Canadian HR Reporter

N E W S 14 www.hrreporter.com Without-cause provisions in peril after court decision After a recent Court of Appeal decision in Ontario, employers may want to take a good look at their employment contracts and without-cause termination provisions to see if they're still up to snuff, finds John Dujay cause termination provision is no longer enforceable." Employers may feel blindsided Employers may feel blindsided by this ruling, says Stuart Rudner, founder of Rudner Law in Toronto. "Most employers probably don't keep up to date on these developments; they've got employment contracts that they think will protect them in the event of dismissal. At some point, they're going to find out that it's not worth the paper it's printed on," he says. "This will have tremendous impact on employment law and employers because I think the vast majority of termination clauses that I see are probably now unenforceable." The ruling may give employees more ammunition during terminations and allow them to challenge more clauses, says George Hamzo, associate lawyer at Lerners Lawyers in London, Ont. "My suspicion is that many more termination provisions and contracts will be ruled to be invalid based on the Court of Appeals decision. Certainly, Waksdale then sued for wrongful d i s m i s s a l a n d c h a l l e n g e d t h e termination-for-cause provision, saying it breached his minimum requirements under the Employment Standards Act (ESA). Neither the ruling of the lower court or the Court of Appeal reproduced the provision because both parties agreed early on that it contravened the act. In allowing the appeal, the appeal court said an employment agreement must be interpreted as a whole and not on a piecemeal basis. "The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee's common law rights on termination, violated the employee's ESA rights." It's going to be a frustrating decision for employers, "especially those who have spent a lot of time and resources updating their without-cause termination provisions in recent years," says Talia Bregman, an associate at Bennett Jones in Toronto. "But even if the without-cause provision is perfect, this case creates some risk that what you thought was a perfect without- more employees will be more willing to challenge certain termination provisions than they otherwise would have been," he says. "It's a big deal for employers because it has the potential to be quite costly." Generally, to be considered legal, employees can be fired for just cause and receive no severance pay or notice if they commit an egregious action, says André Nowakowski, a partner at Miller Thomson. "For example, if there's something in the for-cause definition that captures an item that would not be considered to be willful misconduct, disobedience or willful neglect, then that's the sort of item that would have to be removed from the contract because, at this point, based on the Court of Appeals decision, it creates a real risk of invalidity of the termination clause as a whole," he says. "It is certainly a bit of a nuanced approach, but, for example, there might be employment contracts that say something like 'Just cause includes being charged for a criminal offence.' Well, just being charged for a criminal offence may not even come close to being willful misconduct, disobedience or willful neglect. What the Court of "It's going to be a frustrating decision for those employers who have spent time and resources updating their without- cause termination provisions." Talia Bregman, Bennett Jones A recent Court of Appeal ruling in Ontario may require many employment contracts to be changed after a justice found the illegality of one clause negatively affected the entire agreement. The case, Waksdale v. Swegon North America, hinged on the enforceability of a termination for just cause clause in employment contracts. Benjamin Waksdale was hired as director of sales for Swegon North America on Jan. 8, 2018 for about $200,000 per year. The company terminated his employment without cause on Oct. 18 and paid him two weeks' salary in lieu of notice. ONTARIO'S EMPLOYMENT STANDARDS 1 week Minimum termination notice required, after 3 months of service $2.5 million Minimum employer payroll requiring severance pay 5 years Minimum time employed before qualifying for severance Source: Ontario government

• Cover