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Court of Appeal affirms chaos in the realm of termination clauses

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In December, 2015, I wrote a blog on the 2015 Ontario Superior Court (the “ONSC”) decision in Oudin v. Le Centre Francophone de Toronto (“Oudin”). The decision was of particular interest because the court found that a termination provision effectively displaced the common law presumption of an employee’s entitlement to reasonable notice of termination despite:

  1. Potentially offering a notice period of less than what is required under the Employment Standards Act, 2000 (the “ESA”);
  2. Not mentioning benefit continuation; and
  3. Not mentioning severance entitlements.

Although the decision did not address 2) and 3), which have been cited by courts to be required in an enforceable termination provision, the ONSC used rules of contractual interpretation to remedy a). Specifically, the court acknowledged the intent of the employer to provide at least ESA minimums by virtue of:

  • the contract’s reference to the ESA;
  • the employer historically providing employees with at least the ESA minimums; and
  • the existence of a boiler-plate remedial provision contained in the agreement.

Chaos Confirmed

On June 28, 2016, the Ontario Court of Appeal (the “ONCA”) released its decision that affirms the ONSC decision in Oudin. On its face, the ONCA appears to be upholding a decision that seems to be at odds with many of the decisions of the lower court. However, I do not think this opens the floodgates for employers to rely on termination provisions that do not clearly provide for all minimum entitlements under the ESA because:

  • the ONSC decision relies on the finding that the employer intended to provide the minimum ESA entitlements;
  • the ONCA appears to show substantial deference to the ONSC for its interpretation of the employment agreement (i.e. the parties’ intent); and
  • neither the ONCA nor the ONSC discuss the implications of the termination provision not mentioning benefit continuation or ESA severance.

Although this case represents a step in the direction of favouring leniency for employers in drafting termination provisions, I do not think it represents the encompassing decision I was hoping for in my previous blog. The silence of the ONCA decision around the mention of benefits and severance leaves risk for employers that do not act diligently by including termination provisions that address all entitlements under the ESA. As such, my conclusion in the December 2015 blog on the ONSC decision remains the same: it is best practice for employers to draft these clauses by clearly setting out a minimum ESA entitlement and a continuation of benefits, rather than rely on the courts to read in such elements.

David Witkowski

About the Author: Toronto employment lawyer David Witkowski supports both employee and employer clients with legal counsel in all areas of employment law, including employment contracts, wrongful dismissals, workplace policies, employment standards, workplace investigations and human rights in the workplace.