Most employers are aware of the importance and value of employment contacts, particularly for the purpose of setting out and limiting an employee’s termination entitlements. However, many employers may not be aware that employment contracts are not always set in stone and risk going stale as roles change, grow and expand. In fact, changes over time to an employee’s position, compensation or responsibilities can have an impact on the enforceability of the termination provisions in the original employment contract. This issue was recently addressed by the Ontario Court of Appeal in Celestini v. Shoplogix Inc.,2023 ONCA 131.
BACKGROUND
In 2002, Mr. Celestini co-founded Shoplogix as a technology start-up company. In 2005, he stepped down from his CEO role to that of a Chief Technology Officer (“CTO”). At the time Mr. Celestini became CTO, he signed an employment contract that limited his entitlements upon termination to a 12-month notice period. This contract remained the only written employment contract signed between the parties at the time of Mr. Celestini’s termination.
Twelve years later in 2017, Mr. Celestini’s employment was terminated without cause after Shoplogix was acquired by another company. At the time of his termination, Mr. Celestini argued that the employment contract no longer applied because his role had since substantially changed. 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 contrast, by 2017, Mr. Celestini was expected to handle important operational and managerial duties that extended well beyond his role as CTO following the layoff of senior team members and a mass restructuring. While Mr. Celestini’s title remained CTO, he was assigned significant new duties and responsibilities, including sales which involved significant international travel. Shoplogix argued that Mr. Celestini was bound by the 12-month notice period in his 2005 employment contract, as his role did not significantly change during his employment.
