Termination Clause Invalid Due to Faulty Conflict of Interest and Confidentiality Clauses

By Kyle Burgis

The Ontario Superior Court of Justice has released another decision which demonstrates that the wording in other sections of an employment agreement or hiring letter can invalidate a termination clause that is otherwise valid. This is a must read for both Employers and Employees.

Facts

In Henderson v. Slavkin et al., the Plaintiff was the Defendant’s former receptionist for approximately 30 years. Throughout the majority of her employment, the Plaintiff was employed pursuant to a verbal contract. It was not until 2015 that the Defendant implemented written employment agreements with their employees, including the Plaintiff.

Contained within the Plaintiff’s new employment agreement was a termination clause which attempted to restrict the Plaintiff’s entitlements upon termination to her statutory minimums pursuant to the Employment Standards Act, 2000. Additionally, the employment agreement contained a Conflict of Interest section and Confidential Information section that become a focal point in this decision.

The Conflict of Interest section states:

“18. Conflict of Interest. You agree that you will ensure that your direct or indirect personal interests do not, whether potentially or actually, conflict with the Employer’s interests. You further covenant and agree to promptly report any potential or actual conflicts of interest to the employer. A conflict of interest includes, but is not expressly limited to the following:

(a) Private or financial interest in an organization with which does business [sic] or which competes with our business interests;

(b) A private or financial interest, direct or indirect, in any concern or activity of ours of which you are aware or ought reasonably to be aware;

(c) Financial interests include the financial interest of your parent, spouse, partner, child or relative, a private corporation of which the [sic] you are a shareholder, director or senior officer, and a partner or other employer;

(d) Engage in unacceptable conduct, including but not limited to soliciting patients for dental work, which could jeopardize the patient’s relationship with us.

A failure to comply with this clause above constitutes both a breach of this agreement and cause for termination without notice or compensation in lieu of notice.”

The Confidential Information section states:

“19. Confidential Information. You recognize that in the performance of your duties, you will acquire detailed and confidential knowledge of our business, patient information, and other confidential information, documents, and records. You agree that you will not in any way use, disclose, copy, reproduce, remove or make accessible to any person or other third party, either during your employment or any time thereafter, any confidential information relating to our business, including office forms, instruction sheets, standard form letters to patients or other documents drafted and utilized in the Employer’s practice except as required by law or as required in the performance of your job duties.

For clarity, confidential information includes, without limitation, all information (in written, oral, tape, cd rom, diskette, and USB keys or any electronic form) which relates to the business, affairs, properties, assets, financial condition and plans, concerning or relating to the Employer, our dental practice or patients and specifically includes all records, patient files, patient lists, patient names, patient addresses, patient telephone numbers, email addresses, invoices and/or statements, daily appointment sheets, radiographs, marketing information and strategies, advertising information and strategies, and financial information,

In the event that you breach this clause while employed by the Employer, your employment will be terminated without notice or compensation in lieu thereof, for cause.

This provision shall survive the termination of this Agreement.”

The Plaintiff signed the new employment agreement and continued working for the Defendant until November 1, 2019 when all staff, including the Plaintiff, were informed that their employment would be coming to an end on April 30, 2020.

Following her last day of work, the Plaintiff brought a legal proceeding against the Defendant claiming that she was wrongfully dismissed.

Termination Clause Decision

Following the conclusion of the Trial, the Court determined that while the termination clause contained within the Plaintiff’s employment agreement was valid, the wording of the Conflict of Interest section and Confidential Information section “were not in compliance with the [Employment Standards Act, 2000] and therefore invalidated the employment contract.” Specifically, these sections disentitled the Plaintiff to her statutory minimum entitlements upon termination for conduct that would not actually disentitle her to her statutory minimums, therefore breaching the Employment Standards Act, 2000. As a result, the Plaintiff was not bound by the termination clause contained within the employment agreement.

Importance of Information for Employers and Employees

The above case further supports that it is extremely important for Employers to have their employment agreements and hiring letters drafted by an Employment Lawyer and reviewed on a regular basis to ensure consistency with new Court decisions. Failing to do so can cause great exposure to an Employer that could otherwise be avoided.

Similarly, it is important that Employees have their termination packages and accompanying employment agreements or hiring letters reviewed prior to signing as their notice upon termination may be limited. The above case demonstrates that while a termination clause may exist, it may not be enforceable.

How Minken Employment Lawyers Can Help

At Minken Employment Lawyers, we can review hiring letters and employment agreements to determine if a Court will uphold the termination clause in to order to protect your legal interests. We can advise you on termination notice periods, draft hiring and employment agreements or help with any other workplace issue. Contact us today or call us at 905-477-7011 for assistance prior to taking any steps that may expose you to legal liability.

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