Changes from offer letter in final contract

Is a contract valid if it's different from the offer letter?

Brian Johnston

Question: Can the employer make significant changes between a signed offer letter and the final employment contract?

Answer: It is clear that any significant changes between a signed offer and the final employment offer are generally prohibited. This has generally been the law since Francis v. Canadian Imperial Bank of Commerce, where the Ontario Court of Appeal said:

“The law does not permit employers to present employees with changed terms of employment, threaten to fire them if they do not agree to them, and then rely on the continued employment relationship as the consideration for the new terms.”

In Francis, the employer made a written offer of employment to Trusty Francis on condition of obtaining a satisfactory reference. Francis accepted the offer and the satisfactory reference was obtained. When Francis arrived for his first day of work a few days later, he was given a document to sign entitled “Employment Agreement.” This document said the employer could terminate Francis without cause upon giving one month’s notice for each completed year of service, up to a maximum of three months’ notice. Some eight years later, Francis was dismissed. The Court of Appeal said the three months’ notice period found in the employment agreement was “a tremendously significant modification of the implied term of reasonable notice” that applied to the original terms of employment and additional consideration — something new in exchange for the new term or condition — was required to support such a modification of the original terms of employment.

More recently, in Hobbs v. TDI Canada Ltd., the Ontario Court of Appeal confirmed Francis as authority for the principle that additional consideration is required to bind an employee to a new term or condition. What is an example of the type of consideration required if an employer desires to make significant changes? In Hobbs, the court was clear that consideration is not simply a promise of continued employment.

Thus, continued employment with increased security of employment may, on the facts, constitute new consideration for new terms and conditions an employer seeks to rely on after an employment offer is signed.

For more information see:

Francis v. Canadian Imperial Bank of Commerce, 1994 CarswellOnt 995 (Ont. C.A.).
Hobbs v. TDI Canada Ltd., 2004 CarswellOnt 4989 (Ont. C.A.).

Brian Johnston is a partner with Stewart McKelvey in Halifax. He can be reached at (902) 420-3374.

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