The Ontario Superior Court of Justice decided in Wright v. Young and Rubicam Group of Companies (Wunderman) that a termination clause that is in breach, or has the opportunity to be in breach, of the statutory minimums guaranteed by the Employment Standards Act, 2000 is unenforceable and does not restrict an employee from seeking their common law notice entitlements upon termination.
On December 20, 2004, the Employee, John Wright, was hired in accordance with an employment agreement which contained a termination clause limiting the Employee’s notice entitlement upon termination to specific amounts depending on his length of service with the Employer at the time of termination.
On February 1, 2010, the Employee was terminated without cause, after completing just over 5 years of service with the Employer. At the time of termination, and in accordance with the termination clause, the Employer provided the Employee with 13 weeks notice, being in excess of the statutory minimums owed pursuant to the Employment Standards Act, 2000.
The Employee initiated legal proceedings against the Employer seeking additional notice on the basis that the termination clause was unenforceable due to it deviating from the Employment Standards Act, 2000 requirements in two ways: first, the termination clause excluded benefits, and second, in certain circumstances, the amount of notice provided in accordance with the termination clause would be less then the statutory minimum requirements.
The Ontario Superior Court of Justice’s Decision
After reviewing and analyzing the wording of the termination clause, the Ontario Superior Court of Justice found that the termination clause was unenforceable given that it excluded benefits and had the opportunity to violate the statutory minimum requirements in certain circumstances, both being in breach of the Employment Standards Act, 2000.
In reaching this conclusion, and finding that the Employee was entitled to 12 months notice, the Court stated the following:
“There is, in my view, no particular difficulty in fashioning a termination clause that does not violate either the minimum standards imposed by the Employment Standards Act or the prohibition against waiving statutory minimum requirements and there is no compelling reason to uphold a termination clause which the draftsman may reasonably be understood to have known was not enforceable either at all or under certain circumstances.”
Points of Interest
The decision summarized above demonstrates the necessity of ensuring that termination clauses are drafted accurately and in accordance with the statutory requirements outlined in the Employment Standards Act, 2000.
Termination clauses are usually included in a Hiring Letter or Employment Agreement to inform the employee in advance as to how much notice they will receive upon termination, whether with or without cause. The amount of notice indicated in the termination clause is usually less then the employee’s full common law notice entitlements, but must provide at least the statutory minimums required by the Employment Standards Act, 2000. However, as the case above demonstrates, in the event that the termination clause is drafted in such a manner that it provides, or even has the opportunity to provide less than the statutory minimums, the termination clause will be found to be unenforceable, thereby permitting the employee to receive their common law notice entitlements.
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