Changes to the employment relationship

Employers have some latitude to make changes to an employee’s terms and conditions of employment for business-related reasons. However, the following are examples of issues that may arise in the implementation of such amendments:

(i) Unilateral modifications

Employers should be cautious of unilaterally modifying an employee’s terms and conditions of employment, as they may find themselves defending a constructive dismissal claim once those modifications become apparent to the employee. Such a claim may be alleged where, in the absence of reasonable notice, a fundamental term or condition of employment is unilaterally altered by the employer in any manner detrimental to the affected employee. Actions of an employer that could amount to grounds for a constructive dismissal claim include any substantial change in remuneration, benefits, position, responsibilities, reporting duties or location of work. It is still possible, however, for an employer to make unilateral changes, even if they are substantial, without triggering a constructive dismissal claim, provided the changes are announced and implemented in the proper manner.

(ii) Enforceability of new terms

Any amendment to the terms of an existing written employment agreement should be in writing, preferably with the employee’s consent or at least with the employee’s knowledge. Furthermore, the employer should offer fresh consideration over and above the performance of existing contractual obligations in order to ensure future enforceability of the new terms of employment. Fresh consideration may consist of simply offering an employee a modest bonus or a one-time perquisite in exchange for agreement to the amendments. It is also effective to implement amendments as part of a promotion or a discretionary increase in compensation, including the granting of a bonus or options. Ordinarily, mere continuation of employment will not constitute adequate consideration. Moreover, it is clear that both parties to the employment contract must have full knowledge of the scope and nature of the change and must voluntarily assent to it without duress or coercion in order for the modification to be legally binding.

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