An unfortunate reality for many Canadian employers is that our common law legal system consistently moves the goalposts for what is considered enforceable language in an employment agreement.
The result is an employment agreement compliant with applicable legislation 5 years ago, may not withstand a judge’s scrutiny in a courtroom today.
To remain compliant with constantly evolving employment law standards, employers have the option of presenting their employees with updated employment agreements with terms that align with current legal precedent.
However, the recent British Columbia case of Chowanetz v. Ivor Forest Products Ltd., 2026 BCSC 1760 reminds us that ensuring an employee’s new employment agreement is enforceable is not as easy as putting the contract in front of them and asking them to sign. Instead, the employer must offer fresh and viable consideration to their employee in exchange for signing the new agreement.
The Case
In Chowanetz, an existing employee was presented with a new employment agreement inclusive of a termination clause restricting the employee’s entitlements at termination to the minimum requirements of the British Columbia Employment Standards Act.
When the employee was let go, they sued their former employer for wrongful dismissal, arguing the termination clause in their new agreement was not enforceable because they did not receive valid consideration in exchange for signing.
The employer argued the employee did receive consideration in the form of a raise, and eligibility to participate in an RRSP and bonus programs.
The Court held the eligibility for participation in the bonus and RRSP programs were separately negotiated and not referenced in the new agreement. As such, they did not represent new entitlements. Instead, the employee would have been eligible to these entitlements regardless of whether they agreed to sign the new agreement.
The Court then considered whether the wage increase represented fresh consideration. A major point of the Court’s focus was on language contained in the employee’s previous employment agreement which stated: “Our intent is to build a long-term relationship that is productive and mutually beneficial. Each year thereafter upon the anniversary of your hire date a review will be completed to ensure that your wages are competitive with the local market”.
The Court held this language represented an existing and ongoing entitlement for the employee to have their wages reviewed and updated on an annual basis. As such, the employer’s implementation of a wage increase represented an existing entitlement, not fresh consideration in exchange for the employee executing the new employment agreement.
For these reasons, the Court held the termination clause in the employee’s new employment agreement was not enforceable and awarded the employee common law notice.
Key Takeaways
Whether by past-precedent or as referenced in an existing employment agreement, a routine wage increase will likely not represent fresh consideration in exchange for an employee executing a new employment agreement.
Instead, consideration offered to an employee for signing a new agreement must be clear and explicit. In other words, the consideration should be an objectively black-and-white exchange which leaves no ambiguity that if the employee does not sign the new agreement, they will not receive the consideration.
Conclusion
If you have questions about offering new employment agreements to your existing employees and what constitutes valid consideration, please reach out to ClientCare to connect with an Advisor.