A recent decision from Chowanetz v. Ivor Forest Products Ltd., 2026 BCSC 1760 [“Chowanetz”] serves as an important reminder that seemingly harmless contract language can create unexpected legal consequences years later.
While this is a British Columbia decision, employers should not assume the reasoning will remain confined to British Columbia. If anything, the decision illustrates another avenue by which employees may challenge termination provisions, even after the Ontario Court of Appeal’s recent efforts to bring greater certainty to termination clauses in litigation.
The Facts
The employee accepted an offer in November 2020 to work as a Moulder Technician and relocated from Calgary to Chilliwack to begin employment in January 2021. Four years after the offer, on November 29, 2024, the parties signed a new employment agreement. The new contract limited entitlements upon termination to the minimum notice or pay in lieu of notice required under British Columbia's Employment Standards Act, plus one additional week of base salary conditional upon signing a full and final release. The original offer contained no comparable limitation, leaving the employee entitled to common-law reasonable notice or damages in lieu, assessed on the circumstances of his employment.
As with many mid-employment agreements, the key issue became whether the employee received fresh consideration in exchange for giving up valuable common-law rights.
The employer argued that fresh consideration consisted of:
- a wage increase;
- bonus eligibility; and
- an RRSP matching program.
The court rejected all three arguments and held that the new agreement was unenforceable. As a result, the employee became entitled to six months of common-law notice rather than the substantially lower contractual entitlement.
What Is Fresh Consideration, and Why Does It Matter?
Fresh consideration is one of the most important concepts employers must understand when updating employment contracts after employment has already begun. The common law doctrine of consideration requires that each party provide something of value in exchange for the other party's promise. This principle becomes particularly important when parties seek to amend an existing contractual relationship. When an employer seeks to amend an existing employment contract, the employee must generally receive a new benefit beyond what they are already entitled to receive.
As such, when an employer introduces a new agreement that restricts employee rights, whether through a termination clause, restrictive covenant, confidentiality obligation, or otherwise, the employee must generally receive something of real value in exchange for signing the new agreement. Continued employment alone is usually insufficient.
Examples that often qualify as fresh consideration include:
- a promotion;
- a genuine salary increase;
- a signing bonus;
- guaranteed new benefits;
- additional paid leave; or
- some other contractual benefit the employee was not already entitled to receive.
Without fresh consideration, an employee may sign the agreement and yet the agreement may still be unenforceable years later.
The Discretionary Bonus Problem
The employer argued that a bonus program formed part of the fresh consideration.
The court disagreed.
The only bonus contained in the new contract was entirely discretionary. Because the employer had no contractual obligation to pay it, the court found that it could not constitute fresh consideration supporting the new contract.
The decision highlights an interesting tension in employment law.
Employers frequently face arguments from employees that discretionary bonuses should be included in wrongful dismissal damages upon termination, because they have become a regular component of compensation.
This creates an interesting paradox:
- a discretionary bonus may be too uncertain to constitute “fresh consideration” when the contract is signed; but
- the amount of that same bonus may still become ascertainable when courts later assess termination entitlements.
As such, there can be a situation where the court rules that the bonus is purely discretionary so the termination clause is unenforceable due to lack of fresh consideration, but the employer, at the same time, has no discretion not to pay it as a part of wrongful dismissal damages as a result of its full discretionary nature.
The Surprise Finding: The Wage Increase Was Not Fresh Consideration
The most significant part of the decision involved the wage increase.
The employee's original offer letter contained the following wage annual review commitment:
"Each year thereafter upon the anniversary of your hire date a review will be completed to ensure that your wages are competitive with the local market for qualified Moulder Technicians."
When the new contract was signed, the employee's hourly wage increased from $35.00 to $38.50, approximately a 10% increase. Under most circumstances, employers would assume such an increase clearly constitutes fresh consideration.
The court disagreed.
Because the original contract already required annual wage reviews and promised wages that remained competitive with the local market, the court concluded the employer failed to establish that the employee received anything beyond what he was already contractually entitled to receive. The employer provided no evidence showing the increase exceeded prevailing market rates to go beyond its existing obligations.
As a result, the wage increase was not proved to be fresh consideration and the termination clause failed.
The Hidden Risk of "Competitive Market Wage" Clauses
From a business perspective, there was nothing wrong with the employer's objective.
Most employers want to retain valuable employees and ensure compensation remains competitive. Recording that commitment in writing may appear sensible and employee friendly.
