Unilateral Variation of Employment Contract

Where an employer tries to vary an employment contract unilaterally the employee has several options. Critically, unless accepted, the unilateral variation is not binding.

Today's Court of Appeal decision in Wronko v. Western Inventory Service Ltd., 2008 ONCA 327 makes this clear and holds as follows:

[33]          In the cited passage, Mackay J.A. identifies three options that are available to an employee when an employer attempts a unilateral amendment to a fundamental term of a contract of employment.   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", as discussed in Farber, although this term was not in use when Hill was decided.

[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 fulfill 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 employment 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." 

...

[41]          This result, in my view, is in accordance with the views expressed by employment law scholars.  Ellen Mole in Wrongful Dismissal Practice Manual, vol. 1, 2nd ed., looseleaf (Markham, ON: LexisNexis Canada Inc., 2006) at 3-1 states that: "Once a contract of employment has been formed, neither party has the right to unilaterally change a significant term of the contract, unless both parties agree to the change."  She goes on to cite the passage referred to above from Hill v. Gorman identifying the three options that are available to an employee when an employer attempts to unilaterally alter the employment contract. 

[42]          Similarly, the authors of Employment Law in Canada, vol. 2, 4th ed., looseleaf (Markham, ON: LexisNexis Canada Inc., 2005) note at 13-16 that management "can only make lawful unilateral changes if it precedes them by serving due notice of termination", in which case "it could be said that the employer has given proper notice that employment is to end but has coupled it with an offer of re-engagement on the changed items, which the employee can accept by continuing to work under the new terms."[5] 
James Morton
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