Law Times

Law Times • November 30, 2015 Page 7 www.lawtimesnews.com COMMENT Amending employment contracts a tricky affair odifications to contracts have traditionally encoun- tered problems of enforce- ability, because of the re- quirement that enforceable promises must be given for consideration. Consequently, dismissed employees often challenge the enforceability of their employment contracts, a trend that shows no signs of abating. A case in point is Holland v. Hostopia. Com Inc., where the Ontario Court of Ap- peal was asked to resolve a slew of issues ranging from the amount of damages to enforceability of the post-contractual modifications. The court re-affirmed that the absence of "fresh" consideration to support an amended agreement renders it unenforce- able and entitles dismissed employees to common law damages, including com- missions. The length of reasonable notice is to be determined by the circumstances existing at the time of dismissal, and not by the amount of time it takes an employ- ee to find employment. Hostopia.Com Inc. had hired Sean Holland as its national account manager in May 2003 pursuant to a letter of hire, which was silent about his entitlement to notice of dismissal. Nine months later, he was presented with, and accepted, the employment agreement, which contained a new termination provision limiting his entitlements at dismissal to the statutory minimums set out in the Employment Standards Act, 2000. After seven years of employment, Hostopia.Com Inc. terminated Holland's employment without cause and he sued. At trial, the justice held the termination provision was enforceable, and dismissed the action. Holland appealed. Ontario Court of Appeal Justice George Strathy reversed the trial judge's decision in part and awarded Holland common law wrongful dismissal dam- ages equal to eight months of total compensation. Fresh consideration is a must Dealing with the enforceabil- ity of the employment agree- ment, Strathy explained that once Holland accepted the employment letter, it consti- tuted a complete contract of employment under which he was employed for a subse- quent nine months. Because it contained no termination provision, there was an "implied term" that Holland was entitled to reasonable notice of dismissal. Strathy disagreed with the trial judge's view that the two agreements were interrelated and together consti- tuted a single contract of employment, thereby eliminating a need for fresh consideration. Instead, he found that the two documents were inconsistent. The agreement introduced a novel and "very material term" into the existing contract, which attempted to limit Hol- land's entitlements at dismissal to the statutory minimums. Since Holland neither previously consented to that term nor received fresh consideration for accepting it, the express term con- tradicted the implied term of reason- able notice, which amounted to a "tre- mendously significant modification" of the existing employment contract. Noting that a promise to perform an existing contract is not consideration, Strathy resolved that without fresh con- sideration the agreement could not dis- place Holland's entitlement to reasonable notice contemplated in the earlier hiring letter. In support of his conclusion, he relied on reasoning in Hobbs v. TDI Can- ada Ltd., which held that the requirement of consideration to support an amended agreement is especially im- portant in the employment context, because there is, generally, inequality in bar- gaining power between em- ployers and employees. While some employees may enjoy a measure of bar- gaining power when negoti- ating the terms of prospective employment, once they have been hired and are dependant on the remuneration of the new job, they become more vulnerable. The law recog- nizes that vulnerability and requires the courts to be vigilant when assessing the requirement of fresh consideration for contractual modifications. Speed is not a factor Strathy determined that Holland should be entitled to reasonable notice. He ob- served that the eight months' notice as- sessed by the trial judge was at the "very low end of the range." In determining the period of reasonable notice, the trial judge took into consideration the "speed" with which Holland found new employment — it took only three months. Dealing with the "speed" factor, Strathy made it clear that reasonable notice is to be assessed on the basis of the circumstances exist- ing at the time of dismissal and not by the amount of time that it takes the employee to find employment. The time it takes to find a new job goes to mitigation of dam- ages, not the length of notice. Commissions Significantly, Strathy found that Hol- land's damages were to be calculated on the basis of his salary and commissions to which he would have been entitled during the eight months' notice. Entitle- ment to commissions was based on the rationale that it took time for Holland to generate commissions at his new job. The Ontario Court of Appeal's recognition of the dismissed employees' entitlements to commission during the reasonable notice period is a welcome reaffirmation. This said, there is particular difficulty in deter- mining lost earnings when an employee is partially remunerated by commission. The court will attempt to project what commission would have been earned during the notice period by taking into consideration numerous factors, such as commissions earned by the employee's replacement, projections based on the general sales results of the company, and the time it took the employee to earn com- mission at the new job, among others. Holland serves as a helpful reminder to employers that changed circumstances may render the original terms of an em- ployment contract unenforceable. While the parties may agree to a change, the rule that an existing contractual obligation cannot amount