Introduction

Recent case law has overwhelmingly rejected termination clauses that purport to limit an employee's entitlements upon termination to the minimum notice required by applicable employment standards legislation. In Ontario, provisions that have failed to reference severance pay or benefit continuation have been found to be invalid, resulting in common law notice that far exceeds the intended contractual entitlement. However, the 2015 Ontario Superior Court of Justice decision in Oudin v Le Centre Francophone de Toronto(1) diverged from that case law and was recently upheld by the Ontario Court of Appeal.(2)

Facts

The employer – a non-profit organisation that published a directory of cultural, educational, professional and business resources for the francophone community in Toronto – hired the employee as project manager for the publication.

After almost 13 years of service, the employee's employment was terminated on a without-cause basis when the publication was discontinued. The employee's employment agreement, which was written in French, included a termination provision that purported to displace the employee's entitlement to common law reasonable notice.

Pursuant to the employment agreement, the employee was provided with termination and severance pay in accordance with the Ontario Employment Standards Act, and his benefits were maintained beyond the statutory notice period.

Although the employer offered additional sums above and beyond the employee's contractual or statutory entitlements in exchange for a release, the employee refused to sign the release. Instead, he initiated a wrongful dismissal action.

Decision

On a motion for summary judgment, the employee argued that the termination clause was void because it violated the Ontario Employment Standards Act. The judge translated the termination clause from French to English and found that the employee's entitlement in the event of a without-cause termination was the greater of 15 days' notice or "the minimum" prescribed by the act.

The employee contended that the reference to 15 days' notice – a shorter period than he was entitled to at law by the date on which he signed the employment agreement – was at least ambiguous, if not a disguised and invalid attempt to contract out of the Ontario Employment Standards Act. This rendered the termination clause void and entitled him to common law reasonable notice.

The judge was not persuaded. He found that the parties intended that the greater period of time would apply, in which case the employee would receive no less than the minimum entitlements prescribed by the Ontario Employment Standards Act . In any event, the judge noted that the employment agreement included a clause that provided that the termination provision would be modified if any part of it were found to be invalid. Accordingly, the judge found that the employee was not entitled to reasonable notice at common law, the parties having agreed to only the notice prescribed by the act.

Appeal On appeal, the employee argued that the judge had incorrectly translated the termination clause when it was translated to "the minimum" required by the statute rather than the correct translation to "the minimum notice" required. The employer and the appeal court did not disagree.

However, the court found that, irrespective of the translation error, the judge understood that the termination clause referred to notice only, rather than all of the requirements of the Ontario Employment Standards Act, such as severance pay and benefit continuation.

Ultimately, the court deferred to the motion judge's interpretation that there was no intent to contract out of the act. The court found no error in his conclusion that the termination clause was enforceable despite the fact that it did not reference severance pay or benefit continuation.

Comment

This case stands apart from most of the case law on the subject. Most cases find that failure to provide for severance pay and continuation of benefits in the termination provision renders the entire termination clause void. While perhaps the judge was persuaded that there was no intention to contract out of the Ontario Employment Standards Act, since the employer did in fact comply with the act by paying notice and severance and continuing the employee's benefits, prior cases have nevertheless found that this conduct does not cure an unenforceable termination clause.

The other possibility is that this decision represents a significant change in the legal landscape with respect to the enforceability of Ontario Employment Standards Act-only termination provisions.

For further information on this topic please contact Rachel Younan at Fasken Martineau DuMoulin LLP by telephone (+1 416 366 8381) or email (ryounan@fasken.com). The Fasken Martineau DuMoulin LLP website can be accessed at www.fasken.com.

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Endnotes

(1) 2015 ONSC 6494.

(2) 2016 ONCA 514.

This update was reprinted with permission from Northern Exposure, a blog written by lawyers in the labour, employment and human rights group at Fasken Martineau, and produced in conjunction with HRHero.com.