In Chowanetz v Ivor Forest Products Ltd., 2026 BCSC 1760, the BC Supreme Court found that an employment contract entered into mid-employment was void for lacking fresh consideration.
This case is clearly a win for employees. The case is not binding in Alberta, but it could be considered persuasive authority here.
Facts
The following were the pertinent facts summarized by the BCSC:
- The plaintiff employee Chowanetz and defendant employer Ivor Forest Products executed an employment contract before he started working there in 2021 (the “First Contract”)
- The First Contract contained no clauses purporting to limit entitlement to reasonable notice / severance upon termination of employment
- The First Contract contained a term stating that the employer would give the employee annual wage reviews to ensure his wages were “competitive with the local market”
- In 2021, the plaintiff’s wages were increased from $31/hr to $35/hr. His evidence was that this was part of a wage review; the defendant disagreed on this point and the Court does not appear to have decided if a wage review occurred in 2021
- There were no wage reviews in 2022 or 2023, and his wage remained $35/hr until 2024 (more on that later)
- 4 years after the First Contract, the employee and employer signed another contract (the “Second Contract”) on November 29, 2024. The Court found the Second Contract contained terms that would operate to significantly restrict the employee’s entitlement to reasonable notice upon termination
- The plaintiff’s employment was terminated sometime after signing the Second Contract
- The plaintiff employee sued for wrongful dismissal reasonable notice. He argued the Second Contract was unenforceable for having a lack of fresh consideration
- The defendant argued there was fresh consideration based essentially on the following:
- The employee received a bonus letter on November 14, 2024 indicating he’d receive a $1,500 bonus
- The Second Contract made the employee eligible for discretionary bonuses
- He started receiving RRSP contributions from the defendant in 2024 under a new RRSP match program
- The plaintiff’s hourly wage increased from $35/hr to $38.50/hr starting on the effective date of the Second Contract
Analysis / Conclusion
The Court noted the established rule that fresh consideration is always required for a mid-employment change to employment contracts, and that continued employment does not amount to consideration.
The Court cited the following test for fresh employment contract consideration with approval:
[16] In HungryPanda, the plaintiff signed a modification to an already-existing employment agreement, and the issue was whether or not there was adequate consideration for the new employment agreement. Mr. Justice Blok affirmed a three-part test in determining whether, and to what extent, fresh consideration is required when an employment contract is amended, at para 48:
a) Did the contract contain new terms which were detrimental to the plaintiff?
b) If it did, what is required at law to provide adequate consideration for such changes to the employment relationship?
c) Has the defendant established adequate consideration on the facts here?
The Second Contract contained terms limiting severance, which clearly establishes the first part of the test. The Court went on to consider the balance of the test.
Discretionary Bonus
The Second Contract contained a clause indicating that the employee would now be eligible for discretionary bonuses. It also stated it was not part of his compensation. It did not specify an amount, and contained a clause indicating that he had to be actively employed at time of payment in order to receive it.
The Court found that the discretionary bonus did not form consideration for the Second Contract because: (1) it was entirely discretionary, and (2) the plaintiff’s 2024 bonus letter was provided to him before the Second Contract and the Second Contract did not reference it.
RRSP Matching Program
The Court found the RRSP plan did not form consideration for the Second Contract because:
- The employer had committed to RRSP matching with the employee in October, 2024, prior to the Second Contract
- The Second Contract made no reference to the RRSP matching program, but did contain an “entire agreement” clause
Wage Increase
The Court found that under the First Contract, the employer had an obligation to conduct annual wage reviews to keep the employee’s wages competitive.
The plaintiff’s evidence was that he understood his wage increase from $35/hr to $38.50/hr to be part of an annual wage review.
The Court recognized that no wage reviews had occurred in 2022 or 2023, and that the increase from $35 to $38.50 was coincident with the effective date of the Second Contract.
The Court found that this wage increase did not constitute fresh consideration, reasoning as follows:
[53] … I would note that an increase to $38.50 per hour from $35.00 per hour, an increase of 10%, after three years without any increase, is not one such that I could take judicial notice of it exceeding prevailing rates absent any evidence on the point.
[54] Finally, I observe that the defendant should not be able to rely on its past failures to conduct the Annual Wage Review under the Employment Offer in order to suggest that it was being generous or otherwise was offering the plaintiff an amount in excess of the market rate it had already committed to pay him.
[55] I conclude that the defendant has failed to establish that the increase in the plaintiff’s hourly wage under the 2024 Contract provided him anything he was not already entitled to under the Employment Offer and as such, the defendant has not established that the 2024 Contract is supported by any fresh consideration. The limits to the plaintiff’s recovery in the event of termination without cause in the 2024 Contract therefore do not apply, and he is entitled to damages at common law.
The plaintiff employee was awarded 6 months’ reasonable notice of termination / severance.
My Take
Often employers give little to no consideration for new, mid-employment contracts. This case is an example of the potential results.
This case does not contain many surprises. However, I will say that the standard for fresh consideration outlined in this case is higher than in some other authorities.
This case will likely make it a bit easier for employees seeking to invalidate termination clauses in employment contracts.
This one is clearly a win for employees.
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This blog post is an original work of Bow River Law LLP. The original publish of this article is on Bow River Law’s website blog.