to fresh consideration for the change may defeat the employer's aims. This difficulty can be circumvented if an employee is offered 'fresh' consider- ation, being a thing of value that is not al- ready due. Employers' failure to do so can lead to augmented damages. Prudent employers should seek legal advice prior to modifying their employ- ees' existing contracts. Diligent employ- ees should question post-contractual modifications and especially those that seek to minimize their entitlements at dismissal. LT uNikolay Chsherbinin is an employ- ment lawyer at Chsherbinin Litigation and author of The Law of Inducement in Canadian Employment Law pub- lished by Carswell, a Thomson Reuters Business. He can be reached at 416-907- 2587, nc@nclaw.ca, or at nclaw.ca. Law student Shawn Quigg provided assist- ance with this article. RE: FIRST TERAVIEW FEE INCREASES IN FIVE YEARS As a longtime professional searcher of public records, specializing in land title searches throughout Canada, but primar- ily in Ontario, I was incensed when I read Jeffrey Lem's recent tome in Law Times. Mr. Lem, Ontario's newly appointed director of titles, has taken on a dauntless task to remedy what I perceive as the pres- ent chaos within the Ontario Land Regis- tration recording system. A problem that is a result of the Ministry of Government Services' (MGS) failure to fully appreciate that the Land Registry Office is a public library of real property information. Mr. Lem would have us believe the legal profession and the public it serves are being well served by the fact that the fees charged to file documents with this system and search the system's records are only being increased by half of the CPI (consumer price index). The problem with this assertion is that the fees charged by the Ministry of Government Services and its monopolistic private sector part- ner, Teranet, were already grossly exces- sive and likely contrary in law. As a title searcher who searches largely for the purpose of assisting litigators, the current fee structure has created a massive barrier to legal research, which further exacerbates our access to jus- tice problem. What good public policy is served by serving up the Ontario public to a monopoly and allowing that monopoly to charge "captive user base" monopolistic rents? Inexpensive and easy access to this public record is foundational to the rule of law. A LITTLE BACKGROUND The land titles database is a public asset, which the Ministry is required to make available to the public pursuant to the Land Titles Act, RSO 1990, c L.5 and the Statute of Frauds. The fees governments are permitted to charge for services are limited pursuant to the strictures laid out by the Supreme Court of Canada in Eurig Estate (Re), which holds that governments are only al- lowed to charge fees that are commensu- rate with the costs associated with the ser- vices provided. The Ontario auditor gen- eral concluded in 2009 and again in 2011 that the Ministry of Government Services was charging six times more than it costs to receive and approve documents, such as transfers/deeds and mortgages, and also raised the specter of a constitutional challenge due to the principles established by Eurig. Furthermore, I have been advised by several experts familiar with database administration, including one who has spent time working within a similar pro- vincial land registration system, Alberta's SpinII, that the cost of allowing access to information from an already constructed database is next to nothing. In Alberta, where the government runs this system itself, it's a better than break- even situation bringing in what may have been as much as $50,000,000 annually in recent years. Alberta charges $10 for an abstract. An abstract in Ontario costs $29.35 (plus an extra $2 per page charge). Ontario is about four times the size of Al- berta, so we can extrapolate at four times the search transactions at three times the price, most of which goes to the private actor, Teranet. After Teranet was paid to convert our paper records into a digital format, it was granted exclusive rights to the database from which it created (and retains all of the revenue from) non-standard, "value added" products and services such as Geo- Warehouse. The 50-year contract for the online service provider appears to have been awarded to Teranet without ten- der. Were the fees also set behind closed doors? For the next 50 years, Teranet gets to hold all land titles information behind its firewall and charge the public (and the government itself — municipalities are a large consumer of these services) fees that are grossly in excess of the cost of allow- ing us access to that data — data we in fact own. The ministry and Teranet have never adequately justified their fee struc- tures. To search Ontario's land titles data- base is much more expensive than every other jurisdiction in North America. And I know because I search all of the Canadi- an jurisdictions and many in the United States. Searching in the U.S. is generally free. Until now, title searchers and the gen- eral public routinely attended local LROs across Ontario, bypassing Teranet, to save money. Mr. Lem calls the government's 300% in Land Registry Office ROSCO fee increase a price "harmonization." An egregious example of price goug- ing in Ontario is the extra page charge. In all other provinces, the information associated with a property is one price regardless of the amount of information. To remotely download an extra 10 pages costs Teranet virtually nothing; however, we pay an extra $20 and with the recent fee increase $21. Everything about this arrangement is wrong. Does anyone know a good lawyer? Peter Currie Director, Ontario Association of Professional Searchers of Records M u LETTERS TO THE EDITOR Labour Pains Nikolay Chsherbinin

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