Canadian Employment Law Today

Be mindful of the future with termination provisions Ontario court decision finds termination clauses aren't valid if they could violate employment standards in the future BY ANTHONY LUNGU THE ONTARIO Divisional Court has made a statement on the validity of termi- nation provisions that follow employment standards minimums in the present but po- tentially violate those minimums down the line. Claims from departing employees seek- ing damages for wrongful dismissal can be an expensive proposition for employers. To address this concern, employers have in- creasingly made use of contractual termina- tion clauses in order to limit the amount of notice owing to employees upon dismissal. Such termination clauses allow employ- ers to exercise a measure of control over the entitlements of a departing employee, typically limiting them to the minimum statutory notice and severance owing under provincial or federal employment standards legislation. However, the law is clear that termination clauses cannot be used to defeat the statu- tory minimum entitlements owing upon termination. In other words, an employer cannot "contract out" of the requirements of the applicable employment standards legis- lation. erefore, if a termination clause pro- vides for something less than the statutory minimum entitlements, then that clause will be void and the employee free to seek addi- tional notice at common law. Yet in recent years, a debate has arisen as to whether termination provisions must meet the statutory minimum at all times or simply at the time of termination. In the 1998 deci- sion of Shore v. Ladner Downs, the British Columbia Court of Appeal held that a ter- mination clause must comply with statutory minimum standards at all times or be held void and unenforceable. at decision was subsequently followed by a number of deci- sions in Ontario, such as in the 2007 decision of Slepenkova v. Ivanov and the 2011 case of Wright v. Young & Rubicam Group of Cos. More recently, however, a number of trial- level decisions, namely the Ontario cases of John A. Ford & Associates Inc. v. Keegan and Goldsmith v. Sears Canada Inc., have departed from that principle and held that a termination provision that meets the mini- mum statutory entitlements at the time of termination is enforceable, regardless of whether it may one day hypothetically run afoul of those statutory minimums. Unenforceable termination clause Given the duelling decisions at the trial court level, it has remained unclear in which direction the judicial winds would ultimate- ly blow. It appears, however, that this ques- tion has now been resolved. In Garreton v. Complete Innovations Inc., the Divisional Court of Ontario dealt with a termination provision that provided for an amount of notice that met the minimum statutory entitlement at the time of termination, but would have been void in the event that the employee had worked five or more years due to an amount of notice that would not have met minimum standards at that point in time. e court disagreed with the rea- soning in Keegan, and held that the termina- tion clause was unenforceable: "In my view, the employment contract must be considered at the time it is executed. If the termination provision is not onside with notice provisions and severance provi- sions (if applicable) of the act at the outset, then it is void and unenforceable. Potential violation in the future is sufficient." e Divisional Court has therefore pro- vided a clear statement of the law: Termina- tion clauses must meet the statutory mini- mum standards, at all times and under all circumstances, or they be held void ab initio. As stated by the court in Wright, and cited approvingly in Garreton: "It is not that diffi- cult to draft a clause that complies complete- ly with the act, no matter the circumstance." Review existing employment contracts e Garreton decision will clearly be well re- ceived by employees wishing to bring claims for additional notice upon dismissal without cause. For employers, on the other hand, it provides renewed incentive to review and revise existing employment contracts to make sure that they are compliant with the terms of the applicable employment stan- dards legislation — at all times and under all circumstances. For more information see: • Shore v. Ladner Downs, 1998 CarswellBC 973 (B.C. C.A.). • Slepenkova v. Ivanov, 2007 CarswellOnt 9912 (Ont. S.C.J.). • Wright v. Young & Rubicam Group of Cos., 2011 CarswellOnt 10754 (Ont. S.C.J.). • John A. Ford & Associates Inc. v. Keegan, 2015 CarswellOnt 4418 (Ont. S.C.J.). • Garreton v. Complete Innovations Inc., 2016 CarswellOnt 2500 (Ont. Div. Ct.). Canadian Employment Law Today | 3 Canadian HR Reporter, a Thomson Reuters business 2016 Cases and Trends ABOUT THE AUTHOR Anthony Lungu Anthony Lungu is an associate lawyer at Marvin A. Gorodensky Professional Corporation. Anthony practices all areas of employment law, with a focus on wrongful/unjust dismissal, human rights, workplace harassment, occupational health and safety, and employment standards issues. He can be reached at Anthony@dismissed.ca. "If the termination provision is not onside with notice provisions and severance provisions of the act at the outset, then it is void and unenforceable. Potential violation in the future is sufficient."

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