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How The Word ‘Only’ Within a Contract Could Have Saved An Employer a Significant Sum of Money

Article Author, Giancarlo MazzitelliBy: Giancarlo Mazzitelli
Common Law v. Employment Standards Act

Many disputes surrounding termination entitlement come down to:

  1. The employment contract; and
  2. The Employment Standards Act, 2000, S.O. 2000, Chapter 41 (the "ESA").

If a contract does not comply with minimum standards, a trier in a case will almost always revert to common law decisions, and an employer will typically be forced to pay much more than the minimum ESA requirements.

The Court of Appeal recently touched on employment entitlement in the case of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 (CanLII), 134 O.R. (3d) 481.  In Wood, Justice Laskin J.A. stated that:

15.  At common law, an employee hired for an indefinite period can be dismissed without cause, but only if the employer gives the employee reasonable notice. In Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 998, the Supreme Court characterized the common law principle of termination of employment on reasonable notice “as a presumption, rebuttable if the contract of employment clearly specifies some other period of notice”.

16.  Ontario employers and employees can rebut the presumption of reasonable notice by agreeing to a different notice period. But their agreement will be enforceable only if it complies with the minimum employment standards in the ESA. If it does not do so, then the presumption is not rebutted, and the employee is entitled to reasonable notice of termination.

The Courts have decided that the enforceability of a termination clause relies on:

  1. The wording of the clause;
  2. The purpose and language of the ESA; and
  3. The jurisprudence on interpreting employment agreements.

The reason that the courts view employment contracts and specifically termination contracts, differently from a commercial contract is because of the importance of work in one’s life.

The Public Service Employee Relations Act (Alberta) is a commonly quoted resource on the importance of employment, which states at p. 368:

Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.

This was further reinforced by the courts in the decision of Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701.

The significance of employment and the vulnerable state that an employee is left in when a termination occurs has created several considerations due to the employee within the common law.  The include the considerations that:

  1. The employee, when entering into an employment agreement, typically lacks strong bargaining power;
  2. The employee is unfamiliar with the ESA;
  3. The ESA is a ‘remedial legislation’ created to protect employees and courts should encourage employers to comply with the minimum standards; and
  4. The employee should know at the beginning of the employment, what the employee will be entitled to at the end of the employment.

Without Cause Termination, Ambiguity in Clause

If a termination clause is ambiguous and fails to meet the standards of the ESA, a trier will be forced to revert to common law damages.

This was affirmed in the decision of Vinette v. Delta Printing Limited, 2017 ONSC 182 at paragraph 5, 278 A.C.W.S. (3d) 756:

Termination Without Cause: Delta may terminate your employment at any time on a without cause basis by providing you with written notice of termination or payment in lieu of that notice and severance pay, if applicable, mandated by the ESA.

In the event of without cause termination Delta will continue those benefits mandated by the ESA for the period required by the ESA, and you will be responsible for the replacement of such benefits thereafter.

Delta included several ambiguous terms and did not exclude common law damages.

Macleod J. specifically concluded and affirmed the decision Machinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, 7 O.R. (3d) 480, and stated that:

“[a]s a matter of law, if an employer wishes an employee to contract out of rights that accrue at common law, the words of limitation must be clear and the significance of the provision must be made clear” (para. 16).

In the decision of Nogueira v. Second Cup, 2017 ONSC 6315 (CanLII), Second Cup used a slightly different approach to their termination clause found at paragraph 284:

If the Second Cup terminates your employment, it will comply with its obligations under the employment standards legislation in the province in which you work (the ‘Employment Standards Act’).

In Nogueira, Morgan J determined that “there was no explanation or warning“ and “did not curtain the employee’s right to the common law principal of reasonable notice.

Recent Decisions, Compliant Clause Example 

In Bergeron v. Movati Athletic (Group) Inc., 2018 ONSC 885, Justice M. O’Bonsawin stated that Movati’s clause was too ambiguous and actually went a step further.  Justice M. O’ Bonsawin stated that in order for Movati to maintain and enforce the ESA notice period, a clearer language excluding common law should have been used and provided a specific example found:

[23]  In the present case, in order for Movati to have been successful in its argument to exclude common law damages, it would have had to make the language more clear and have stated, for example:

Movati Athletic Inc. may terminate your employment without cause at any time during the term of your employment upon providing you with notice or pay in lieu of notice, and severance, if applicable, only pursuant to the Employment Standards Act, 2000 and subject to the continuation of your group benefits coverage, if applicable, only for the minimum period required by the Employment Standards Act, 2000, as amended from time to time.

Synopsis

Prior to a synopsis, it is important to note that this blog was written for educational purposes only and does not even begin to scratch the surface of employment law requirements.  Any employment law inquiries surrounding compliance should be reviewed by an employment lawyer.

The most notable summary above surrounding termination clauses continues to be ambiguity. An employee should know, at the onset of the employment agreement, exactly what they will be entitled to if they are terminated.

The most recent decision of Bergeron above provides just how important a singular word can be. The example provided added the word ‘only’ which in the trier’s point of view, would have excluded common law remedies or damages.

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