A small technology company hired an employee in January 2025. In April it put a new agreement in front of him, a proposed CEO contract that would have transferred all of his intellectual property, assets and work product to the company. His first contract had no such clause. Within weeks he had resigned and sued, claiming constructive dismissal, conversion of his intellectual property, unauthorized use of his name and fraudulent misrepresentation.
Published October 2026
In Gratton v. 15408806 Canada Inc., 2026 ONSC 5950, the Ontario Superior Court of Justice did not decide whether any of those claims will succeed. The decision is about pleadings. But the way the court sorted the claims tells employers where their exposure sits when they change contract terms mid-employment, use an employee’s name with customers, or make promises about equity at hiring.
The court has not decided whether he was constructively dismissed. It found the claim was described clearly enough that the employer had to answer it. For employers, the lesson is to settle intellectual property ownership in the first employment contract. Adding a broad assignment clause later, without fresh consideration and a careful process, invites exactly this kind of claim.
What happened
According to the employee’s pleadings, which have not been tested in court, he signed an employment contract in January 2025. That contract did not contain an intellectual property assignment or transfer clause. On April 25, 2025, the company presented a proposed CEO employment agreement, which he did not sign. It would have required all intellectual property, assets and work product to be transferred to the company immediately. He says he owned a brand and operating model called Web Inventix AI, including a domain name, and that the company misused it.
He also alleges that the company used his name and identity with customers without his permission, including in an engagement agreement with a U.S. client dated April 30, 2025, and that it used aliases and domain names that hid the fact it was not operating from North America. He says being associated with those practices damaged his reputation and cost him specific business opportunities. He resigned, and issued his statement of claim on May 23, 2025.
The company served a demand for particulars in July 2025. The employee refused, taking the view that the company was not entitled to particulars until it had filed a defence. He also had the individual defendant noted in default. That noting was later set aside, with $2,500 in costs payable to the defendant. The employee eventually delivered nine pages of supplementary particulars in February 2026, and the company brought this motion arguing they were still not enough.
What the court decided
Associate Justice D. Michael Brown read the employee’s documents generously, given that he was representing himself, and sorted the claims as follows:
| Claim | Result on the motion |
|---|---|
| Constructive dismissal | Sufficiently particularized. The original contract had no IP clause, the later agreement added a broad transfer, and that change, together with the alleged business practices, was pleaded as the reason he lost trust and resigned. |
| Unpaid wages, expenses, benefits and vacation pay | Not particularized. He had pleaded no basis for the entitlement and no amounts. Particulars ordered. |
| Conversion of intellectual property | Not particularized. Nothing said how, when or by whom the assets were misused. Particulars ordered. |
| Unauthorized use of his name | Sufficiently particularized, including the alleged lost business opportunities. |
| Fraudulent misrepresentation | Not particularized. Statements made to the company’s clients could not support his claim; he had to set out what was said to him, by whom, when and how he relied on it. Particulars ordered. |
On documents, the court ordered the employee to produce the January 2025 employment contract, the unsigned April 2025 CEO agreement and the April 30, 2025 engagement agreement, which he had agreed to produce. It refused the company’s broader request, which read like a discovery demand for categories of documents, and refused to order production of a settlement proposal and preservation notice the company already had.
Lesson 1: settle intellectual property in the first contract
The constructive dismissal claim rests on a simple comparison: the contract he signed in January had no IP transfer, and the agreement the company proposed in April did. A constructive dismissal happens when an employer unilaterally makes a fundamental change to the terms of employment. Whether a new IP clause is fundamental will depend on the facts, especially where, as here, the employee says he brought his own brand and business model to the role. But it is a claim an employer does not need to face.
Under the federal Copyright Act, an employer generally owns copyright in work an employee creates in the course of employment, unless they agree otherwise. That default does not cover everything. It does not address inventions and other forms of intellectual property in the same way, work done outside the job, or anything the employee owned before they were hired. That is why an employment contract should say clearly who owns what, and should list any pre-existing intellectual property the employee is keeping.
If you need to add or broaden an IP clause for current employees, treat it as a contract change. Ontario courts, including the Court of Appeal in Hobbs v. TDI Hearing Systems Inc. (2004), have held that new terms imposed on an existing employee need fresh consideration to be enforceable: something of real value in return, such as a raise, a bonus or a promotion. Give the employee time to review the change and get advice, and do not present it as a condition of keeping the job.
Lesson 2: get consent before using an employee’s name
The court let the employee’s claim about the use of his name go forward, including his allegation that being linked to the company’s practices cost him business. Employers often put staff names and titles on proposals, engagement letters, websites and pitch decks without thinking twice. When the employee is senior, client-facing or building their own reputation, get written consent, describe their role accurately, and remove their name promptly when they leave.
Lesson 3: put promises about equity and ownership in writing
The fraudulent misrepresentation claim failed this round for lack of detail, not because it cannot succeed. The employee alleges he was misled at hiring about the job, equity, ownership structure and employment terms. He now has to say exactly what was said, by whom, when and how he relied on it. Start-ups and small companies recruiting senior people often discuss equity informally. Any equity offer should be documented, with its conditions, and the employment contract should include a properly drafted entire agreement clause. Even then, statements made to induce someone to accept a job can found a misrepresentation claim, so recruiters and founders should be careful about what they promise.
Lesson 4: what this decision says about defending a claim
- Respond to a claim quickly. One defendant was noted in default within weeks of service. Getting that set aside cost time, even though he recovered $2,500 in costs.
- A demand for particulars can work. The company got further particulars on three of the five claims, including full particulars of the fraud allegation, which the Rules require.
- Do not use a request to inspect as early discovery. The court refused category-based document demands before the close of pleadings, and would not order production of documents the company already had.
- Self-represented plaintiffs get some latitude. The court read the pleadings generously and looked past drafting problems. Expect a vague claim to be read in its strongest form.
Employer checklist
- Include an intellectual property ownership clause in every employment contract from day one, with a schedule of any IP the employee is keeping.
- Before changing IP, confidentiality or restrictive covenant terms for existing staff, provide fresh consideration and allow time for independent advice.
- Do not tie acceptance of new terms to continued employment without legal advice.
- Get written consent before using an employee’s name or title with clients, and remove it when they leave.
- Document equity, ownership and bonus promises in writing, and keep recruiting conversations consistent with the written offer.
- If you are sued, calendar the deadline to defend and get counsel involved before it passes.
How Achkar Law helps employers
Achkar Law drafts and reviews employment contracts for Ontario employers, including intellectual property, confidentiality and equity terms, and advises on how to introduce new terms to existing employees without creating a constructive dismissal claim. Learn more about our employment contract lawyers for employers. When a claim has already been made, our employment litigation lawyers defend it.
This article is general information about Gratton v. 15408806 Canada Inc., 2026 ONSC 5950, and is not legal advice. The decision deals with a procedural motion; the facts described are allegations in the plaintiff’s pleadings that have not been proven, and the court made no findings on the merits. Current as of October 2026. An employment lawyer can advise on your specific situation.
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