Consideration — Ontario Employment Law
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About Consideration
In Ontario employment law, a binding legal agreement requires a mutual exchange of value. This concept is known as "consideration." When you are first hired, the initial consideration is straightforward: the employer offers compensation and benefits, and you offer your labour and skills in return. Because value is being exchanged on both sides, the employment contract is generally legally enforceable.
However, issues regarding consideration most often arise after the employment relationship has already begun. Employers will frequently ask existing employees to sign updated contracts, confidentiality agreements, or restrictive covenants (like a non-competition or non-solicitation clause). They may also attempt to introduce new termination provisions that limit an employee's common law entitlements to severance. Under Ontario law, an employer cannot simply force an existing employee to agree to less favourable terms without offering something valuable in return. This is referred to as "fresh consideration."
Crucially, Ontario courts have repeatedly ruled that simply allowing you to keep your job—often called "continued employment"—does not amount to valid fresh consideration. If your employer hands you a new contract that strips away rights and threatens to fire you if you do not sign it, the courts will typically find that agreement void and unenforceable. To make a mid-employment contract binding, the employer must provide a new, tangible benefit. Examples of valid fresh consideration include a signing bonus, a promotion, a permanent increase in base salary, or additional paid vacation days.
Another common timing issue happens on a worker's first day. If you accept a clear, unconditional job offer over the phone or by email, the contract is technically formed at that moment. If you arrive on your first day and are unexpectedly handed a lengthy written agreement with strict termination clauses, that new document may be unenforceable because the employer did not offer any fresh consideration past the initial job offer.
The rules can shift dynamically in specific business scenarios, such as when a company is sold and the purchasing corporation offers new employment to the existing staff. Because the circumstances of each contractual negotiation are entirely unique, it is highly recommended to have an experienced employment professional assess the timeline of your agreements to determine which terms are actually legally binding.
Frequently Asked Questions
What is consideration in an employment contract?
Consideration is the legal requirement that both parties exchange something of value to make a contract binding. In a standard hire, the employer provides wages while the employee provides their work. Without this mutual exchange, a contract or specific clause is generally invalid.
Can my employer make me sign a new contract to keep my job?
Under Ontario law, your employer generally cannot force you to accept fundamentally new terms—like a harsh termination clause—merely in exchange for keeping your job. "Continued employment" is not considered valid legal consideration to support a restrictive new contract.
What counts as "fresh consideration" for a mid-employment contract?
Fresh consideration must be a clear, new benefit you were not previously entitled to receive. Common examples include a one-time signing bonus, a structural pay raise, a promotion, stock options, or an increase in your annual vacation entitlement.
I signed a contract on my very first day of work. Is it valid?
It depends on the timing of your offer. If you had already legally accepted the job (such as agreeing to an email offer outlining your salary and start date) and were only given the physical contract after arriving on day one, the employer may have needed to provide fresh consideration to enforce the new written terms.
Is a contract valid if my company is sold and the new owner requires me to sign one?
Yes, it often is. Ontario courts have found that an offer of employment from a new corporate entity purchasing the business assets can constitute valid consideration, even if you are essentially continuing to do the same job at the same desk.
At what point should I have a lawyer review my new employment contract?
The ideal time to get a legal evaluation is the moment you are presented with a new agreement but before you actually sign it, particularly if the employer is attempting to roll out new non-compete clauses or severance limiters without offering you a financial bonus.
Common Scenarios
- An applicant accepts a job offer via email, resigns from their old workplace, and arrives on Monday morning. HR immediately mandates that they sign a dense final contract containing severe restrictions on notice of termination. No additional bonus is offered for signing.
- A company updates its corporate policies and requires all staff members who have been there for years to sign a new non-solicitation agreement by Friday, threatening to dismiss anyone who refuses. They do not offer raises or extra time off in exchange.
- An employee is offered a promotion from a coordinator role to a management position, which includes a $15,000 raise. The employer makes this promotion explicitly conditional on signing a newly drafted employment agreement with an updated termination clause.
- A dental practice is sold to a new professional corporation. The new owner issues fresh contracts to all dental hygienists. Because the offer of employment comes from a newly legally distinct purchaser, it acts as consideration for the new agreements.
