THE EMPLOYERS' EDGE
WE’VE BEEN WAITING FOR THIS DAY! Termination Clause Upheld by the Ontario Court of Appeal!
In the recent decision of Bertsch v Datastealth Inc, the Ontario Court of Appeal (“the Court”) upheld a motion judge’s ruling that the termination provision in an employment agreement (the “agreement”) was clear and met the minimum standards guaranteed by the Employment Standards Act, 2000 (the “ESA”). This meant that the agreement was enforceable and the Appellant’s claim to common law damages for wrongful dismissal had to be denied.
Background
The Appellant, Gavin Bertsch, was employed by the Respondent, Datastealth Inc., in the position of vice-president for approximately eight and a half months before he was dismissed without cause. Datastealth Inc. paid the Plaintiff four weeks’ pay in lieu of notice of termination, which is greater than the one week he was owed pursuant to his contract and the ESA.
Mr. Bertsch started an action against his employer, claiming that the four weeks’ pay in lieu of notice was not sufficient, and that he was entitled to common law damages for wrongful dismissal because the termination clause violated the ESA, and was therefore void and unenforceable.
Issue
The main issue on appeal was whether the termination provision in the agreement complied with the ESA to make it enforceable, or whether it was void, entitling the Appellant to reasonable notice under common law.
The Employment Agreement
The termination provision in the agreement stated the following:
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.
The Decision
In dismissing the appeal, the Court’s reasoning highlighted the language of the termination clause. Mr. Bertsch’s position was that the termination clause can be ambiguous to an ordinary person who is not well-versed with the law, as they may incorrectly believe they could be terminated without being provided notice for conduct such as negligence. The Court relied on Amberber v IMB Canada Ltd, 2018 ONCA 571 at paragraph 45, where it stated that ambiguity is “something more than mere existence of competing interpretations.” The Appellant’s position was rejected by the Court, as there was no language or legal terms used that may confuse an ordinary person or imply multiple interpretations. In fact, the termination provision specifically stated that an employee terminated “with or without cause” would receive the minimum payments and entitlements under the ESA and effectively excluded any claim under common law wrongful dismissal damages.
It is important to note that the termination clause at issue in this case also avoided common pitfalls that have recently doomed other termination clauses, such as purporting to allow an employer to terminate the employee with notice “at any time” or allowing an employer to terminate the employee without notice for “cause”, where “cause” is not defined consistently with the ESA.
Takeaways for Employers
This decision emphasizes the value of employers drafting employment agreements, specifically termination provisions, in a careful, clear and unambiguous manner to ensure that it meets the minimum ESA standards. This is the most effective way for an employer to proactively limit its legal liability when letting go of an employee.
Reach out to our team at CCPartners for any assistance in reviewing or drafting employment agreements.
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