The Ontario Court of Appeal recently upheld a termination clause that provided for the minimum standards set out in the Employment Standards Act, 2000 (ESA). Yes, you read that correctly, the clause was upheld. This is a win for employers.
In Bertsch v. Datastealth Inc., ONCA 370, the executive employee had signed an employment agreement that contained, among others, the following clause:
Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the Ontario Employment Standards Act, 2000 and its Regulations, as may be amended from time to time (the “ESA”), including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation.
You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation. You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
In this case, the executive had been employed for 8.5 months as a VP when he was let go without cause. The company paid him 4 weeks (which was higher than the 1 week’s pay he would have been entitled to under the ESA). He then sued seeking common law damages for wrongful dismissal. The enforceability of the termination clause was at issue. The matter proceeded by way of a Rule 21 motion for summary judgment and the Superior Court upheld the clause and held that it was clear and unambiguous. The executive appealed to the Court of Appeal.
On appeal, the executive argued that the termination clause was unenforceable for several reasons including (i) it could be interpreted as allowing for termination without notice in situations that do not rise to the level of “wilful misconduct” and (ii) ambiguity. The Court of Appeal did not agree and upheld the clause.
This decision confirms that employers can limit their liability to the minimum standards provided the wording of the termination clause is clear and unambiguous and does not run afoul the ESA.
If you have any questions regarding your employment agreements or require assistance revising termination clauses, please do not hesitate to contact a member of our team.
This publication is intended for general information purposes only and should not be relied upon as legal advice.
