Court of Appeal Strikes Down Termination Clause
Deeley provided Ms. Wood with 13 weeks of notice, plus a lump sum payment equivalent to eight weeks’ pay for a total of 21 weeks, which is actually more than what Deeley owed under the contract, since Ms. Wood had been working for Deeley for 8 years. Technically, under the termination provisions of the contract and under the Employment Standards Act (ESA), Deeley only needed to provide Ms. Wood with 16.3 weeks’ (8 weeks’ termination pay and 8.3 weeks’ severance).
Nevertheless, Ms. Wood sued Deeley for reasonable notice under the common-law, which is substantially higher than the minimum notice periods required by the ESA. Ms. Wood argued that the termination clause in her employment contract was unenforceable because it failed to provide for the continuation of benefits during the notice period as required by the ESA. While Ms. Wood initially lost on a motion for summary judgment brought by Deeley, the motion judge’s decision was overturned on appeal and she was ultimately awarded 9 months’ salary (about $75,000) plus the costs of the motion and appeal (about $39,000 combined).
The Court of Appeal found that the termination provision precluded the employer’s obligation to continue Ms. Woods’ benefits during the notice period. Even though Deeley actually did continue to pay for Ms. Woods’ benefits during the notice period, the court found that this had no bearing on the enforceability of the termination clause.
The wording of the clause, as outlined above, is completely silent on the issue of continuation of benefits. Deeley attempted to argue that the word “pay” is broad enough to include benefits. The Court of Appeal found this was not sufficient. The Court of Appeal explained that, in order to contract out of common-law reasonable notice, the employment agreement must do so in clear and unambiguous language. This is due to the imbalance in bargaining power between employers and employees and the fact that employers are generally more sophisticated when it comes to drafting employment contracts.
For employees, it is always important to pay attention to a termination clause prior to entering into an employment relationship. Where an employer attempts to contract out of common-law reasonable notice, the employee must seriously consider the insecurity this provides to the employment relationship and perhaps negotiate a notice provision that better reflects the employee’s need for longer notice, especially in industries where finding a job takes some time.
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.