My Employer Wants Me to Sign a New Employment Contract. Do I Have To?
If your employer suddenly asks you to sign a new employment contract, do not assume it is just “paperwork.”
A new agreement can change important rights, including your termination pay, severance, bonus eligibility, commission structure, remote-work rights, layoff rights, confidentiality obligations, and post-employment restrictions.
Before signing, employees should have the agreement reviewed by an Ontario employment lawyer. Vanguard Law reviews employment contracts for employees across Ontario and can help you understand what the new document actually changes.
Why Would an Employer Introduce a New Employment Contract?
Employers may introduce new employment contracts for many reasons, including:
A promotion or title change
A raise or compensation restructuring
A move to remote, hybrid, or in-office work
A merger, acquisition, or ownership change
A new bonus, commission, or equity plan
A desire to add termination, layoff, or restrictive covenant language
A company-wide HR update
A previous contract that may be outdated or unenforceable
Some changes may be harmless. Others may significantly limit your rights.
For example, a new contract might give your employer the ability to terminate you with only the minimum amounts required under Ontario’s Employment Standards Act, 2000, instead of potentially larger common law notice entitlements.
Do I Have to Sign a New Employment Contract?
Usually, you do not have to sign a new employment contract immediately just because your employer asks.
Employment contracts are agreements. That means the terms matter, your consent matters, and the timing matters.
If you are already employed, your employer may need to provide something new in exchange for your agreement to new contractual terms. This is often called fresh consideration.
Fresh consideration can include something of value, such as:
A signing bonus
A raise that is tied to signing
A promotion
A new benefit
Additional vacation
A meaningful new opportunity
Simply allowing you to continue working in the same job is not always enough. In Holland v. Hostopia.com Inc., the Ontario Court of Appeal confirmed that fresh consideration may be required where an employer tries to amend an existing employment relationship with a new agreement. The court found that the later employment agreement could not replace the employee’s common law notice rights without fresh consideration.
What Is “Fresh Consideration” in an Employment Contract?
Fresh consideration means the employee receives something new in exchange for giving up or changing legal rights.
This is important because many new employment contracts are not neutral. They may reduce rights the employee already has.
For example, a new contract may:
Limit severance to ESA minimums
Add a temporary layoff clause
Add a relocation clause
Add a non-solicitation clause
Restrict bonus or commission rights after termination
Give the employer more discretion over duties, hours, or location
Add confidentiality, intellectual property, or monitoring obligations
Vanguard Law’s employment contracts page explains that major changes to essential terms may require consent, appropriate notice, or fresh consideration.
Watch Out for Termination Clauses
One of the most important parts of any new employment contract is the termination clause.
This clause may determine what you receive if your employer ends your employment without cause.
Without an enforceable termination clause, many employees may be entitled to common law reasonable notice, which can be much higher than ESA minimums. With a properly drafted clause, an employer may try to limit the employee to only the minimum amounts required by the ESA.
The Supreme Court of Canada has confirmed that employment contracts cannot contract out of minimum employment standards. In Machtinger v. HOJ Industries Ltd., termination clauses that provided less than statutory minimums were found to be invalid. Link: Machtinger v. HOJ Industries Ltd..
This is why employees should never assume a termination clause is enforceable — or fair — just because it appears in a contract.
Can a New Contract Reduce My Severance?
It can try to.
Many new employment contracts contain language designed to reduce the employee’s future severance rights. This may include wording that limits the employee to ESA-only termination pay and severance pay.
Ontario’s ESA provides minimum standards. Vanguard Law’s article, What Is the Employment Standards Act?, explains that the ESA is the “floor” of employee rights in Ontario, meaning employers can generally offer more, but not less. Vanguard’s guide also notes that the ESA covers termination pay, notice, severance pay in some cases, and protection against reprisals.
Employees should also understand the difference between ESA minimums and common law entitlements. Vanguard Law’s severance package review page explains that many employees may have additional common law entitlements based on role, length of service, age, and the job market.
Be Careful With Temporary Layoff Clauses
A new employment contract may include a clause allowing the employer to temporarily lay you off.
This matters because, at common law, a temporary layoff may be treated as a constructive dismissal if the employer does not have the contractual right to impose one.
Vanguard Law’s article on laid off vs. terminated in Ontario explains that if an employment contract does not clearly allow temporary layoffs, a sudden layoff can amount to constructive dismissal.
A new contract may be the employer’s attempt to add that right for the future.
Can My Employer Change My Job Without My Agreement?
Some minor changes may be allowed. But major changes to fundamental terms can create legal risk.
A substantial change to pay, duties, title, hours, location, bonus structure, or reporting relationship may amount to constructive dismissal. Vanguard Law explains that constructive dismissal can occur when an employer makes a fundamental, unilateral change to employment terms, and typical triggers include significant pay cuts, demotions, major changes to duties, hours, or location, prolonged unpaid layoffs, or toxic workplace conditions.
The Ontario Court of Appeal addressed unilateral contract changes in Wronko v. Western Inventory Service Ltd. The court summarized that when an employer attempts to impose a fundamental contract change, an employee may accept it, reject it and potentially claim constructive dismissal if the employer insists on the new term, or clearly reject it and insist on the existing contract unless the employer properly terminates and offers re-employment on new terms.
