A look at the various pitfalls of specifying notice periods in contracts

It's important to carefully draft contract, review periodically
By Tim Mitchell
|Canadian HR Reporter|Last Updated: 10/06/2014

Question: If an employee signs an employment agreement with a termination provision stipulating specific notice periods and severance payments that are greater than legislative minimums, are there any circumstances where the employee could legally challenge that provision?

Answer: There are definitely pitfalls in stipulating specific notice and severance pay entitlements in employment contracts.

Employment standards legislation varies from province to province. However, provisions stipulating minimum periods of notice, pay in lieu and severance pay are common, as are provisions disallowing attempts to contract out of statutory minimums.

Generally speaking, the combined effect of these provisions is to allow the parties to an employment contract to stipulate any notice period/severance pay that is equal to or greater than the corresponding minimums set out in the applicable legislation. The effect of a failure to do so was addressed by the Supreme Court of Canada in Machtinger v. HOJ Industries Ltd.

In Machtinger, the employment contracts allowed termination of one Ontario employee with no notice and the other on two weeks’ notice. These provisions did not meet the Ontario Employment Standards Act