Canadian HR Reporter is the national journal of human resource management. It features the latest workplace news, HR best practices, employment law commentary and tools and tips for employers to get the most out of their workforce.
Issue link: https://digital.hrreporter.com/i/1212438
Priya Sarin and Matthew Badrov are lawyers with Sherrard Kuzz LLP, one of Canada's leading employment and labour law firms, representing employers. Priya and Matt can be reached at (416) 603-0700 (main), (416) 420-0738 (24-hour) or by visiting www.sherrardkuzz.com. RELATED CASES event the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement, such statutory requirements will replace the notice or payments in lieu of notice contemplated under this agreement. The Employee agrees to accept the notice or pay in lieu of notice as set out in this paragraph as full and final settlement of all amounts owing by the Employer on termination, including any payment in lieu of notice of termination, entitlement of the employee under any applicable statute and any rights which the Employee may have at common law, and the Employee thereby waives any claim to any other payment or benefits from the employer. Benefits shall cease 4 weeks from the written notice." The motions judge concluded this termination clause was void and unenforceable as the final sentence was either (a) ambiguous as it was inconsistent with the rest of the clause, or (b) an attempt to contract out of the minimum requirement of the ESA to provide benefit continuation during the statutory notice period, which could exceed four weeks. The Court of Appeal agreed, noting the language used in the saving provision was virtually identical to the language in IBM Canada. However, this provision was distinguished on the basis the final sentence referencing termina- tion of benefits after four weeks, was in direct conflict with the ESA: "In the present case, there is this terse and final sentence in the Termination Clause: 'Benefits shall cease 4 weeks from the written notice.' There is no similar language in the employment contract at issue in Amberber. Accordingly, the 2012 Employment Agreement contains, as the motions judge found, a genuine ambiguity created by the duelling language in the termination clause — the initial 'ESA trumps' language versus the concluding 'but nothing above 4 weeks' language. "Unlike the rest of the language in the Termination Clause, the four-week benefits clause is not future facing, nor does it express an intention to conform to the ESA. It cannot be the case that the saving provision here — designed to make the Termination Clause compatible with future changes to the ESA — could reconcile a conclusory provision that is in direct conflict with the ESA from the outset." The court then explained the policy reasons why a saving provision must be reviewed critically: "Employees need to know the conditions, including entitlements, of their employment with certainty. This is especially so with respect to an employee's termination – a fragile moment of stress and uncertainty. "In this context, saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA's minimum standards. Holding otherwise creates the risk employers will slip sentences, like the four-week benefits clause, into employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA — to protect employees and to ensure that employers treat them fairly upon termination." Lessons for employers Even with the best of intentions and the services of a skilled employment lawyer, there is always the possibility of ambiguity in the language of an agreement. Moreover, the law as it relates to the enforceability of termination clauses has undergone enormous change in the past few years, rendering language that may have once been enforceable, no longer so, exposing an employer to the risk of liability. It therefore remains good practice to include a saving provision in any termination provision to ensure, to the extent possible, a terminated employee receives no less than the minimum standards under prevailing employment standards legislation. The most effective way to address these risks is to proactively review and revise your organization's employment agreements on a regular basis — at least once a year. Doing nothing and hoping for the best is a not a prudent strategy. Even long-standing employment agreements can be addressed with careful planning. CHRR ANDROS V. COLLIERS MACAULAY NICOLLS INC., 2019 ONCA 679 (Ont. C.A.). A termination clause was unenforceable because the failsafe provision was worded as the employer's choice. Other options didn't meet ESA minimums. NEMETH V. HATCH LTD., 2018 CarswellOnt 142 (Ont. C.A.). A termination clause's silence on severance pay did not indicate an intention to contract out of it. Clause was enforceable. NORTH V. METASWITCH NETWORKS CORPORATION, 2017 Carswell 15733 (Ont. C.A.). Termination clause stating entitlements were based on base salary was unenforceable because commissions were excluded. Paragraph couldn't be deleted to make it enforceable; only entire clause could be removed. 24 HOUR 416.420.0738 We're the apple a day. sherrardkuzz.com | 416.603.0700 | 24 Hour 416.420.0738 | 250 Yonge St #3300, Toronto, ON M5B 2L7 | @sherrardkuzz At Sherrard Kuzz LLP we collaborate with our clients to anticipate and avoid human resources problems. We know proactive steps today will prevent painful headaches tomorrow. From human rights to health and safety, and everything in between… If you're an employer, we're the only call you need to make.