Watch for Non-Compete Clauses
Ontario has strict rules about non-compete agreements.
The ESA defines a non-compete agreement as an agreement that prohibits an employee from engaging in work or business that competes with the employer after the employment relationship ends. The ESA states that employers generally cannot enter into employment contracts or other agreements containing non-compete agreements, and if they do, the non-compete agreement is void. There are exceptions, including certain sale-of-business situations and certain executive roles. Link: Employment Standards Act, 2000 – Non-Compete Agreements.
Employees should still be careful. Employers may use clauses labelled as confidentiality, non-solicitation, conflict of interest, fiduciary duty, or intellectual property provisions. These clauses may still affect your future career options.
What Clauses Should Employees Look For?
Before signing a new employment contract, employees should carefully review:
1. Termination and Severance Clauses
Does the contract limit you to ESA minimums? Does it exclude benefits, bonuses, commissions, or equity during the notice period?
2. Bonus, Commission, and Incentive Language
Does the contract say you must be “actively employed” to receive a bonus or commission? Does it remove entitlement after notice of termination?
The Supreme Court of Canada considered incentive compensation in Matthews v. Ocean Nutrition Canada Ltd., a major employment law case dealing with damages and incentive compensation during a reasonable notice period. Link: Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26.
3. Temporary Layoff Language
Does the contract allow the employer to lay you off temporarily? Is that a new right the employer did not previously have?
4. Duties and Location
Can the employer change your duties, reporting structure, work location, or schedule at its discretion?
5. Remote or Hybrid Work Terms
Does the contract allow your employer to revoke remote work or require relocation?
6. Restrictive Covenants
Does the agreement include non-solicitation, confidentiality, intellectual property, or non-compete language?
7. Policy Incorporation
Does the contract incorporate workplace policies that the employer can change later?
8. Entire Agreement Clauses
Does the new contract erase previous promises, offer letters, bonus plans, emails, or verbal agreements?
Should I Sign If My Employer Gives Me a Deadline?
Do not ignore the deadline, but do not panic-sign either.
It is common to ask for more time to review a new employment contract. A reasonable response might be:
“Thank you for sending this. I would like to review it carefully before signing. I will follow up once I have had a chance to consider the terms.”
If the employer pressures you to sign immediately, that may be a reason to get legal advice quickly.
Vanguard Law’s Toronto employment lawyer page notes that the firm helps employees dealing with employment contracts, non-compete and non-solicitation clauses, constructive dismissal, and major unwanted changes to their job.
What If I Refuse to Sign?
This depends on the situation.
Your employer may:
Leave your existing terms in place
Offer more consideration
Negotiate revised language
Give working notice of a change
Terminate your employment and offer re-employment on new terms
Attempt to pressure you into signing
The safest response depends on the contract, the proposed changes, your length of service, your compensation, and your goals.
Do not resign without legal advice. Resignation can affect severance, Employment Insurance, and your legal position. Vanguard Law’s constructive dismissal page specifically warns employees not to resign before understanding their rights.
Can I Negotiate a New Employment Contract?
Yes. Many employees can negotiate contract terms, especially if the employer wants them to sign quickly.
Depending on the facts, Vanguard Law may be able to help negotiate:
Stronger severance language
Removal or narrowing of restrictive covenants
Clear bonus or commission protections
Better remote-work language
More vacation or benefits
A signing bonus or other fresh consideration
Clearer job duties and reporting structure
Protection for equity, stock options, RSUs, or incentive compensation
Removal of broad layoff or relocation language
The key is to review the agreement before signing. Once you sign, it may be much harder to undo.
Speak With an Ontario Employment Contract Lawyer Before You Sign
A new employment contract can affect your rights for years.
If your employer has asked you to sign a new agreement, Vanguard Law can review the document, explain what is changing, and help you decide whether to sign, negotiate, or push back.
Speak with Vanguard Law before signing a new employment contract.
FAQ Section
Do I have to sign a new employment contract in Ontario?
Not necessarily. If you are already employed, your employer usually cannot force you to immediately sign new terms without legal consequences. Whether you should sign depends on what the contract changes, whether you receive fresh consideration, and what risks the new terms create.
Can my employer fire me for refusing to sign a new contract?
An employer may be able to terminate employment without cause, but it must provide proper notice or pay in lieu, subject to the ESA, common law, and any enforceable contract. Refusing to sign should not automatically be treated as misconduct.
What is fresh consideration in an employment contract?
Fresh consideration means something new of value given to an existing employee in exchange for signing new contractual terms. This could include a raise, bonus, promotion, additional vacation, or another meaningful benefit.
Can a new employment contract reduce my severance?
A new contract may try to limit your future severance or termination entitlements. Employees should have termination clauses reviewed before signing because enforceability depends on the wording and the law.
What should I do before signing a new employment agreement?
Ask for time, save a copy of your current contract, compare the new terms to your existing rights, avoid resigning, and speak with an Ontario employment lawyer before signing.