The problem is that phrases such as:
"competitive with the local market for qualified technicians"
may create countless legal questions that nobody intended to answer when the contract was drafted.
For example:
- What is the "local market"?
- A city?
- A region?
- The province?
- Canada as a whole?
- Where is that “local market”?
- Is it where the employee physically works?
- Where the employer's head office is located?
- Where the contract was signed?
- Where the employee was recruited from?
- What is a "qualified technician"?
- An entry-level employee?
- A senior employee?
- Someone with specialized certifications?
- Someone with similar years of experience?
- Does employee performance matter?
- Is the employer obligated to increase wages regardless of performance?
- Can poor performance justify a lower increase or no increase?
- Are market adjustments affected by merit adjustments?
- What is “competitive”?
- Same as mean or median wages or else?
- Better than the above?
- What timeframe should be used to measure competitiveness?
- Mean or median wages during the entire year?
- Mean or median wages closely around the review date?
- What evidence is needed to establish a competitive market wage?
The geographic issue is particularly interesting in this case.
The employee was recruited from Calgary and relocated to Chilliwack for employment. Yet the contract referred only to wages being competitive with the "local market for qualified Moulder Technicians." What exactly does that mean? Chilliwack? The Fraser Valley? British Columbia? Western Canada? The court appears to think it should be the Fraser Valley, but was it really intended by the parties?
Different answers could produce different wage comparisons and different conclusions regarding whether the employer complied with its contractual promise.
The court did not need to answer those questions because the employer failed by not producing any evidence of the prevailing rates at all. However, the case demonstrates how a seemingly simple commitment can become the centrepiece of complicated litigation years later.
Documentation Matters
If employers decide to include a similar competitive wage review clause, this decision suggests that thorough documentation is essential.
Employers should consider maintaining:
- annual review records;
- evidence of equivalent opportunities within the local region;
- records of prevailing market rates;
- performance evaluations considered during reviews;
- documentation explaining compensation decisions; and
- written records showing why compensation remained competitive.
The practical challenge is that these records may need to be preserved for years, potentially until the employment relationship ends and all litigation risk has passed.
Without such evidence, employers may later find themselves unable to prove that a wage increase constituted fresh consideration or that their contractual obligations were fulfilled.
An Additional Risk: Back Pay Claims
The annual review clause created risks beyond the fresh consideration analysis.
Employers should remember that such clauses can also generate direct compensation claims.
An employee may argue that the employer failed to maintain compensation at competitive levels as promised and seek years of retroactive back pay or even make a constructive dismissal claim as a result.
These claims can become significant, particularly where employers have not documented their review process.
Business Intent Must Be Translated into Contract Language
Perhaps the most important lesson from this case is that employers must translate business objectives into contractual language.
The employer's business goal here was entirely reasonable. It wanted to attract and retain talent by maintaining competitive wages.
The problem was not the objective.
The problem was the wording.
Terms such as "competitive wages" make perfect business sense but can create enormous uncertainty and onus in litigation. Years later, employers may be required to prove prevailing market rate, but relevant evidence may become hard to find due to passage of time.
An alternative solution may sometimes be to use objective and verifiable benchmarks.
For example, wage increases could be tied to:
- annual inflation figures published by Statistics Canada;
- annual increases in Ontario minimum wage rates;
- fixed percentage increases; or
- other objectively measurable benchmarks.
Employers should also address what happens if those benchmarks cease to exist.
A well-drafted clause can specify:
- a replacement index;
- a successor government publication;
- the closest equivalent benchmark; or
- a predetermined method for selecting a replacement measure.
The benefit is certainty.
Rather than litigating what "competitive wages" means years later, the parties can simply determine whether the contractual formula was followed.
The broader lesson is that employers sometimes need to adapt their business objectives to legal realities. Contracts should not merely reflect what employers hope to accomplish. They should also create obligations that can be objectively measured, consistently administered, and readily proven in court.
How Hyde HR Law Can Help
At Hyde HR Law, we help employers draft employment agreements that do more than reflect business objectives.
Effective employment contracts must also remain practical, enforceable, and defensible years later when they are scrutinized by courts.
The lesson from Chowanetz is straightforward: every promise written into an employment contract carries legal consequences, including unintended ones. Sometimes a clause intended to help employee retention can ultimately undermine an otherwise enforceable termination provision.
Careful drafting by seasoned experts can ensure employment agreements reflect business realities while minimizing unexpected legal risks, evidentiary burdens, and costly litigation.
