23 Mar What Happens If You Refuse to Sign an Employment Contract in Canada?
Your employer may ask you to sign a new employment contract if the company is being acquired, restructuring, creating new contracts that limit severance, or introducing new policies, compensation structures, or termination clauses. If you have just received a new employment contract, it is normal to feel hesitant about signing it – especially if certain sections of the contract seem concerning.
It is a good sign that you are taking the time to question what is included in the contract before signing and considering whether these conditions are right for you. Reviewing an employment contract carefully is extremely important, particularly because there is a possibility that your rights could be reduced or limited under the new terms and conditions.
For example, some contracts attempt to limit an employee’s entitlements to the minimum standards set out in the Employment Standards Act (ESA), which may be less than what you could otherwise be entitled to under common law.
In Ontario, an employer may request an employee to sign a new contract; however, employees generally cannot be forced or obligated to sign a new employment agreement. If an employee refuses to sign the contract, the employer cannot enforce the new terms unilaterally.
For an employment contract to be valid:
- Both parties must agree to the terms of the contract, and
- The contract must include consideration (something of value offered to the employee)
It is important to note that even a new contract or amendment must provide something of value to the employee in exchange for accepting the new terms. Examples of consideration include a pay raise, bonus, promotion, or additional benefits.
If the only “value” offered is simply the continuation of employment, this may not be sufficient consideration if the new contract places the employee at a disadvantage. This principle was reinforced in Kohler Canada Co v. Porter.
If You Refuse to Sign
Refusing to sign a new employment contract does not automatically mean you will be terminated. If you refuse to sign, the following scenarios may happen:
1: The Employer Negotiates New Terms
After you refuse to sign the contract, an employer may choose to negotiate new terms. During this process, you may request additional time to review the contract, seek legal advice, and propose modifications to certain clauses.
2: Employment May Continue Under Original Contract
If you refuse to sign and the employer does not attempt to impose or negotiate new terms, your employment may simply continue under your original employment contract.
3: The Employer May Decide to Terminate Your Employment
Employers in Ontario are generally permitted to terminate employment without cause. If this occurs, you may be entitled to reasonable notice, pay in lieu of notice, or severance (where applicable), based on your existing contract and common law entitlements.
If Your Employer is Pressuring You to Sign
If your employer has stated, “signing this contract is mandatory for you to keep your job”, “you have until the end of the day to sign”, or “everyone else has signed, why is this a problem for you?” – you may be experiencing unfair pressure to sign the agreement.
Even if your employer is making these statements, you have the right to take reasonable time to review the contract and seek legal advice prior to signing.
In situations where an employer is pressuring you to sign quickly or discouraging you from reviewing the contact carefully, it is important to proceed with caution. In some cases, this pressure may signal that the contract includes terms that are unfair or unreasonable. Seeking legal advice before signing can help ensure you fully understand your rights and obligations.
Constructive Dismissal Risks
If your employer attempts to implement new contract terms without your consent, and those terms significantly alter the employment relationship, this may amount to constructive dismissal.
A constructive dismissal occurs when an employer unilaterally makes a fundamental change to an essential term of employment – such as work hours, work location, compensation, or job duties – without the employee’s agreement. If any of these changes occur, the employee may treat the situation as a termination of employment and may pursue damages or severance where applicable.
If you have been asked to sign a new employment contract, it is important to fully understand how the new terms may impact your rights and entitlements before agreeing to them. Even contracts that appear reasonable at first glance may contain clauses that limit your rights under common law.
Having a lawyer review both your original and proposed employment contracts can help identify potential concerns, clarify your legal entitlements, and support you if negotiations are necessary.
If you have been asked to sign a new employment contract and want to better understand your rights, contact KCY at LAW by phone at 905-639-0999 to book your consultation today.