Considering Consideration: The Negotiation of Employment ContractsHolland v. Hostopia.com Inc., 2015 ONCA 762
The Ontario case of Holland v Hostopia.com offers a poignant reiteration of the common law rule which requires fresh consideration - something of value given to the other party when entering a contract - when an employer seeks to amend an employment agreement. If not, the contract may be void. This has run-off consequences for employers in determining the amount of notice required in terminating employees.
Mr. Holland was hired as the National Account Manager of Hostopia.com, and accepted a written offer of employment (the “written offer”) that stipulated that he would later have to sign an employment contract. However, it took the employer nine months to present Mr. Holland with an employment contract (the “employment contract”), which he signed.
The crux of the case involved determining the notice period applicable to Mr. Holland’s termination after 7 years of employment. The employment contract stipulated that notice was to be given pursuant to the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “Ontario ESA”). Mr. Holland was given the minimum notice provided for under the Ontario ESA. He sued for wrongful dismissal.
One of the bases of his suit was the relevant notice period for his termination. Specifically, the case centered on whether Mr. Holland was entitled only to the minimum notice period stipulated by the Ontario ESA, or whether he could avail of the common law period of notice, which did not limit his rights of recovery. Mr. Holland was most concerned to protect his right to commissions during the notice period. The Ontario ESA was silent on this point, but he would have significant recourse under the common law.
The issue came down to the validity of the employment contract. While initially upheld at trial, the Ontario Court of Appeal held that the employment contract had been voided, for two key reasons.
First, there were differences in the terms between the written offer and the employment contract. The employment contract doubled the periods of non-solicitation and non-competition. As such, the terms of both are inconsistent with each other. Second, there were no stipulations in the written offer regarding a notice period. Once signed, the written offer became a contract. This meant that, as a matter of law, it was an implied term of the written offer that Mr. Holland was entitled to reasonable notice under common law.
However, as noted, the employment contract provided only for the minimum notice set out in the Ontario ESA. As the Court held:
- There was no evidence of any discussion of the subject prior to [Mr. Holland’s] acceptance of the Offer Letter, no evidence that he was told that the Employment Agreement would contain terms inconsistent with the Offer Letter and no evidence that he agreed to waive his right to reasonable notice of termination when he signed the Offer Letter. Accordingly, the Employment Agreement introduced a new, very material term, into the existing contract of employment – a term to which the appellant had not previously consented and for which he received no consideration.
Given the inconsistencies, the employment contract was found to be a new contract and therefore had to conform to all the legal requirements of a contract. Absent fresh consideration, it was void, and Mr. Holland could avail of his rights and remedies under the common law doctrine of reasonable notice.
Lessons to Employers
This case offers a key lesson for employers, given the Court’s focus on fairness and prudent business relations – Canadian courts are willing to step in as a measure of employee protection. Employers should be cognizant of this when drafting employment contracts, and ensure that all terms are negotiated and fresh consideration given to the employee.
The comments contained in this eCaseNote provide general information only and should not be construed as legal advice or opinion. For more information or specific advice on matters of interest, please call our offices at (709) 579-2081.