In our practice the question of whether an employment contract is still enforceable comes up often. This usually happens around terminations — whether we are advising a recently terminated employee or helping an employer prepare for a termination, the question of whether dated contract provisions can be relied upon is crucial. Assuming that the contract is otherwise valid, the entire contract may be obsolete if the employee’s role has changed significantly since the time the contract was signed.
What renders a contract obsolete?
Significant changes to an individual’s employment can render an old contract void. Changes a court may consider significant are:
- Significant changes to title or position
- Increased responsibility
- Major compensation changes
- Changes to reporting relationships
When these changes are numerous and significant enough it can be said that the “substratum of an employment contract entered into at the time of original hiring has disappeared or it can be implied that that contract could not have been intended to apply to the position in the company ultimately occupied.” Thank you, Justice Robins — writing for the majority of the Ontario Court of Appeal in Wallace v. Toronto-Dominion Bank.
A contract may no longer apply if the employee’s role now looks very different from that which they were hired into. A court may determine that the change to the role was not contemplated when the contract was entered into and therefore the parties could not have intended the contract apply to the new role.
Changes to the law, such as increased employee leave and vacation entitlements under the Bill 148 changes to the Employment Standards Act may also have the effect of rendering a contract unenforceable. An obsolete contract is something additional to watch out for as employees change roles and progress in an organization.
If you are concerned that your employees’ contracts are out of date, or obsolete, contact us for a contract checkup. We can help you figure out if new contracts are necessary and the right steps to take to introduce them to existing employees.
