Author: Daniel A. Lublin
Fresh “consideration” required to support variation of contract
On Krzysztof Rejdak’s first day of work, he found himself in a pickle. He was given an employment contract with a three-month probationary term and asked to sign his name. For Rejdak, who had already resigned from his previous long-term job, his options were grim: he could either sign his name and agree to be a probationary employee or he could refuse and potentially be unemployed. Fortunately for Rejdak, he later learned in court that not all signed agreements will ultimately be enforced.
For seven years, Rejdak honed his skills as a sports editor at the Ontario-based sports television network, The Score. When an opportunity came about at The Fight Network Inc., a start-up digital television channel focusing on fighting, Rejdak’s response was swift. He interviewed for an editor’s position.
Impressed with his skills, The Fight Network then telephoned Rejdak and offered him the job. After they had discussed his title, salary and start date, Rejdak was satisfied with the offer and the next morning he resigned from The Score.
Later in the day, Rejdak showed up at The Fight Network set to work. But his bosses were surprised to see him there so quickly, since he hadn’t yet signed the standard employment contract given to all new employees. Rejdak was then given a contract containing a three-month probationary period.
Despite reading the contract and understanding its implications, Rejdak signed his name and continued to work as before. Within three months, however, The Fight Network fired Rejdak, relying on his probationary period as the reason it would not provide him with any severance. But Rejdak disagreed. When he had decided over the telephone to join The Fight Network, there was no discussion of any probationary term and according to him, he had no other choice but to sign the written contract because he had already resigned from his long-term job.
The legal doctrine of “consideration” requires that any detrimental changes to an existing agreement must be supported by something of new value, such as a bonus, raise or promotion that the employee was not already entitled to. Therefore, once Rejdak agreed to employment over the telephone, a contract was created that could only be varied with his consent by providing him with something of new value in order to allow him to decide on its new terms.
In this case, The Fight Network argued that the “consideration” in the written contract was that it contained two weeks’ vacation and health benefits. Recently, however, an Ontario judge disagreed, finding that the contract Rejdak signed, or at least the punitive terms, were not enforceable against him. The vacation pay and health benefits were available to all employees and there was nothing else of value given to Rejdak in exchange for signing the contract.
If you want to create an enforceable employment contract, there are a few rules. Contracts signed by employees even on the first day of work may not be enforceable unless they are given something of new value within the contract itself. Otherwise, the initial job offer may be the only agreement.