After the Supreme Court of Canada denied leave to appeal on the controversial Oudin v. Centre Francophone de Toronto decision, the Ontario Court of Appeal appears to have clarified the law with respect to the validity of termination clauses in their February 23, 2017 decision in Wood v. Fred Deeley Imports Ltd.
After approximately 8 years of employment, the Employee was terminated from their employment pursuant to a termination clause contained in the Employee’s written Employment Agreement which, pursuant to paragraph 3 of the Court of Appeal’s decision, stated the following:
“[The Company] is entitled to terminate your employment at any time without cause by providing you with 2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph…. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000.”
The Employer provided the Employee with 13 weeks working notice, as well as an additional payment of 8 weeks’ pay.
Thereafter, the Employee commenced litigation against the Employer on the grounds that the termination clause was invalid and unenforceable for a number of reasons, including that it contravened the Employment Standards Act, 2000.
Motion for Summary Judgment
The Employee brought a Motion for Summary Judgment, wherein the Motion Judge dismissed the Employee’s motion on the grounds that the termination clause was valid and enforceable, thereby disentitling the Employee to any further notice amounts.
Ontario Court of Appeal
The Employee appealed the Motion Judge’s decision to the Ontario Court of Appeal, where the decision was overturned on the grounds that the termination clause contravened the Employment Standards Act, 2000, and therefore awarded the Employee notice in excess of that provided for in the termination clause.
In reaching this decision, the Court of Appeal found that the termination clause contravened the Employment Standards Act, 2000 by:
- Containing wording which excludes the Employer’s obligation to contribute to the Employee’s benefit plans during the statutory notice period; and,
- Failing to clearly satisfy the Employer’s statutory obligation to provide the Employee with statutory severance pay.
As a result, the Employee was awarded 9 months’ notice, along with costs of the motion at $14,000.00 and costs of the appeal at $25,000.00.
Lessons for Employers
As we have written many times in our previous blogs involving termination clauses, it is of upmost importance that an Employer obtain the assistance of an Employment Law Lawyer when drafting an Employment Agreement or Hiring Letter that contains a termination clause. Given the ever changing landscape of the law and what is required to be said in writing to validate a termination clause, along with the financial amount that may be at risk if a termination clause is not drafted properly, it is crucial that proper advice is obtained for such clauses.
Lessons for Employees
Similarly, Employees should always make a conscious effort to have their termination clauses reviewed prior to signing off on an Employment Agreement or Hiring Letter, or when their employment has been terminated to obtain a legal opinion of whether the clause is valid and enforceable. As the above decision demonstrates, what is put into writing may not always be what an Employee is entitled to.
Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.