Canadian HR Reporter

RELATED CASES However, the parties agreed that the without-cause provision was enforceable because it did comply with the ESA. The only issue for the lower court to decide was whether the invalidity of the for-cause provision also rendered the without-cause provision invalid and unenforceable. The court found that it did not, applied the valid without-cause provision (as the employer had) and dismissed Waksdale's lawsuit. In reaching this conclusion, the lower court noted that the without-cause provision was clear, unambiguous and capable of being read on its own without reference to the for-cause provision. As Waksdale's termination was without cause, it was the only termination provision that was relevant. Court of Appeal takes different view In a very brief decision, the Court of Appeal allowed Waksdale's appeal and struck down both termination provisions as violating the ESA. According to the court, the two provisions had to be read together and not in a piecemeal fashion. If one provision was invalid, it would render the other provision invalid as well, and a severability provision could not avoid this. "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. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated or whether the provisions are by their terms otherwise linked. Here the motion judge erred because he failed to read the termination provisions as a whole and instead applied a piecemeal approach without regard to their combined effect." Further, the court dismissed as irrelevant the employer's argument that it only relied on the valid without-cause provision and never sought to rely on the unenforceable for-cause provision. Lessons for employers The Waksdale decision is an unfortunate one for employers. Not only does it appear to misapply the law of severability in contractual relations, it arguably does not give effect to the intentions of the parties: • the two termination provisions were contained in separate and discrete provisions of the agreement and stood on their own as independent clauses • the two termination provisions addressed wholly different fact scenarios (for cause versus without cause) • the without-cause provision was clear, unambiguous and valid in its own right • the employer sought to rely on the valid without-cause provision, not the invalid for-cause provision • Waksdale — a senior manager at the time he signed the contract — was likely never a vulnerable employee. This decision serves as a strong reminder to employers to review their employment agreements regularly to ensure compliance with the current (fluctuating) state of employment law in Canada. If the for-cause language in your organization's employment agreements includes either of the following potential issues, you may wish to have your contracts updated: • Does the for-cause language assert that specific types of misconduct will constitute cause and disentitle an employee to any notice of termination or pay in lieu? The ESA narrowly defines the types of behaviour that will disentitle an employee to pay in lieu of notice of termination. • Does the for-cause language fail to recognize that there may be situations in which an employee dismissed for cause may still have termination entitlements under the ESA? There may be circumstances where the reason for dismissal constitutes just cause at common law but does not meet the "willful misconduct" threshold under the ESA. Failure to reference that an employee may still have ESA entitlements in a dismissal for-cause scenario may put the enforceability of this provision (and the rest of the termination clause) at risk. CHRR Priya Sarin and Matthew Badrov are lawyers with Sherrard Kuzz LLP, one of Canada's leading employment and l a b o u r l a w f i r m s , r e p r e s e n t i n g employers. They can be reached at (416) 603-0700 (main), (416) 420- 0738 (24-hour) or by visiting www. sherrardkuzz.com. ROSSMAN V CANADIAN SOLAR INC., 2019 ONCA 992 (ONT. C.A.) Termination clause unenforceable because benefits ended after four weeks (less than statutory entitlement after four years), despite allowing notice in accordance with ESA. NEMETH V. HATCH LTD., 2018 CARSWELLONT 142 (ONT. C.A.) Termination clause that limited common law notice was valid. It didn't have to expressly include all possible statutory entitlements, just not expressly exclude them. BELLINI V. AUSENCO ENGINEERING ALBERTA INC., 2016 CARSWELLNS 735 (N.S. S.C.) Termination clause providing for notice "in accordance with the provincial employment standards legislation" was vague and didn't exclude common law notice entitlement. 24 HOUR 416.420.0738 Your workplace experts. 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 Murphy's Law 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.

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