You make the call
This instalment of You Make the Call features a worker who was fired after less than a year of service and contested the termination clause in his employment agreement.
The 54-year-old worker was hired by Crystal Claire Cosmetics, a cosmetics company based in Toronto, in September 2018 to be its warehouse manager. At the start of his employment, the worker signed an employment agreement that contained a termination clause.
The clause provided Crystal Claire with the right to terminate the worker’s employment without notice or payment in lieu of notice if he engaged “in conduct which constitutes just cause for summary dismissal.” It also allowed for termination without cause, stating that the company could terminate employment “at any other time and for any reason upon providing you with either advance notice and/or applicable payments equivalent to the minimum applicable entitlements contained within the ESA [Employment Standards Act], as amended.” It further clarified that “Crystal Claire’s maximum liability to you for common law notice, termination pay, severance pay, or payment in lieu of notice shall be limited to the payment of the amounts specified in the ESA.”
The worker’s employment with Crystal Claire lasted only until July 15, 2019, when the company terminated him without cause. It paid him one week’s salary in lieu of notice and benefits continuation, the minimum entitlement under the Ontario Employment Standards Act, 2000.
The worker found a new job three months later, but he filed a claim for wrongful dismissal, claiming the termination clause was unenforceable and that he was entitled to common law reasonable notice of termination. Crystal Claire disputed the claim, arguing that the termination clause allowed for the minimum statutory entitlements and, therefore, complied with the ESA.
You Make the Call
Was the termination clause unenforceable?
OR
Did the termination clause legally restrict the worker’s notice entitlement to the statutory minimum?
IF YOU SAID the termination clause was unenforceable, you’re right. The court noted that the termination clause permitted Crystal Claire to avoid providing notice or pay in lieu of if an employee “engages in conduct which constitutes just cause for summary dismissal.” The ESA regulations state that employees who are “guilty of wilful misconduct, disobedience or wilful neglectful duty that is not trivial and has not been condoned by the employer” are not entitled to reasonable notice, but case law has established that “just cause” can be made with a lesser standard than wilful misconduct or disobedience.
However, the termination clause didn’t specifically refer to just-cause dismissal as a way to avoid a notice entitlement. It referred to “summary dismissal,” which means a termination that is carried out quickly and efficiently,” the court said, adding that “the potential speed and manner of an employee’s dismissal does not necessarily lead to a conclusion that the employee was guilty of wilful misconduct and disobedience.”
“[Crystal Claire] is the drafter of the agreement, and thus had the opportunity to ensure that provisions of its termination clause properly delineated the threshold of ‘wilful misconduct or disobedience’ to justify non-payment of notice,” said the court. “The termination clause expressly fails to do so, and I am not prepared to accept one of several potential implied interpretations to render the clause enforceable.”
The court also found that the termination clause made no mention of benefits continuation, as it required the company to pay the worker his minimum termination pay but not the value of his benefits during the minimum notice period. This also made the clause unenforceable.
Without a restriction on the worker’s common law notice entitlements, the court determined that the worker’s age, senior position, supervisory role and job functions entitled him to three months’ notice for his 10 months of service. Since the worker didn’t find new employment until three months after his dismissal, there was no reduction of the damage award on that count.
For more information. see:
- Ojo v. Crystal Claire Cosmetics Inc., 2021 ONSC 1428 (Ont. S.C.J.).
