Insight

Dusting Off the Original Employment Agreement – What Happens When an Employee’s Role Changes?

Dusting Off the Original Employment Agreement – What Happens When an Employee’s Role Changes?

Colleen Hoey

Colleen Hoey

August 11, 2021 03:31 PM

Claims of constructive dismissal are typically triggered by adverse changes to an employee’s position such as the loss of managerial responsibilities, significant wage cuts and demotions. However, it is also the case that positive, mutually rewarding and welcome changes to an employee’s roles and responsibilities can have an impact on the underlying employment agreement.

The Changed Substratum Doctrine

In essence, the changed substratum doctrine stands for the principle that where significant changes have been made to an employee’s position, role and or responsibilities, the foundation on which the employment contract was built, may have eroded to the point that the notice provisions in the employment contract may have become unenforceable. The changed substratum doctrine was at the heart of the recent decision in Celestini v. Shoplogix Inc., 2021 ONSC 3539 (CanLII).

Mr. Celestini co-founded Shoplogix in 2002. In 2005 he signed an employment agreement with the company which remained the only written employment agreement signed between the parties until his termination in 2017. At the time of his termination, he contended that the substratum of his contract had disappeared or sufficiently eroded to render the contractual notice period unenforceable.

Shoplogix for its part argued that Mr. Celestini was bound by the 12 month notice period in his employment contract as his role at Shoplogix did not significantly change during his employment.

In arriving at its decision, the court considered the following facts:

In 2005 when he started as the CTO, Mr. Celestini was not responsible for any operational programs or anything directly related to sales or research and development. He had no staff, nor any managerial responsibilities. By 2007, Mr. Celestini was expected to handle important managerial and operational duties that extended well beyond the limited role he initially performed as CTO. Following the layoff of many other senior members of the leadership team Mr. Celestini’s role was further expanded. The organization came to rely on him to handle important managerial and operational duties that extended well beyond the limited CTO role that he initially performed.

In the end the court found Mr. Celestini was assigned significant additional responsibilities that led the substratum of his written employment agreement to disappear. It followed that the 12 month contractual notice period in his employment agreement was considered unenforceable and instead Mr. Celestini was awarded 18 months of notice.

Commentary

  • The court in this case paid attention to the impact of the layoffs of other employees (who were not replaced) on Mr. Celestini’s roles and responsibilities. While layoffs do reduce headcount, they do not always correlate with a decrease in work. This case seems to suggest that where those employees who are left behind are expected to shoulder a significant additional burden, this increase in workload may be a factor in a substratum argument.
    .
  • Celestini’s job title remained the same between 2005 and his termination. The absence of a change in title will not be determinative of whether or not the employee’s roles and responsibilities have changed significantly enough to find that the substratum has been eroded.
    .
  • This case also highlights the importance of job descriptions. While Shoplogix tried to argue that the change in Mr. Celestini’s role was not significant, the absence of a job description, as well as the failure to produce witnesses to contradict Mr. Celestini’s testimony as to his evolving roles and responsibilities over the years left the employer without any meaningful evidence to support its position.
    .
  • For employers this case supports the often repeated advice of the importance of regularly reviewing your employment agreements to ensure that they are current. In the case at hand, Shoplogix significantly amended its compensation plan in 2008. At the time the company did not mention or ratify its existing Employment Agreement with Mr. Celestini. The court wrote “As the ICA substantially changed his compensation, I am satisfied that Shoplogix ought to have ratified the Termination Clause in the Employment Agreement had it wished to continue relying on its terms.”
    .
  • Employers may also want to consider using language in their contracts to address changes in circumstances although one cannot assume that radical changes in an employee’s role will be condoned on the strength of catch all language. Notably, Shoplogix did try to argue that its contract with Mr. Celestini did allow it to impose changes to his role as CTO. In particular they relied on the term of the contract that required Mr. Celestini to devote his full working time and attention

“to the performance of the duties to be performed by him hereunder and to the performance of any other duties that may reasonably from time to time be assigned to him by the Chief Executive Officer of [Shoplogix] and/or the board of directors of [Shoplogix].”

The Court disagreed and concluded that the language was NOT sufficiently clear to allow Shoplogix to make substantial or fundamental changes to the CTO role.

  • Employees who have been terminated may want to consider whether there have been significant changes in their roles and responsibilities and discuss those changes with their legal counsel.

Related Articles

An Employer’s Guidebook to Responding to Online Harassment


by Brent Siler and Belle Harris

Navigating online defamation against your business requires strategic responses. Two employment lawyers guide how to leverage contracts, understand social media limitations and the risks of legal action.