What You Should Know
- When presented with a new contract mid-employment, politely ask your employer for a few days to review it rather than feeling pressured to sign on the spot.
- Keep a precise chronological record of when job offers were accepted versus when physical contracts were presented to you, as this timeline is vital to assessing contract validity.
- Look closely for a true "exchange of value." If your employer wants you to sign away substantial legal rights but is not offering any new compensation or benefits in return, the document may lack enforceable consideration.
- Ascertaining whether legal value was validly exchanged can be incredibly complex; it is always prudent to have an Ontario employment lawyer evaluate newly presented workplace agreements before you accept them.
Featured Cases
Brant Securities Limited v. G.
2025 ONCA 8 (CanLII) · 2025-01-09Brant Securities Ltd v G.: Amended Contract Consideration
This is an appeal to the Court of Appeal from a motion judge's decision granting summary judgment to the employer. The employer sued to enforce an amended promissory note against the dismissed employee, who counterclaimed for set-off of unpaid bonuses from 2014 and 2015. The motion judge found the amended note was valid and supported by fresh consideration, barring the employee's claims to the earlier bonuses. The Court of Appeal upheld this decision, agreeing that the amended note resolved the parties' past issues, deferred tax consequences, and extended interest-free status as valid consideration.
G. v. Knights of Columbus
2022 ONSC 3788 (CanLII) · 2022-06-27Employment Contract: Arbitration Clause Invalid for Lack of Consideration
This interlocutory proceeding determined the validity of arbitration clauses in employment contracts where the plaintiff alleged lack of consideration for subsequent agreements. The court applied the Sagaz test to classify the plaintiff as an employee and found the arbitration agreements invalid due to insufficient consideration, thereby refusing to stay the wrongful dismissal action in favour of arbitration.
P. v. Bravo Logistics Corporation
2021 ONSC 4455 (CanLII) · 2021-06-23P. v. Bravo Logistics: Working Notice Appeal
This is an appeal from a trial judge's decision in a wrongful dismissal case involving an employee with seven years of service who was terminated without a written employment contract. The central issue was whether the employer's provision of ten weeks' working notice, later breached by preventing the employee from returning to work, constituted a valid agreement enforceable for damages or if it allowed the employee to claim common law notice. The Divisional Court reviewed whether the trial judge erred in enforcing the agreement and assessing damages based on the unpaid balance of that notice period.
A. v. NORR Limited Architects & Engineers
2019 ONCA 449 (CanLII) · 2019-05-30Appeal Dismissed: Waiver of Notice Upheld
This appeal concerns a wrongful dismissal action where the employer relied on a 2006 waiver of common law notice and a 2013 employment agreement amendment. The Court of Appeal upheld the waiver of common law notice, found that the 2013 amendments were supported by adequate consideration, and determined that the employee's employment remained continuous under the Employment Standards Act despite a transition to part-time work. Additionally, the court rejected the employer's argument that the employee failed to mitigate damages.
K. v. Olympus Canada Inc.
2017 ONCA 873 (CanLII) · 2017-11-16K. v. Olympus: Termination Clause & ESA Continuity
This appeal addresses whether a termination clause in a new employment contract offered by a purchaser of business assets is enforceable, specifically examining if section 9(1) of the Employment Standards Act, 2000 deems employment continuous for all purposes and if the offer of employment constitutes valid consideration. The Court of Appeal for Ontario held that the ESA protects minimum statutory entitlements but does not deem continuity for all purposes, and that the offer of employment constitutes valid consideration for the new contract. The court declined to address alternative arguments regarding the termination clause's validity due to the absence of a cross-appeal and factual findings from the trial.
United Rentals of Canada Inc. v B.
2016 ONSC 6854 (CanLII) · 2016-11-09Non-Compete Unenforceable: Lack of Consideration
This case concerns the enforceability of a non-competition and non-solicitation agreement signed by an employee who alleged signing under threat of dismissal. The court found the agreement unenforceable due to lack of consideration, as continued employment did not constitute valid consideration, applying principles from Braiden v. La-Z-Boy and Holland v. Hostopia. The court also noted the clause was overly broad in its temporal and spatial scope, restricting the defendant from working within 100 km for 12 months.
