By Stephen Dugandzic
In Goberdhan v Knights of Columbus, 2023 ONCA 327, the Ontario Court of Appeal addressed the enforceability of arbitration clauses in employment contracts and the necessity of fresh consideration for contract modifications.
Factual Background:
Neil Goberdhan was engaged as a field agent by the Knights of Columbus, a fraternal benefit society offering insurance products. Over his tenure, Goberdhan signed three contracts: the initial agreement in 2011, followed by two subsequent contracts in 2018 and 2019. The latter two contracts introduced mandatory arbitration clauses. Upon termination in April 2019, Goberdhan initiated a wrongful dismissal lawsuit, claiming he was an employee entitled to severance, outstanding wages, commissions, and punitive damages. The Knights of Columbus sought to stay the proceedings, invoking the arbitration clauses in the second and third contracts.
Legal Issues:
Validity of Arbitration Clauses: Whether the arbitration clauses in the second and third contracts were enforceable, considering the requirement of fresh consideration.
Court’s Analysis and Conclusions:
Fresh Consideration: The Court affirmed the motion judge’s finding that the second and third contracts lacked fresh consideration. The only change in these contracts was the addition of arbitration clauses, which did not confer any new benefit to Goberdhan. Continued employment alone does not constitute sufficient consideration for new contractual terms. Therefore, the arbitration clauses were unenforceable.
Significance:
This decision underscores the importance of providing fresh consideration when modifying employment contracts, especially when introducing clauses that may limit an employee’s rights, such as mandatory arbitration provisions. Employers must ensure that any new contractual terms are supported by additional benefits to the employee to be enforceable.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018.