The recent Ontario Court of Appeal decision of Rossman v. Canadian Solar Inc. is yet another case dealing with the enforceability of termination clauses in employment contracts. This issue often comes before the courts because it involves one of the most litigated and important principles in employment law, which is that the employer must provide reasonable notice to an employee upon termination.
Termination clauses in employment contracts generally seek to limit the employee’s ability to seek notice pursuant to the common law. For instance, most clauses will try to limit the employee to the statutory minimum entitlements under the Employment Standards Act, 2000. However, if the clause in any way does not comply with these statutory minimum entitlements then the courts may strike out that clause and the employee is able to claim notice pursuant to the common law. In most instances, the employee will be able to claim a greater amount under the common law than under the Employment Standards Act, 2000.
In an effort to ensure that the employment clause has an effective and air-tight termination clause, employers will often include language that sets out that if the clause somehow provides for less than the minimums under the Employment Standards Act, 2000, then the employee will still receive those minimums regardless. The purpose of this type of wording is to “save” the termination clause from being struck by the court. The Ontario Court of Appeal Rossman v. Canadian Solar Inc. contends with this sort of wording in an employment contract.
The plaintiff employee in Rossman v. Canadian Solar Inc. signed an employment contract with an employer that contained a termination clause that sought to limit the plaintiff to statutory minimum entitlements to notice upon termination. The cause included wording to “save” the termination clause. Namely, the clause in Rossman v. Canadian Solar Inc. set out that if the minimum statutory entitlements were greater than the benefit as provided upon termination pursuant to the employment contract, that those statutory entitlements would apply.
However, the Ontario Court of Appeal held that the termination clause was unenforceable regardless of the fact that it also included wording to “save” the termination clause. This is noteworthy because the Ontario Court of Appeal previously in Amberer v. IBM had held that that type of wording could be used to “save” a termination clause. The Ontario Court of Appeal distinguished the termination clause in Rossman v. Canadian Solar Inc. in that it also contained a conclusory statement that was in direct conflict with the Employment Standards Act, 2000, while the termination clause in Amberer v. IBM had genuine ambiguous language, which may have been in conflict with the Employment Standards Act, 2000.
The Ontario Court of Appeal went on in Rossman v. Canadian Solar Inc. to set out clearly that employment contracts should not be interpreted under the rules of regular contract law. The Court stated that employees need to know the terms of their employment with certainty and that is “especially so” upon termination which is “a fragile moment of stress and uncertainly” for employees. The Court goes on to state that “saving provisions” cannot be used to “save employers” who attempt to contract out statutory minimum entitlements, because this outcome would “exploit employees who hold unequal bargaining power in contract negotiations.”
This case serves as a warning to employers with respect to termination clauses contained in their employment contracts. Employers need to be aware that wording to “save” a termination will not be enforceable if the termination provision contains any other statement that is contradictory to the minimum entitlements under the Employment Standards Act, 2000, even if it is somewhat unclear. This case also sets out clearly that the courts are moving toward a protectionist stance on behalf of employees with respect to issues relating to termination provisions.
