Avoiding common law notice in termination provisions

Question: If a termination provision provides that minimum notice under legislation applies, is this enough to avoid common law notice entitlement?

Answer: A new line of cases emerging from Ontario has suggested that it is not enough to simply include a provision that notice or pay in lieu of notice will be the statutory minimum, but there must be a specific limitation to rebut the presumption of common law damages or notice.

Decision-makers have considered the following factors when determining whether a termination provision can rebut common law reasonable notice:

• There is a presumption that an employee is entitled to common law notice upon termination of employment without cause; however, an employer may contract out of common law notice upon termination without cause provided minimum legislative requirements are met.
• The presumption of reasonable notice at common law may be rebutted if the contract specifies some other period of notice as long as that other notice period meets or exceeds the minimum requirements of the applicable legislation — in this case, the Ontario Employment Standards Act, 2000.
• The intention to rebut the right to common law reasonable notice must be clear and unambiguous. The need for clarity does not require the use of a specific phrase or formula; however, the intention must be “readily gleaned” from the language agreed to by the parties.
• Ambiguity will be resolved in favour of the employee and against the drafter of the termination clause in accordance with the principle of contra proferentem.
• Surrounding circumstances may be considered when interpreting the terms of a contract but are not to overwhelm the words of the agreement itself.

While such cases are only binding in Ontario, similar decisions could arise in other provinces. Therefore, while it is not necessary to specifically state that common law notice will not apply, it would be best practice for employers to implement wording in their contractual provisions to address this and avoid potential ambiguity.

Leah Schatz is a partner with MLT Aikins LLP in Saskatoon. She can be reached at (306) 975-7144 or [email protected].