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Termination Clause Withstands Court Scrutiny

The Ontario Court of Appeal found that a termination clause prescribing minimum notice under the Employment Standards Act (“ESA”) was valid and therefore barred any claim on behalf of the former employee to common-law notice.

Facts

The action on appeal involved a wrongful dismissal claim on behalf of the appellant against his employer. The appellant unsuccessfully brought a motion for summary judgment and subsequently appealed the motion judge’s decision. The appellant argued that the motion judge improperly translated the termination clause from French to English, resulting in a misinterpretation. In its original form, the termination clause read as follows:

“Le CFT peut également résilier la présente entente pour tout autre motif en donnant à l`employé(e) un préavis de quinze (15) jours ou le préavis minimum prescript par la Lois ur les norms d`employ, ou en lui versant une indemnité salariale égale au salaire qu`elle aurait droit de recevoir pendant la période de préavis…”

The motion judge translated the words “ou le préavis minimum prescript par la Lois ur les norms d’emploi” to “or the minimum prescribed by the Employment Standards Act.” The appellants argued that this translation was wrong and should instead read: “or the minimum notice required under the Employment Standards Act” [emphasis added]. As the argument goes, the inaccurate translation led the motion judge to find that the termination clause did not amount to a contracting out of the minimum standards in the ESA and was therefore valid. The appellant argued that, when translated accurately, the termination clause amounts to an attempt to contract out of the minimum standards set out by the ESA, rendering the clause void.

When read properly, the appellants argued that the termination clause suggests that the employee is only entitled to the minimum notice requirements prescribed in the ESA, not inclusive of severance and benefits. The minimum standards prescribed by the ESA cannot be contracted out of. A clause which attempts to do so is invalid and can be struck down by the courts, entitling the wrongfully terminated employee to reasonable notice under the common-law—which is typically much more generous. In this case, however, the Court of Appeal adopted the reasoning of the motion judge. The Court of Appeal agreed that, although the motion judge’s translation was inaccurate, his reasons suggested that he was apprised of the issue raised by the appellant. In his reasons, the motion judge made clear that he interpreted the contract properly and with reference to the position of the parties and the circumstances surrounding the execution of the contract. After conducting an interpretation of the termination clause, the motion judge found that it was not reasonable to conclude that the parties intended to contract out of the ESA. The Court of Appeal found insufficient reason to interfere with the motion judge’s decision, especially given the deference owed to a motion judge’s interpretation of a contract.

Our Thoughts

Courts will closely scrutinize termination clauses which operate to contract out of reasonable notice as provided for under the common-law. This is because reasonable notice under the common-law is much more generous to employees and the courts are cognizant of the disparity in bargaining power often present between employees and employers.
 
Employers are usually more sophisticated when it comes to employment matters and possess more resources for seeking competent legal advice. As such, courts routinely strike out employment clauses that are vague or which can be interpreted as providing for standards below the minimum standards prescribed by the ESA. In this case, the motion judge adopted what he believed to be a reasonable interpretation of the termination clause in the contract. The decision is interesting in that it signals a more balanced approach to contract interpretation in the employment context. It will be interesting to see whether the approach taken in this decision is part a larger trend or whether this decision is merely an aberration. Also, it is important to remember that in contracts involving unsophisticated employees, the courts will apply greater scrutiny to clauses such as this. In this case, the terminated employee was a Project Manager. This may have influenced the motion judge’s decision.
 
Oudin v Centre Francophone de Toronto

The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.