Changing Employment Contracts Without Fresh Consideration

An employer decides to tighten up its paperwork. New contracts go out to existing staff with a termination clause, a non-solicitation covenant, and an IP assignment. Everyone signs. Two years later someone is terminated, relies on the new termination clause, and a court finds the whole agreement unenforceable because nothing was given in exchange for it.

This is one of the most expensive and most preventable mistakes in Alberta employment law. This guide from the Employment Law team at Libra Law explains the rule and how to comply with it.

The Rule

A contract requires consideration, meaning each party must give something of value. That is not controversial at the hiring stage: the employer offers the job, the employee offers their services, and the contract is formed.

The problem arises when the employer wants to change the deal after employment has begun. At that point the employee is already working and the employer is already paying. If the employer now imposes new obligations and gives nothing new in return, there is no consideration for the change.

Canadian courts have repeatedly held that continued employment, by itself, is not fresh consideration. An employer cannot rely on “you still have a job” as the value exchanged, because the employer was already obliged to continue employing the employee on the existing terms or to provide reasonable notice of dismissal.

The consequence is blunt. Without fresh consideration, the amendment is generally unenforceable, and the original terms, including the common law right to reasonable notice, continue to apply.

Why Employers Keep Making This Mistake

Usually with good intentions:

The company grew and wants standardized agreements
A new HR advisor identified that long-service employees have no written contract
The business was acquired and the buyer wants everyone on its own template
A privacy, IP, or confidentiality gap was identified and needs closing
The original contract was poorly drafted and the employer wants to fix the termination clause

Every one of those is a legitimate objective. The mistake is in execution: circulating new agreements as an administrative exercise, with a signature line and a deadline, and no consideration attached.

What Counts as Fresh Consideration

Something of real value flowing to the employee, granted at the time of the amendment. Common examples:

A salary increase, beyond one already promised or already earned
A signing bonus specifically tied to the new agreement
A promotion with genuinely enhanced duties and compensation
New or materially improved benefits, pension contributions, or paid time off
Equity, options, or a participation in a bonus plan the employee did not previously have
An enhanced contractual severance entitlement above the statutory minimum

What does not count:

Continued employment
A raise the employee was already entitled to under an existing policy
A cost-of-living adjustment given to everyone regardless of signing
A vague promise of future consideration
Nominal consideration disproportionate to what is being given up

The value should be documented, identifiable, and connected in writing to the new agreement. A separate letter stating that the bonus is provided in consideration of entering into the amended agreement is far stronger than a raise that happens to occur in the same month.

Timing, Pressure, and Duress

Consideration is necessary but not sufficient. Courts also examine how the agreement was obtained.

An agreement presented on a take-it-or-leave-it basis, with same-day signature demanded, no opportunity to obtain advice, and an implication that refusal means dismissal, is vulnerable even where consideration exists. The same concern arises when documents are pushed on an employee at a moment of maximum pressure, which is why a release signed on termination day can be attacked. See termination day pressure and when a signed employment release may be unenforceable.

Give reasonable time. Recommend independent legal advice in writing. Keep the record.

Unilateral Changes Are a Separate Problem

Sometimes the employer does not ask for a signature at all and simply announces a change: reduced commission, a new reporting line, a different territory, a pay cut.

A unilateral change to a fundamental term of employment can amount to constructive dismissal, entitling the employee to treat the employment as ended and claim reasonable notice. An employee who continues working without objection may, over time, be found to have accepted the change, which is why prompt advice matters on both sides.

How to Change an Employment Contract Properly

For employers, a defensible process looks like this:

Identify what actually needs to change, and why. Do not rewrite everything if the issue is one clause.
Decide on the consideration, and make sure it is real and additional.
Document the exchange. State expressly in the agreement or a covering letter what the employee is receiving in consideration of the new terms.
Give reasonable time to review, and say so in writing.
Recommend independent legal advice, and offer to contribute to the cost for senior roles.
Do not link signature to keeping the job. That framing is the problem, not the solution.
Have the clauses themselves reviewed. Fresh consideration will not save a termination clause that contracts below the Employment Standards Code, which is a separate ground on which such clauses fail.
Keep the executed copy, with the date and the consideration evidence, in the employee file.

For an acquisition, the analysis is different again, and the structure of the transaction affects whether new agreements are needed and what consideration is required. See buying a business in Alberta and employment law risks.

If You Are the Employee

If you have been handed a new agreement:

Ask what you are receiving in exchange. If the answer is nothing, that is significant.
Compare the termination provisions to what you had before. This is where value is usually removed.
Look for new restrictive covenants. Broad non-competes are difficult to enforce in Alberta. See non-compete clauses in Alberta.
Look for IP assignment language and confidentiality obligations that survive termination.
Do not sign under time pressure. Ask for time in writing.
Get it reviewed. See lawyer review of employment contracts before you sign.

Signing does not automatically end the discussion. If there was no fresh consideration, or the circumstances were coercive, the agreement may not bind you.

What It Costs to Get Wrong

The exposure is not the cost of redrafting. It is the difference between the notice period the employer thought it had capped and the reasonable notice a court awards. For a long-service senior employee, that gap can be a year or more of total compensation, plus legal costs.

Our articles on severance pay in Alberta and wrongful dismissal compensation in Alberta set out how those amounts are assessed.

Final Thoughts

Changing an employment contract mid-relationship is entirely possible. It just cannot be free. Give something of real value, document the exchange, allow time for advice, and have the new clauses reviewed against the Employment Standards Code.

If you are updating your employment agreements, or you have been asked to sign a new one, speak with an employment lawyer at Libra Law first.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a qualified professional.