Updating an Employment Agreement Equals Constructive Dismissal?

***A Lesson for Employers:* *Timothy Comeau v. Valcom Consulting Ltd. –*** In a tightening labour market, employment disputes over contract changes can quickly escalate into costly litigation, reputational risk, and operational disruption

A recent New Brunswick decision serves as an important warning for employers who update employment agreements without clearly communicating material changes to employees.

In Timothy Comeau v. Valcom Consulting Ltd., 2025 NBKB 253 (CanLII), the Court found that an employer constructively dismissed a long-service employee after presenting a new contract that significantly reduced termination rights, even though the employee initially objected only to salary.

This case highlights how changes to termination, layoff, and suspension provisions can fundamentally alter the employment relationship and expose employers to wrongful dismissal liability.

What Happened?

Mr. Comeau had worked with Valcom Consulting since 2009 and, from 2016 onward, under a series of fixed-term employment contracts. When his most recent fixed-term contract was nearing expiry in March 2024, the employer presented him with a new agreement.

While the salary increase offered became the focus of early discussions, the new contract also introduced major changes, including:

Termination provisions limiting entitlements to Employment Standards Act, 2000 minimums
New layoff and suspension clauses
Broad employer discretion to alter duties and working conditions

These provisions were materially different from the employee’s previous contracts, which did not contain such restrictions.

Although the employee initially raised concerns about compensation, he later learned, after reviewing the contract with legal counsel, that the new agreement substantially reduced his legal protections. He did not sign the contract and ultimately left the workplace when the fixed-term agreement expired.

The employer argued that the employment relationship simply ended with the expiry of the fixed-term contract and that no dismissal had occurred.

The Court disagreed.

Why the Court Found Constructive Dismissal

The Court applied the Supreme Court of Canada’s framework from Potter v. New Brunswick Legal Aid Services Commission and confirmed that constructive dismissal occurs when an employer unilaterally makes a fundamental change to essential terms of employment.

Justice DeWare held that changes to termination, layoff, and suspension provisions go to the heart of the employment relationship and constitute substantial terms of employment. Reducing an employee’s termination entitlements to statutory minimums was found to be a material change, even though the employee had not raised those concerns at the time the contract was presented.

Crucially, the Court emphasized that the employee was not properly informed of these material changes, nor was there meaningful discussion about how the new contract altered his rights. As a result, the employer was found to have constructively dismissed the employee and was ordered to pay damages based on a ten-month notice period.

Key Lessons for Employers

This decision reinforces several important principles for employers across Canada:

1. Material contract changes carry real legal risk
Termination provisions, layoff rights, and suspension clauses are not “administrative” terms. Changes to these provisions can fundamentally alter the employment relationship.

2. Expiry of a fixed-term contract does not always end the legal risk
Even where a fixed-term contract expires, how the employer conducts itself during renewal discussions matters. Introducing adverse new terms without transparency or consultation can still trigger liability.

3. Employers should encourage employees to get independent legal advice
The Court accepted that employees may not immediately appreciate the full legal impact of new contract language. Employers cannot rely on silence or lack of immediate objection as consent. Employees should be encouraged to seek independent legal advice.

4. Employers must be careful when modernizing contracts
While updating contracts to reflect evolving case law is often necessary, doing so without proper communication and consideration can expose employers to constructive dismissal claims.

Why This Matters in Today’s Employment Climate

As employers increasingly revisit employment agreements to address termination language, remote work arrangements, layoff rights, and policy compliance, this case is a reminder that contract updates must be handled thoughtfully.

In a tightening labour market, employment disputes over contract changes can quickly escalate into costly litigation, reputational risk, and operational disruption.

How Minken Employment Lawyers Can Help

At Minken Employment Lawyers (Est. 1990), we work with employers across Ontario and beyond to proactively manage employment contract risk. Our team advises on:

Drafting and updating enforceable employment agreements
Structuring contract renewals and amendments to minimize constructive dismissal exposure
Termination planning, ESA compliance, and litigation risk mitigation
Strategic HR and workplace policy audits

If you are planning to introduce new employment agreements, revise termination clauses, or modernize workplace policies, now is the time to get legal guidance before problems arise. Speak with Minken Employment Lawyers (Est. 1990) to ensure your contracts protect your business and withstand legal scrutiny. Visit www.minkenemploymentlawyers.com or call 905-477-7011 or email at contact@minken.com to book a consultation.

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Please note that this article is for informational purposes only and does not constitute legal advice or opinion.