Canadian Employment Law Today

June 16, 2021

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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©2021 Key Media Canada (HR) Ltd., a subsidiary of Key Media KEY MEDIA and the KEY MEDIA logo are trademarks of Key Media IP Limited, and used under licence by Key Media Canada (HR) Ltd. CANADIAN EMPLOYMENT LAW TODAY is a trademark of Key Media Canada (HR) Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. The publisher is not engaged in rendering legal, accounting or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The analysis contained herein represents the opinion of the authors and should in no way be construed as being either official or unofficial policy of any governmental body. GST/HST#: 79990 3547 RC-0001 How would you handle this case? Read the facts and see if the judge agrees YOU MAKE THE CALL Published biweekly 22 times a year Subscription rate: $299 per year CUSTOMER SERVICE President: Tim Duce Editor: Jeffrey R. Smith Email: Production Editor: Clare Alexander Business Development Manager: Fred Crossley Email: Phone: (416) 644-8740 x 236 NAUK Subscriptions Co-ordinator: Donnabel Reyes Email: Phone: (647) 374-4536 ext. 243 THIS EDITION of You Make the Call features a worker's challenge to the termination clause in her employment contract. The 37-year-old worker — a chartered accountant — started employment as an assistant controller for J.L. Richards & Associates, an Ottawa-based firm providing engineering, architectural, and planning services, in November 2013. Soon after, she was promoted to the position of controller, where she supervised a staff of eight people. She was responsible for the company's accounting and reported to the vice-president. The worker's employment contract included a termination clause stating that after the completion of a six-month probationary period — during which the company could terminate her for any reason with statutory notice or pay in lieu of notice, if required — her employment "may be terminated for cause at any time, without notice." It also stated that "in the event that employment is terminated for any other reason, it is understood that you will have no entitlement to common law notice of termination," and she would be provided with notice of termination or pay in lieu, plus severance pay "in accordance with the Employment Standards Act of Ontario [ESA] or any successor legislation." The clause concluded by stating that the "minimum period of notice or pay in lieu thereof specified in the act will constitute your complete entitlement to notice or pay in lieu thereof." J.L. Richards & Associates terminated the worker's employment on Feb. 19, 2020. The company paid her the balance of her outstanding pay, along with pay in lieu of notice equal to the minimum required under the ESA — six weeks' pay for service of more than six years and fewer than seven. The worker filed an application to deter - mine if the termination clause in her employ- ment contract was enforceable and claimed she was entitled to 15 months' pay in lieu of notice, including a bonus, overtime pay, bene- fits, and retirement plan contributions. YOU MAKE THE CALL Was the worker entitled to common law reasonable notice? OR Was the termination clause enforceable? IF YOU SAID the worker was entitled to common law reasonable notice, you're right. The court noted that the presumption at common law of reasonable notice of termination could only be "rebutted by clear language that complies with the minimum statutory notice provisions of the ESA; if it does not, then the presumption of reasonable notice is not rebutted." The court also pointed out that employment contracts must be interpreted in the context that terminated employees are vulnerable and in need of protection, while employees usually have less bargaining power than employers when employment agreements are made. As a result, the ESA is intended to protect the inter - ests of employees, and employers should be encouraged to draft agreements that comply with it. In addition, any ambiguity will be inter- preted in a way that gives the greater benefit to the employee, the court said. The court added that if a termination clause violated the ESA or tried to contract out of an employment standard without clearly substi- tuting a greater benefit, the entire termination clause would be void. In this case, the court found that the termin- ation clause was unenforceable because the provision for termination for cause breached the ESA. The statement that termination for cause at any time could happen without notice referred to the concept of "for cause" in both common law and legislation. However, incorporating the common law "just cause" concept meant that an employee could be terminated without notice for conduct that was not "willful" or "bad on purpose" — the only reasons an employer can legally forgo statutory notice entitlement. In addition, the "without cause" provision specifically referred to severance pay, while the next sentence said that the notice entitlement or pay in lieu constituted the complete entitle - ment to notice or pay in lieu thereof. The incon- sistency of specific references meant it was an attempt to contract out of the requirement to pay benefits and bonuses during the notice period and was also illegal, said the court. Since the termination clause was illegal, J.L. Richards & Associates was ordered to pay the worker 10 months' pay in lieu of notice, including base salary, retirement contribu - tion, bonus, overtime pay, and benefits. After subtracting mitigation income and amounts already paid, the total award was $40,273.40. For more information, see: • Lamontagne v. J.L. Richards & Associates Ltd., 2021 ONSC 2133 (Ont. S.C.J.). Worker serves notice that she wants pay in lieu of notice The termination clause allowed the company to terminate employment "for cause at any time, without notice."

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