Image of person pushing giant phone with mouth and words coming out

Avon Calling


by Rebecca Blackwell

Nostalgia-soaked childhood memories of the neighborhood "Avon lady" can mask an insidious reality: Multilevel marketing companies are often little more than polished Ponzi schemes. My experience is illustrative.

Multilevel Marketing Is Not Employment

Options for a Wrongfully Dismissed Employee


by Stacey Reginald Ball

Mediation, Negotiation, Lawsuit

Options for a Wrongfully Dismissed Employee

How College Athletes Will Be Paid Under California’s Fair Pay to Play Act


by Hugh F. Murray III

Another Challenge to NCAA’s Financial Structure

College Athletes Will Be Paid Under New Law

Trending Articles

Discover The Best Lawyers in Spain 2025 Edition


by Jennifer Verta

Highlighting Spain’s leading legal professionals and rising talents.

Flags of Spain, representing Best Lawyers country

Introducing the 2026 Best Lawyers Awards in Australia, Japan, New Zealand and Singapore


by Jennifer Verta

This year’s awards reflect the strength of the Best Lawyers network and its role in elevating legal talent worldwide.

2026 Best Lawyers Awards in Australia, Japan, New Zealand and Singapore

Unveiling the 2025 Best Lawyers Editions in Brazil, Mexico, Portugal and South Africa


by Jennifer Verta

Best Lawyers celebrates the finest in law, reaffirming its commitment to the global legal community.

Flags of Brazil, Mexico, Portugal and South Africa, representing Best Lawyers countries

How to Increase Your Online Visibility With a Legal Directory Profile


by Jennifer Verta

Maximize your firm’s reach with a legal directory profile.

Image of a legal directory profile

Paramount Hit With NY Class Action Lawsuit Over Mass Layoffs


by Gregory Sirico

Paramount Global faces a class action lawsuit for allegedly violating New York's WARN Act after laying off 300+ employees without proper notice in September.

Animated man in suit being erased with Paramount logo in background

The Future of Family Law: 3 Top Trends Driving the Field


by Gregory Sirico

How technology, mental health awareness and alternative dispute resolution are transforming family law to better support evolving family dynamics.

Animated child looking at staircase to beach scene

Effective Communication: A Conversation with Jefferson Fisher


by Jamilla Tabbara

The power of effective communication beyond the law.

 Image of Jefferson Fisher and Phillip Greer engaged in a conversation about effective communication

The 2025 Legal Outlook Survey Results Are In


by Jennifer Verta

Discover what Best Lawyers honorees see ahead for the legal industry.

Person standing at a crossroads with multiple intersecting paths and a signpost.

The Best Lawyers Network: Global Recognition with Long-term Value


by Jamilla Tabbara

Learn how Best Lawyers' peer-review process helps recognized lawyers attract more clients and referral opportunities.

Lawyers networking

Safe Drinking Water Is the Law, First Nations Tell Canada in $1.1B Class Action


by Gregory Sirico

Canada's argument that it has "no legal obligation" to provide First Nations with clean drinking water has sparked a major human rights debate.

Individual drinking water in front of window

New Mass. Child Custody Bills Could Transform US Family Law


by Gregory Sirico

How new shared-parenting child custody bills may reshape family law in the state and set a national precedent.

Two children in a field holding hands with parents

Jefferson Fisher: The Secrets to Influential Legal Marketing


by Jennifer Verta

How lawyers can apply Jefferson Fisher’s communication and marketing strategies to build trust, attract clients and grow their practice.

Portrait of Jefferson Fisher a legal marketing expert

Finding the Right Divorce Attorney


by Best Lawyers

Divorce proceedings are inherently a complex legal undertaking. Hiring the right divorce attorney can make all the difference in the outcome of any case.

Person at a computer holding a phone and pen

New Texas Law Opens Door for Non-Lawyers to Practice


by Gregory Sirico

Texas is at a critical turning point in addressing longstanding legal challenges. Could licensing paralegals to provide legal services to low-income and rural communities close the justice gap?

Animated figures walk up a steep hill with hand

The Future of Canadian Law. Insights from Best Lawyers: Ones to Watch Honorees


by Jennifer Verta

Emerging leaders in Canada share their perspectives on the challenges and opportunities shaping the future of Canadian law

Digital eye with futuristic overlays, symbolizing legal innovation and technology

Family Law Wrestles With Ethics as It Embraces Technology


by Michele M. Jochner

Generative AI is revolutionizing family law with far-reaching implications for the practice area.

Microchip above animated head with eyes closed