IT?IS?OFTEN assumed that an employer can unilaterally change the terms of a contract of employment, provided he gives reasonable notice of the change.
The changes that employers may seek to make may relate to termination benefits, pension rights and pay or to more immediate matters such as hours of work or place of work.
The English case of Bateman v Asda Stores (2010) decided that the right to vary may be reserved in the contract and if this has been done then the change can be made unilaterally. But what is the position where no right to alter has been reserved in the contract?
In the recent Canadian case of Wronko v Western Inventory Service Ltd.(2008) the Court of Appeal of Ontario had to consider the effect of an attempt by an employer to unilaterally alter a fundamental term of an employee’s contract of employment. The material facts of the case were:
Wronko was employed by the company under a contract that entitled him to two years’ salary on termination of employment. His employers delivered another contract reducing his entitlement from two years to three weeks’ notice or pay in lieu of notice for each year of employment, to a maximum of 30 weeks. Wronko rejected the new agreement. He was then given notice that the new agreement would start in two years. Wronko continued to work for the company during the two-year notice period and continued to reject the agreement.
After the notice period came to an end, his employers informed Wronko that the new agreement had come into effect and that if he did not accept it he would be dismissed from his employment. Wronko instituted proceedings for wrongful dismissal.
The trial judge held that the company had the right to unilaterally alter the termination provision in Wronko’s contract of employment and dismissed his claim. The Court of Appeal allowed Wronko’s appeal, holding that the employer did not have the right to unilaterally change a fundamental term of employment if the employee refused to accept the change.
Chief Justice of Ontario, Justice Winkler, delivering the opinion of the court, relied on a previous decision of the court in Hill v Peter Gorman Ltd.(1957) where McKay J. A. “held that mere continuance by an employee in employment does not amount in law to an acceptance by an employee of a unilateral variation of his contract by his employer”.
The Chief Justice said: “The basic premise underlying the individual contract of employment is that it continues as long as the parties agree. In common parlance, the employment of persons is “at will”, that is, either party has the right to terminate the employment relationship without cause. However, the use of the expressions ‘at will’ and ‘a right to terminate’ must not obscure the reality that the employer’s right to terminate an employee without cause is a breach of contract that carries with it consequences for the employer, both under statute and at common law. The use of these expressions also must not obscure the reality that an employer’s unilateral change to a fundamental term of an employment contract constitutes a repudiation of the contract.”
The Court went on to hold that if an employee refuses to accept an employer’s offer to alter the terms of the original contract and the employer allows the employee to continue working, the terms of the original contract remain in force. By permitting the employee to continue working, the employer acquiesces to the employee’s refusal to accept the change in the contract of employment.
I will return to this topic to discuss in greater detail the reasoning of the court.
• Cecil McCarthy is a Queen’s Counsel. Send your letters to: Everyday Law, Nation House, Fontabelle, St Michael. Send your email to [email protected].
