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  • Karoline Verdi
    Participant
    Post count: 2

    Hi there,

    Our company acquired couple companies backs in 2015/2018 and we have never renewed acquired employees contracts.
    What would be the best way to approach this many years after acquisition?

    Thank you

    Rick Tobin
    Keymaster
    Post count: 40

    An employment contract can be understood as any other contract (for example, a service contract, agreement of purchase and sale, etc.). Therefore, it is helpful for both employees and employers to understand the basic requirements of an enforceable contract. There are three basic components needed to form a valid contract.

    Offer – Company A is offering Employee B employment.
    Acceptance – Employee B accepts the offer of employment.
    Mutual Consideration – Company A receives the value of an employee and Employee B receives the value of payment.

    The above components also apply when amending an existing employment contract. An employer cannot unilaterally change the terms of an existing employment contract without providing an offer, the employee’s acceptance of the offer, and new consideration. New consideration means that both parties are receiving something new of value in exchange for the amendment.

    An employer may seek to revise an employment contract for various reasons such as updating the termination clause, revising the pay structure, changing the hours of work, etc. Typically, the change proposed is one that is beneficial to the employer. An employment contract cannot be changed solely because the employer revises the contract and the employee signs it. In order for the new contract to be enforceable, there must be a third component – mutual consideration.

    In order to have an enforceable revision to the employment contract, both parties must receive new consideration. Both the employer and the employee must be receiving something of value that they were not already entitled to before.

    This means that the employer cannot continue to rely on the value of providing employment to the employee, rather, they must give an additional benefit.

    An employee can decide not to accept a change to an employment contract if they are not agreeable to the revision presented by the employer. In the event that an employee does not want to accept the proposed changes, there are two possible outcomes.

    1. The employer decides to abandon the proposed change or revise the change in a way that is agreeable.
    2. The employer is not willing to abandon the change and there is no agreement.

    If an employer is hoping to propose an amendment to an existing employment contract, the employer should present the employee with the proposed change and inform the employee that the existing employment contract will terminate following the necessary notice period.

    The employee will then have the opportunity to accept the new terms of employment or decline the change. If the employee is not willing to agree to the amendments, the employer will then terminate the employment contract by providing the necessary notice period or pay in lieu of notice.

    Employers should be careful to ensure that they are providing the necessary notice period as per the applicable employment standards legislation and/or common law in order to mitigate the risk of a potential constructive dismissal claim.

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