Special facts for altering contracts
IN?CONSIDERING cases in which an employer has attempted to unilaterally alter the terms of a contract of employment, one must always pay special attention to the facts.
For example, is the term a fundamental term of the contract? Is the term one that will take effect immediately or will it only impact on the employee in the future? Was the employee invited to sign as accepting the altered provisions and did he sign to that effect?
All the above can potentially impact the decision of the court.
In arriving at its decision in the case of Wronko vs Western Inventory Services Ltd (2008), the decision of the Court of Appeal discussed in last week’s article, the court made it clear that it was considering a situation in which an employee was registering an unequivocal objection of an intended fundamental change to the terms of his employment and where the employer permitted him to continue to work according to the existing terms without giving notice that refusal will result in termination.
The Chief Justice, who gave the decision of the Ontario Court of Appeal, referred to a previous decision of the court in Hill vs Peter Gorman Ltd (1957) and referred specifically to a passage from Mackay J.A. in which he identified three options that are available to an employee when an employer attempts a unilateral amendment to a fundamental term of a contract of employment.
He then said to these options:
“They may be summarized as follows.
34. “First, the employee may accept the change in the terms of employment, either expressly or implicitly through apparent acquiescence, in which case the employment will continue under the altered terms.
35. “Second, the employee may reject the change and sue for damages if the employer persists in treating the relationship as subject to the varied term. This course of action would now be termed a “constructive dismissal”. . . .
36. “Third, the employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond to this rejection by terminating the employee with proper notice and offering re-employment on the new terms. If the employer does not take this course and permits the employee to continue to fulfil his or her job requirements, then the employee is entitled to insist on adherence to the terms of the original contract. In other words, if the employer permits the employee to discharge his obligations under the original contract, then – unless proper notice of termination is given – the employer is regarded as acquiescing to the employee’s position. As Mackay J. A. so aptly put it: ‘I cannot agree that an employer has any unilateral right to change a contract or that by attempting to make such a change he can force an employee to either accept it or quit’.”
The Chief Justice then observed that the case under consideration was in the third category above and continued:
39. “Western gave notice in September 2002 of its intention to amend the termination provision of Wronko’s employment contract effective September 2004. This notice constituted a repudiation of the contract. In response, Wronko gave clear, unequivocal and repeated notice from September 2002 until September 2004 that he refused to accept the new termination provision. In other words, he did not choose to attempt the employer’s repudiation of the contract and sue for damages, as would be the case in a constructive dismissal situation. Despite Wronko’s refusal to agree to the new termination provision, Western permitted him to continue in his employment according to the existing terms of his contract.
40. “Having been made aware of Wronko’s opposition to the new contract in September 2002 and his continued opposition thereafter, Western had two choices: it could advise Wronko that his refusal to accept the new contract would result in termination and that re-employment would be offered on the new terms. If Western were to take this position, the termination provision in the December 2000 contract would be triggered. Alternatively, Western could accept that there would be no new agreement and that Wronko’s employment would continue on the existing terms. Having failed to choose the former course, Western must be taken to have acquiesced to Wronko’s position and to have accepted that the terms of the existing contract remained in effect. Western’s decision to terminate Wronko in September 2004 thus carried with it the consequence that Wronko was entitled to two years termination pay pursuant to the terms of his existing employment contract.”
Wronko’s case must be considered on its own special facts. The issue of acquiescence by conduct has been discussed in other cases, and in next week’s article I shall consider one of those cases.
• Cecil McCarthy is a Queen’s Counsel. Send your letters to: Everyday Law, Nation House, Fontabelle, St Michael. Send your email to [email protected]