Employer’s Termination Clause Covers All The Bases

Written on behalf of Arbesman Hamilton LLP

Nobody is entitled to keep their job forever. That said, people who lose their jobs without cause are entitled to compensation in lieu of notice as prescribed by the Employment Standards Act (“the Act”). In addition to that, common law has traditionally given terminated employees even more notice than what is called for in the Act. Employers are able to draft contracts limiting notice to the statutory minimum, but as seen in a recent case from Ontario Superior Court of Justice, employers must be careful when doing so.

Background

The employee started work with the employer as a legal assistant on March 3, 2003. Her salary at that time was $30,000 per year. She was also enrolled in a group benefit plan upon the completion of her probationary period. The contract she signed upon starting the job contained a clause dealing with “Termination by (the employer) Without Cause” (“the termination clause”). It stated:

(a)   (the employer) may, at its sole discretion, terminate your employment without cause (a “Non-Cause Termination”). In the event of a Non-Cause Termination, (the employer) shall provide you with severance pay in accordance with the Employment Standards Act, as amended, and any successor legislation, if so required as at the time of a Non-Cause Termination; and

(b)   Notwithstanding the foregoing, and for greater certainty, if the amounts which you would receive upon a Non-Cause Termination, as set out above, are less than the amounts to which you would be entitled under the Employment Standards Act, as amended or any successor legislation, then you shall be entitled to notice, severance pay, and any other payment required by the relevant legislation in force as at the time of the termination.

By May 2012 the employee was earning $70,000 annually with bonuses that amounted to $16,000 in 2013 and $10,000 in 2014. The employer had put in place a salary cap that limited pay for those serving as law clerks to $70,000. The employee and some of her colleagues met to discuss this, which did not sit well with the employer. During a performance review on April 21, 2015, the employee’s manager was angry that the employee had broken her employment contract by discussing salaries with other employees. The employee refused to answer any questions about those conversations. The employer, citing the employee’s failure to “acknowledge, apologize, or correct her insubordinate behaviour”, terminated her employment on April 29, 2015. She was provided with a payment of $39,372.92, which the employer stated was her minimum severance pay required under the Act. The employer also offered to continue to provide the employee with benefits for eight weeks.

The employee takes the employer to court

The employee claimed the termination clause was invalid since it fails to comply with the minimum requirements set out in the Act, or in the alternative, that it is unconscionable. She claimed she was entitled to notice of termination at common-law, and asked for 14 month’s salary as well as other damages.

The court’s analysis

The court looked at the termination clause and determined

“in my view the termination clause in the Contract is consistent with the Act, since it provides that the Plaintiff is to receive the entitlements provided for under the Act in the event of a “without cause” termination. Nor is the termination clause unconscionable or otherwise legally invalid. AMR provided the Plaintiff with her entitlements under the Act when it terminated her employment on April 29, 2015, in accordance with the terms of the Contract. Since the termination clause is sufficient to oust the Plaintiff’s entitlements to notice at common law, the Plaintiff’s claim for additional compensation arising from her termination of employment cannot succeed.”

The clause was consistent with the Act for a number of reasons, including acknowledging that the Act could make it null and void and by continuing to provide benefits as required. The court found the termination clause to be sufficiently clear in displacing the employee’s common law notice entitlement.

The court ruled in favour of the employer, also awarding it costs.

Disputes in employment law matters can be time consuming, expensive, and stressful on all involved. At Arbesman Hamilton LLP we represent both employers and employees in employment law matters and workplace disputes including wrongful termination. We assist employers by helping them draft contracts aimed at reducing the likelihood of litigation, and provide all parties to an employment relationship with a clear understanding of their rights and responsibilities. Please call us at 416-481-5604 or reach us online to see how we can help with your employment law issues today.