Rules In Favour Of Employer

At trial, the judge found the employee was properly terminated for cause, stating the employer was within its rights to impose new terms of employment and that the employee was given reasonable notice of the requirement to move his office.

Court Of Appeal Finds Fundamental Change

On appeal the court found the trial judge had erred in not determining whether the change in location could be made by the employer during the period of notice, or whether the contract allowed for unilateral changes. The employer argued before the court that the company’s Agent Compensation Agreement (the contract) did allow for the employer to require the employee to relocate.

However, the employee cited an amendment to the contract (The Neighbourhood Office Agent Amendment (NOA)), which he argued prevented the employer from unilaterally imposing changes to the contract that resulted in fundamental changes to the terms of employment.

The court agreed that the NOA precluded the employer from making fundamental changes to the employment contract during the notice period. Requiring the employee to move offices was more than just a geographic relocation. Instead, the court said it amounted to a fundamental change to his terms of employment.

The employee was awarded compensation for the balance of the notice period, from November 6 2008 – September 1, 2009. Additionally, the court awarded the employee for compensation on insurance policies that would have renewed during that time.

Arbesman Hamilton LLP represents both employees and employers in matters of employment law. We work with employers to produce contracts that void confusing language with the aim of reducing the nee for litigation. We can also help employees understand their contracts as well as whether they may be entitled to damages as a result of their employment rights being broken. Call us at 416-481-5604 or reach out to us online to schedule a consultation today.