THE EMPLOYERS' EDGE
If “Only” the Termination Clause was Valid: Ontario Superior Court finds termination clause violates the ESA due to its use of “and/or” and “only”
A recent case Quesnelle v. Camus Hydronics Ltd. (2022) ONSC 6156 demonstrates the importance of carefully and properly drafting an employment contract. In this matter, the Superior Court of Ontario found that the use of “and/or” and “only” in a termination clause contravened the Employment Standards Act, 2000 (“ESA”) and rendered the employment contract void.
Background
At common law, employees hired for an indefinite period of time can be dismissed without cause but only if the employer gives the employee reasonable notice. However, the Supreme Court of Canada characterized this principle as a presumption that is rebuttable if there is a contract of employment clearly specifying some other period of notice. In Ontario, employers can rebut this presumption through a termination clause but it will only be enforceable if it complies with the minimum employment standards found in the ESA. If it does not do so, or if it violates the ESA, in any way then the presumption is not rebutted and the employee is entitled to a common law reasonable notice.
This presumption is exactly why well drafted employment agreements are crucial for employers as the common law notice period is considerably longer in most cases than the notice period, and where applicable, severance pay provisions in the ESA. If the termination clause is at all unclear or ambiguous in its compliance with the minimum entitlements under the ESA then it will be considered void and unenforceable. If a provision within the termination clause is void the Court will not simply strike out the offending provision, instead, the Court will treat the entire clause as void.
The Case
The plaintiff, Quesnelle, had been employed with the defendant, Camus Hydronics Ltd., since 2014. The plaintiff’s employment was governed by an employment contract that contained the following termination clause:
“During your Probation Period and afterwards, you will be entitled only to notice of termination, termination pay and/or severance pay as required by the Ontario Employment Standards Act.”
The Court found that the effect of the word “only” limited the plaintiff’s entitlement to termination pay and/or severance pay only and possibly excluded them from other ESA entitlements they would receive when dismissed.
Further, as the plaintiff had been employed with the Company for over five years he was entitled to severance pay under the ESA. However, the Superior Court found that the “and/or” implied that the employer could pay termination pay or severance, which is contrary to the ESA. For those reasons, the termination clause was found to be void and unenforceable and the plaintiff was entitled to reasonable notice under common law.
Key Takeaways
This case clearly shows the importance of working with legal counsel to prepare a termination clause that can successfully limit employer liability. If the plaintiff’s employment was governed by a valid termination clause the employer would have owed him 7 weeks’ notice of termination and 7.2 weeks’ severance pay. Since the plaintiff’s termination clause was not valid, the Court found that the employer was required to give the plaintiff ten (10) months’ notice.
If you require assistance preparing employment contracts, the lawyers for employers at CCPartners can help. Click here for a list of lawyers who can assist you drafting agreements and all your other labour and employment needs.
Click HERE to access CCPartners' “Lawyers for Employers” podcasts on important workplace issues and developments in labour and employment law.