Canada: Court Confirms Promotions Don’t Always Void Termination Clauses
Bottom Line
In LaPlume v. AAA Internet Publishing Inc., 2025 BCSC 2139 (“LaPlume”), the Supreme Court of British Columbia upheld the enforceability of a termination clause that limited an employee’s notice entitlement to his contractual entitlements, despite multiple promotions and salary increases over almost a decade of service. The Court rejected the employee’s argument that these changes had fundamentally altered the employment relationship and invalidated the original contract.
For employers, the decision reinforces the principle that a well-drafted employment agreement – particularly one that anticipates future changes in role or compensation – can remain enforceable even as an employee’s position or duties evolve.
Background Facts
The plaintiff began working for AAA Internet Publishing Inc., a Kelowna-based tech company, in 2013 as a junior developer earning $42,000 per year. Over the following nine years, he received several pay increases and one promotion, eventually earning around $80,000 annually as an operations manager.
The employment contract signed at the start of his employment contained two key provisions:
- A termination clause limiting termination-related entitlements; and
- A “change clause” allowing the employer to modify the employee’s position, duties, or reporting relationship, provided the changes did not materially increase workload or hours.
When the plaintiff’s employment was terminated in 2023, the employer provided sixteen weeks’ pay in accordance with the employment agreement. The plaintiff sued, claiming that the employment agreement was no longer valid because his role had fundamentally changed over time, rendering the termination clause unenforceable. If the plaintiff’s claim was successful, he would instead be entitled to damages at common law, which could potentially far exceed those provided pursuant to his employment agreement.
The Decision
Ultimately, the BC Supreme Court dismissed the plaintiff’s claim and upheld the termination clause.
The plaintiff claimed the termination clause in the employment agreement was no longer valid on the basis that the “changed substratum” doctrine applied, i.e. that the underlying employment relationship had been “fundamentally and dramatically” altered to the point that it no longer reflected the terms of the employment agreement.
The Court disagreed and concluded the “substratum” of the parties’ employment relationship had not been “fundamentally and dramatically” altered.
First, the Court did not agree that the changes to the plaintiff’s employment were of the magnitude required for the application of the “changed substratum” doctrine.
The Court acknowledged that there had been changes to the plaintiff’s compensation and job duties. Most notably, when the plaintiff was promoted to operations manager, his job duties changed from having no responsibility over others, to having responsibility over a “small team of new hires and support representatives”. However, the Court concluded that it was predictable that his job duties would expand to involve overseeing other lesser experienced employees perform the same function. Further, the Court noted that most of the remaining terms of his employment relationship had remained the same, such as his work location, hours of work, reporting structure, and remaining job duties.
Second, the Court also concluded that the plaintiff’s salary increases were the kind of “normal salary increases” that the plaintiff would have expected when he signed his employment agreement.
Finally, the Court also placed significance on the following “change clause” in the plaintiff’s employment contract:
During your employment, the Company may change your position, title, duties, responsibilities or reporting relationship as it deems appropriate from time to time, consistent with your qualifications, skills and experience, and such change will not constitute a breach of this [employment contract] or a constructive dismissal, as long as such changes do not materially increase work duties or hours of work;
The Court noted that the changes to the plaintiff’s employment accorded with the change clause and were accordingly within the expectations of the parties at the time the execution of the employment agreement. As the Court noted, pursuant to the “change clause”, the parties expected the plaintiff’s role would evolve with his qualifications, skills and experience, which is exactly what occurred when his role evolved to overseeing less experienced developers.
Takeaways
LaPlume offers welcome guidance for employers seeking contractual certainty in long-term employment relationships. While promotions and salary increases are common over time, they may not, on their own, invalidate a termination clause – particularly where the employment agreement anticipates such an evolution.
However, LaPlume also highlights that the enforceability of termination clauses in employment contracts may be invalidated by a fundamental change to the “substratum” of an employment contract, often pursuant to one or more promotions or transfers which dramatically alters the terms and conditions of employment. While a “change clause” can help prevent a court’s finding that the “changed substratum” doctrine applies to invalidate a termination clause, it may not save termination clauses in all circumstances. To address this concern, employers should use the opportunity occasioned by a promotion to review and/or update their employment agreements, to ensure they continue to apply to the current form of the employment relationship.
Need More Information?
For more information or assistance with drafting or reviewing employment contract language, contact Spencer Knibutat at sknibutat@filionlaw.com or your regular lawyer at the firm.
