Zeilikman Law recently represented an employee plaintiff in Tarras v. The Municipal Infrastructure Group Ltd., 2022 ONSC 4522 (CanLII) (“Tarras”).
In Tarras, the plaintiff employee brought a motion for summary judgement pursuant to Rule 20 of the Rules of Civil Procedure for breach of contract and / or wrongful dismissal. The plaintiff employee (“Mr. Tarras”) was an engineer and one of the former owners and directing minds of the defendant company. Mr. Tarras (along with other former owners) had sold his interest in the company in December 2019 by way of a share sale to a large international engineering firm. At the time of the sale, Mr. Tarras had negotiated a fixed-term contract of 3 years which included a gross base salary along with other forms of compensation including fringe benefits and an incentive compensation plan. However, in November 2020, Mr. Tarras was in receipt of a termination letter from the defendant setting out that he was dismissed “without cause” effective the end of December 2020.
The parties had agreed that summary judgment was appropriate. The only dispute concerned the enforceability of the termination clause contained in the employment agreement which purported to limit Mr. Tarras’ rights to his statutory entitlements.
The judge went on to hold that the termination clause in the employment agreement was not enforceable. The language in the termination provision was in conflict of that found in the Employment Standards Act, 2000 (“ESA”) and the prevailing jurisprudence. As such, and relying on the decision of Waksdale, the court found that the termination clause rendered the entire termination clause void and unenforceable. To read more about the decision of Waksdale, please read our blog which can be found here.
The court went on to regard the defendant’s argument that the termination clause was enforceable because Mr. Tarras had the benefit of counsel throughout the negotiation of the agreement and because he was a sophisticated party with commercial experience as unpersuasive. The court followed the Ontario Court of Appeal’s decision in Rahman that stands for the proposition that being a sophisticated party and having legal counsel are “subjective considerations” which should not be given any weight when assessing statutory compliance of contractual provisions in an employment context. Again, to read more about the decision of Rahman, please read our blog which can be found here.
The court likewise went on to find that Mr. Tarras did not have any obligation to mitigate his damages and that the balance of the fixed-term contract was owed to the plaintiff. It was the position of the court that in the absence of an enforceable contractual provision stipulating a fixed-term of notice that a fixed-term employment agreement obligates an employer to pay an employee to the end of the term. And that this obligation is not subject to mitigation. As such, the court awarded Mr. Tarras $479,166.67 plus benefits, representing the 23 months remaining in his fixed-term contract.