Should You Review Your Company’s Employment Contracts?
The short answer is yes, and regularly, because Canadian Courts continue to show commitment to safeguarding employees’ rights over employers in recognition of employees’ lesser bargaining power when negotiating employment contracts.
Two recent decisions of the Ontario Court of Appeal and Ontario Superior Court of Justice, Waksdale v. Swegon North America Inc. and Rutledge v. Canaan Construction Inc., raise the ever-rising bar for employers even higher when it comes to enforcing termination provisions. If our Courts of British Columbia follow suit, the consequences for employers could be very costly.
STATUTORY NOTICE VS. COMMON LAW NOTICE
I have previously discussed the difference between statutory notice entitlements and common law notice entitlements in my article on Layoffs and Constructive Dismissal. A valid written employment contract can limit an employee’s notice entitlements upon termination without-cause to the statutory minimums set-out in the Employment Standards Act but, if termination provisions within an employment contract are challenged and ultimately struck down by a Court, common law notice entitlements will apply.
In almost all scenarios, common law notice entitlements will greatly exceed the statutory minimums. 24 months’ notice has typically served as a high water mark for common law notice in Canadian Courts but there have been cases in which an employee was awarded more.
WAKSDALE V. SWEGON NORTH AMERICA INC.
In Waksdale, the employer terminated a high-salaried employee without cause and sought to limit that employee’s notice entitlement to two weeks; the statutory minimum. The applicable termination provision in the employee’s contract complied with Ontario’s employment standards legislation but the wording of a separate and inapplicable ‘termination for cause’ provision did not.
Notwithstanding the fact that the impugned just cause provision did not apply to the termination of this particular employee, Ontario’s Court of Appeal held that the employment contract must be read as a whole and refused to simply separate-out the non-compliant provision. As a result, the Court of Appeal struck down the termination provisions as a whole and ordered that common law notice would apply.
RUTLEDGE V. CANAAN CONSTRUCTION INC.
The Rutledge case involved a construction industry employee. Ontario’s employment standards legislation creates a carve-out for certain construction employees where they are not entitled to notice or severance pay on termination and, in this case, the employee was ultimately terminated without notice or pay, and sued for wrongful dismissal. The employer sought to rely on their contract that limited the employee to the statutory minimums which were nil.
In the eyes of the Ontario Superior Court of Justice, the employer’s mistake was failing to contemplate that, at some point in the future during the employee’s employment, the employee may have become something other than a construction employee and thus become entitled to statutory notice. This hypothetical violation resulted in the termination provisions being struck out entirely and the employee was awarded common law notice.
These decisions serve as a reminder to employers that employment contracts and termination provisions should be reviewed regularly to assess their enforceability in light of the ever evolving law in this area.
If you have any questions or concerns or are interested in having your company’s employment contracts reviewed, please feel free to contact us. Our team of lawyers would be happy to help you navigate your matter.
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Disclaimer: This article is not intended to serve as, or should be construed as legal advice, and is only to provide general information. No portion or use of this article will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, please get in touch with us.