What steps are involved when changing an employee’s employment contract?

What steps are involved when changing an employee’s employment contract?

Sometimes there are shifts that occur in the workplace that prompt creating new employment contracts for some or all employees. Drafting new employment contracts must be done with precision and accuracy. Any mistakes could possibly lead to constructive dismissal claims, especially if the changes negatively impact the employee’s role.

An employment contract not only outlines the employee’s pay, expectations, and responsibilities; but it also includes the steps that follow possible, or inevitable, termination. The contract will include variables like termination notice, pay, and if a severance package is relevant under the circumstances. For example, an employee’s contract can outline, that when terminated, they are entitled to a minimum of 3 months of pay in lieu of notice meaning they will be paid the equivalent to three months’ pay instead of three months’ warning. It is the employer’s legal responsibility to provide this amount of pay-in-lieu of notice, and if abandoned, can expect a wrongful dismissal claim.

When an employer needs to make drastic changes to an employee’s contract, like altering their role, sending them to a new location, reducing wages, etc.; the court has characterized these alterations as a fundamental change. This type of change to a contract should be accepted by the employee for it to be legally reasonable. Without the consent of the employee, the employer could again, be subject to a constructive dismissal claim.

Additional to the consent of the employee, the employer must include a “valuable consideration” to accepting the new terms of the contract. In other words, when an employer decides to make a drastic change to an employee’s contract, there must be some incentive for the employee to agree to these changes.

If the employee does not accept these new terms, it is legally possible for the employer to make the decision to make the adjustment, nonetheless. This option is called a unilateral decision by the employer, where the consent of the employee is not necessary. There are situations where transitions in a workplace ought to be pursued, even if the employees aren’t in agreeance.

However, contracts are meant to be signify a mutual acceptance of the terms, not solely the opinion of one party. A unilateral change becomes more accepted if there had been written terms in the previous contracts enabling these changes to occur in the future. For example, if one of the terms of the original employment contract describes ways the employer can alter the employee’s work role and the employer has not strayed from these provisions, then these actions are legally acceptable.

For an employer’s unilateral decision to be reasonable, there is a specific methodology the employer should follow. First, the employer must provide sufficient notice to their employee that changes must be made. The employer must be clear that these modifications are necessary, and that the preceding contract is no longer viable. The employer could also offer the employee a job consisting of the new terms. And lastly, the employer must guarantee that no changes will be implemented until the employee’s notice period is over.

If you are an employer who wants to create new employment contracts, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.