Updating or implementing terms is not as simple as handing over a new agreement to sign
Exclusive to Canadian HR Reporter from Rudner Law.
A dismissed employee may be entitled to up to 24 months of common law notice or as little as their statutory minimum entitlements, usually one week of notice per year of service, capped at eight weeks.
The most effective way to limit the employee to their statutory minimum entitlements is to implement a properly drafted and executed employment agreement.
However, as case law evolves, older agreements may become unenforceable, requiring updates to remain compliant. Updating or implementing terms is not as simple as handing over a new agreement to sign. If revised terms reduce existing employee rights, the employer must provide fresh consideration: something of value given in exchange for the employee's signature on the new agreement.
In Chowanetz v. Ivor Forest Products Ltd., the B.C. Supreme Court showed that failing to provide fresh consideration can turn six weeks of notice pay into six months.
Background of case
James Chowanetz began employment in November 2020 under an agreement with annual wage reviews but no clause limiting termination notice.
In November 2024, the employer had him sign a new contract containing an entire agreement clause and a termination provision limiting entitlements to statutory minimums under the Employment Standards Act, plus one week of base salary.
Upon his dismissal in October 2025, Chowanetz sued, arguing the updated agreement was unenforceable for lack of consideration.
The trial
The employer claimed it provided three forms of fresh consideration: a wage increase from $35.00 to $38.50 per hour, an RRSP matching program, and a bonus program.
Under contract law, binding amendments require fresh value passing to the employee beyond existing entitlements; continued employment alone is insufficient.
The court held that the employer failed to establish fresh consideration for several reasons:
Entire agreement clause: Neither the RRSP program nor the bonus was mentioned in the agreement. The employer could not rely on unmentioned benefits while enforcing an entire agreement clause that excluded them.
Pre-existing obligation: The wage increase fulfilled the employer's earlier promise to conduct annual wage reviews, representing a pre-existing contractual obligation rather than new consideration.
The court noted that Chowanetz’s initial employment agreement included a commitment to an annual review to ensure his wage remained competitive. Despite this, the employer had not conducted reviews in 2022 or 2023. Consequently, the court found that the wage increase merely fulfilled what the employer had already promised — a contractual wage review to ensure earnings aligned with market rates — and therefore did not constitute fresh consideration.
The termination provision was deemed unenforceable, and Chowanetz was awarded six months of pay in lieu of notice.
Why this matters
Mid-employment contract revisions must be treated as genuine exchanges of value, not administrative tasks.
Before asking an existing employee to sign a new agreement that limits termination rights, employers should consider the following:
- Identify the exact new benefit: The employee should receive a real and identifiable advantage beyond existing contractual and statutory entitlements.
- Tie the benefit to the signature: The correspondence and agreement should make clear that the new benefit is being provided in exchange for accepting the revised terms.
- Put the consideration in the agreement: Do not rely on separate emails, policies, or oral assurances that are absent from an agreement containing an entire-agreement clause.
- Confirm that the benefit is actually new: A promised wage review, an existing entitlement, or a benefit already offered to all employees may not be sufficient.
- Keep the paper trail consistent: Conflicting offer letters, benefit descriptions, and integration clauses can undermine the employer's position before a court ever reviews the wording of the termination provision.
Conclusion for HR
The best time to establish the written terms and conditions of an employee's employment, including their entitlements on dismissal, is at the time of hire.
However, an employee's role can change over time, as can the law. Sometimes an employer allows an employee to start working without a written employment agreement or the employee's employment agreement may not dislodge their entitlements to reasonable notice at common law. In each of these instances, it can be in the employer’s interest to introduce a new or updated employment agreement to solidify the terms and conditions of employment.
This must be provided in exchange for the employee receiving something of value. The employment agreement should clearly state what the employee is receiving and specify that receiving it is contingent upon signing the agreement.
Chowanetz serves as a practical warning of what can go wrong when an employer fails to follow these steps. It is possible that the new employment agreement would have been enforceable had the employer explicitly stated that Chowanetz would be eligible for the RRSP plan if and only if he agreed to sign the new agreement.
Because it failed to do so, Chowanetz, who would have been limited to six weeks of pay in lieu of notice under the agreement, was awarded six months of pay in lieu of notice. The additional length of notice is the price the employer paid for failing to follow proper procedure.
Geoffrey Lowe is an associate lawyer at Rudner Law in Toronto. He can be reached at (416) 864-8500 or [email protected].
