Canadian HR Reporter is the national journal of human resource management. It features the latest workplace news, HR best practices, employment law commentary and tools and tips for employers to get the most out of their workforce.
Issue link: https://digital.hrreporter.com/i/1220817
C O L U M N S 30 www.hrreporter.com T O U G H E S T H R Q U E S T I O N Have a particularly difficult or interesting question? Why not share it with us? Email: sarah.dobson@keymedia.com Have a question? HOW CAN WE CHANGE AN EXISTING AGREEMENT? Q How does an employer make changes to existing employment agreements? A While the essence of an employment relationship is "the employee works and the employer pays," employment contracts are unique, often layered with written and implied terms that cement the expectations of employees, often based only on the past accepted practice. For example, it is not uncommon for employers to provide a raise in salary, change in title or increased duties without any written amendment to any prior employment contract. However, when dramatic changes are necessary, particularly those that are or are perceived to be unfavourable to an employee, issues arise as to how to legally implement the change and enforce the new terms. Often, allegations of constructive dismissal are rooted in miscommunication between the parties, which escalate to the point of confrontation. To mitigate the risk, employers should consider the following strategies: Provide reasonable notice of the change: Changes to a fundamental term of an employment contract, such as a reduction in salary, change in commission structure or demotion within the organization, can be made if appropriate reasonable notice is given to the employee before the change becomes effective. This notice is analogous to working notice of termination of the prior employment contract. The notice must, however, be that which is provided in the contract or at common law, with the risk that the employee will use that notice period to seek alternate employment. Include flexibility in the employment contract: For minor changes, such as changes to hours of work, layoff or work location, include specific provisions that permit these minor amendments. When these clauses are included at the time of hire, the employee is on notice that these terms are not fundamental to the employment relationship and, therefore, can be changed at the reasonable discretion of the company. Provide consideration: When fundamental changes are necessary (and notice is not an option), employers should provide an additional material benefit — such as a promotion, material increase in salary, new bonus or stock option plan — to secure the employee's acceptance of the change and avoid a claim of constructive dismissal. Employers should, however, avoid securing changes during an employee's regular annual review or contemporaneous with historical periods of salary increase or bonus payment. It is best practice to secure changes when the consideration offered is separate and identifiable, and for which the employee would not otherwise have been entitled. Communicate and explain: Some changes become necessary to address immediate business needs and neither time nor money are an option. While not without risk of a constructive dismissal claim, explaining the circumstances and business needs to an employee can secure acceptance to even drastic changes. Entering into temporary arrangements to address urgent needs — with the expectation that the old terms will be reinstated when the company is able — can get the company and employee through a difficult time and retain a valued employee for future recovery. Employers should also provide clear information on the nature of the changes to ensure the employee fully understands them and provide the employee the opportunity to review them, make suggestions and provide feedback. When significant changes become necessary, employers must remember the necessary components of a binding agreement: offer, consideration and acceptance. Employers should constantly review employment contracts and introduce changes at key milestones in the employment relationship, such as promotions or when new compensation or benefits are introduced. Changes to a job can be difficult and traumatic. Acknowledging this fact, being sensitive to the possible impact and communicating openly with the employee often makes something that is inherently difficult much easier to approach. CHRR This article was written with the assistance of Michael Horvat, also a partner at Aird & Berlis and a member of the Workplace Law Group. Changes to a job can be difficult and traumatic for an employee. Acknowledging this fact, being sensitive to the possible impact and communicating openly with the person can make an inherently difficult situation much easier to approach, says Lorenzo Lisi of Aird & Berlis Lorenzo Lisi Partner and leader of the Workplace Law Group at Aird & Berlis in Toronto