H. v. Hostopia Inc.
2015 ONCA 762 (CanLII) · 2015-11-10H. v. Hostopia: 8 Months Notice Upheld
This appeal concerned the enforceability of a termination provision in an employment agreement signed after the employee commenced work and the calculation of damages for wrongful dismissal. The Court of Appeal upheld the trial judge's determination of an eight-month notice period and ruled that the employee was entitled to commissions earned during the notice period, subject to mitigation.
M. v. Raywal Limited Partnership
2013 ONCA 312 (CanLII) · 2013-05-09Wrongful Dismissal: Notice Reduced to 8 Months on Appeal
This is an appeal from a wrongful dismissal trial decision regarding reasonable notice and mitigation. The Court of Appeal partially allowed the appeal, reducing the notice period to 8 months due to the employee's unjustified refusal to return to work, while upholding the trial judge's finding of no consideration in the agreement.
F. v. Investments Hardware Ltd.
2012 ONSC 2809 (CanLII) · 2012-05-10Wrongful Dismissal: 3.9 Months Notice Awarded
This wrongful dismissal case involved a plaintiff who was terminated without cause after 3 years and 9 months of employment. The court determined that a notice period of 3.9 months was reasonable based on the Bardal factors and awarded damages of $23,188.03. Additionally, the court found that the employer's 'Termination on Notice' clause was null and void due to a lack of consideration and was not revived by subsequent contract amendments.
D. v. Ecore International Inc.
2011 ONSC 6617 (CanLII) · 2011-11-08Forum Selection Clause Unenforceable: Lack of Consideration
This case addresses whether a forum selection clause in a Confidentiality Agreement was binding on a plaintiff who provided services through a corporation but signed the agreement as an 'employee'. The court found the clause unenforceable against the plaintiff personally due to a lack of consideration in his individual capacity, despite the agreement being between corporate entities.
C. v. Insight Components (Canada) Inc.
2008 ONCA 837 (CanLII) · 2008-12-11C. v Insight Components: Termination Clause Enforceability
The Court of Appeal for Ontario heard an appeal regarding a wrongful dismissal claim where the enforceability of a termination clause was challenged on grounds of ambiguity, lack of consideration, and statutory compliance. The court found the clause unambiguous and validly supported by consideration (promotion and enhanced remuneration), and upheld its enforceability despite arguments regarding hypothetical conflicts with other statutes.
Hobbs v. TDI Canada Ltd.
2004 CanLII 44783 (ON CA) · 2004-12-01Hobbs v. TDI Canada Ltd: Post-Hiring Agreement Enforceability
This is an appeal concerning the enforceability of a post-hiring Solicitor’s Agreement and the employee's entitlement to unpaid commissions. The Court of Appeal found the agreement unenforceable due to lack of valid consideration, as continued employment did not suffice. Consequently, the appellant was awarded $52,778.81 in unpaid commissions based on agreed rates.
K.M.A. Caterers Ltd. v. H.
1968 CanLII 172 (ON CA) · 1968-10-18Restrictive Covenant Consideration: Continuation of Employment
This appeal addresses the legal validity of restrictive covenants signed by employees, specifically focusing on whether continuation of employment serves as sufficient consideration to support a non-solicitation clause. The court examined whether such covenants are enforceable when the employee is already subject to a collective agreement that precludes private negotiation on covered matters.
P.C.O. Services Ltd. v. R.
1963 CanLII 619 (ON SC) · 1963-03-22Enforceability of Restrictive Covenant in Employment Agreement
A case involving the enforceability of a restrictive covenant in an employment agreement, where the defendant was prohibited from engaging in pest control business within a specified area for two years. The court found the covenant reasonable in scope and duration, and deemed the continuation of employment as sufficient consideration to support the covenant. An injunction was granted to prevent further breaches.
R. v. T.
1939 CanLII 649 (ON SC) · 1939-03-14Employment Contract: Restrictive Covenants in Medical Practice Upheld
An employment contract dispute involving restrictive covenants between doctors in a medical practice. The court considered whether the restrictive covenant was excessive, whether the agreement violated the Medical Act, and whether the renewal of the agreement was supported by valid consideration. The court upheld the agreement as a valid contract of employment.