The Ontario Court of Appeal recently upheld a decision of the Superior Court in Celestini v. Shoplogix Inc., 2023 ONCA 131. The main issue at appeal was whether the trial judge had erred in applying the “changed substratum” doctrine.  Plainly put, this doctrine can be relied upon to argue that an employment contract in whole or in part is unenforceable because the nature of the duties, responsibilities, and terms of the employment have substantially changed since the agreement was signed. 

Background

Celestini was one of the co-founders of Shoplogix and signed an employment agreement in 2005.  The termination provisions in his contract capped the amount of notice that would be owed to him. In 2008 two major changes took place. First, a new bonus plan was unveiled that significantly changed his compensation structure, and second, his workload and responsibilities increased substantively. Celestini had to manage more staff, was required to travel internationally, handled infrastructure responsibilities and was expected to solicit investment funds. In 2017 he was terminated without cause.

Analysis

Shortly after his termination, Celestini commenced a wrongful dismissal lawsuit and it proceeded to summary judgment.  The motion judge agreed with Celestini, that the changes “far exceeded any predictable or incremental changes to his role that reasonably would have been expected when he started”. Accordingly the 2005 contract was unenforceable at the time of dismissal and he was entitled to damages at common law.  He was awarded 18 months’ notice (less the 12 months already provided). 

Shoplogix unsuccessfully appealed. The Court of Appeal held that the motion judge did not err at law in their application of the changed substratum doctrine. Celestini’s title did not have to change to recognize that there was a non-incremental expansion of his duties such that his position was fundamentally different. 

Takeaway

It is not uncommon for employers to adjust an employee’s duties and role over the course of a long tenure. Employees should be aware that significant changes to their job may invalidate contracts they have signed. This could expand notice and other compensation upon a termination since the employee may claim greater entitlements under common law. Conversely employers will need to be vigilant when big changes are made and can better protect themselves by amending or updating the employee’s contract.

If you have been terminated and are unsure as to what your entitlements may be, contact JPak Employment Lawyers as soon as possible for legal advice before signing anything.  Email us at info@jpakemploymentlawyers.com or contact us here.