Employment agreements are sometimes treated as “set it and forget it” documents, but in reality their enforceability can be affected by changing laws and shifts within your business. Failing to update them properly can leave your organization exposed to significant legal and financial risk.
That’s the focus of a recent webinar with employment lawyer Negeen Yazdani of Emond Harnden LLP, who emphasizes that updating employment agreements is not just a best practice – it’s a legal necessity.
When should employers review agreements?
Employment agreements should not remain static. In many cases, once-solid agreements can become partially – or even fully – unenforceable over time. For example, in 2021, the Ontario Employment Standards Act was amended to largely prohibit non-compete clauses.
There are three primary reasons why you need to schedule a regular review:
- Legislative changes: Regular, ongoing amendments to employment standards legislation can render certain clauses invalid.
- Evolving common law: Court decisions can shift how key provisions are interpreted and enforced.
- Changes within the business or role: Promotions, new responsibilities, changes to work arrangements, or restructuring can impact employment terms.
The most common – and costly – mistake
One of the biggest pitfalls employers encounter is failing to provide “fresh consideration” when changing an employment agreement.
Fresh consideration means that in order for an updated agreement to be enforceable, something of value must be exchanged between the parties. This could be a salary increase, a bonus, additional vacation time, or another tangible benefit. Without this exchange, a revised agreement may not hold up if challenged.
A critical misconception is that continued employment is enough. It isn’t.
As Yazdani explains: “the promise to continue existing obligations that an employee has to perform under the existing contract is insufficient as valid consideration; instead, there must be something new to bind the parties.”
The risk of constructive dismissal
Beyond enforceability, employers must also be mindful of constructive dismissal. This occurs when an employer makes unilateral changes to fundamental terms of employment – such as compensation, job location, or core responsibilities — without the employee’s agreement.
“If an employee is required to relocate from Ottawa to Vancouver – even where there may be fresh consideration, such as an increase in salary – this can still trigger a constructive dismissal claim,” Yazdani explains. “In such cases, the employee may treat the contract as terminated and pursue severance or damages.”
The key to mitigating this risk lies in how changes are introduced. Employers should ensure that:
- Changes are clearly presented as an offer, and not imposed unilaterally.
- Employees are given time to review and consider the proposal.
- There is clear and explicit acceptance from the employee.
Handled properly, these steps help demonstrate mutual agreement and reduce the likelihood of disputes.
The takeaway: Always keep employment agreements up to date
Employment agreements are a critical tool for managing risk, but only if they are properly maintained. Employers who fail to update agreements carefully may find themselves facing unenforceable clauses or costly claims.
For employers, the message is straightforward: Review agreements regularly, introduce changes thoughtfully, and ensure that every update is supported by fresh consideration and clear acceptance.
For a deeper look at how to implement changes and avoid common pitfalls, watch the webinar with Emond Harnden LLP’s Negeen Yazdani, where these principles are explored in practical, real-world terms.
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This article is intended to provide readers with general information only. It should not be regarded or relied upon as legal advice or opinion. Accessing, reading, relying on or otherwise using this article does not, under any circumstances, create a lawyer-client relationship between you and Emond Harnden.
