Termination clause

Question: Can a termination clause require a longer period of notice for the employee to terminate the relationship if it gives the employer the right to terminate with minimum statutory notice? Can a blanket termination clause (one intended to cover any jurisdiction in Canada) be considered too vague to be enforceable?

Answer: When drafting a termination clause, employers must ensure the contract clearly limits notice to the statutory minimum, as the common law presumes an employee can only be dismissed upon reasonable notice. This presumption can only be rebutted where a contract clearly and precisely limits an employee's notice to the statutory minimum. To do so, the employment contract must clearly state that the employee has expressly agreed that any notice will be governed by the relevant statutory authority. Further, a clause of this nature must form part of the employment contract executed by the employee. Thus, policy manuals that purport to limit an employee's entitlement to the statutory minimum will not be enforceable, since the policy manual is not part of the express agreement between the employee and employer.

With respect to a blanket termination clause, as referred to in the second part of the question, there is more risk that such clause may fall short of rebutting the common law's presumption of reasonable notice upon dismissal. For example, a termination clause that was to be determined in accordance with “provincial law” was too ambiguous and uncertain to be enforceable. As such, in Boulé v. Ericatel Ltd., the employee was held to be entitled to reasonable notice pursuant to the common law.

Only where the parties set out a clear notice provision, either expressly or by implication, is the presumption of reasonable notice rebutted. Here, that clarity is lacking. Nothing which occurred between the parties suffices to supply it. I will therefore go on to consider the proper length of reasonable notice under the common law.

As is apparent, the danger of a termination clause being too vague or ambiguous is that the court may determine that an employee is entitled to reasonable notice under the common law.

An employer's right to notice is viewed through a different lens than an employee's right to notice. As set out by the court in Wiebe v. Central Transport Refrigeration (Man.) Ltd., the rationale for this different treatment is the inherent inequality in position between the employer and employee.

I cannot accept, however, that in every — or even most — employment arrangements there is an understanding that the reasonable notice that must be given by an employer to an employee upon dismissal is necessarily the same as the notice which must be given by an employee to his employer when he resigns. The different concerns of the parties and the inequality of their positions will normally make the search for a common position a pointless one.

The notice period described in this question goes heavily in favour of the employer. Consequently, an issue that will need to be considered is the issue of whether the contract is unconscionable. Courts have held that termination clauses that are particularly harsh or unconscionable will not be enforced. Whether and to what degree a contract can provide more notice to the employer will depend on the circumstances. While the courts will treat an employee's right to notice differently than an employer's right to notice, similar factors will come into play as to the degree of notice an employer is entitled to. For example, an employee with a specialized degree of knowledge, whose unannounced departure is likely to bring some hardship upon the employer may require a longer notice period. Factors that should therefore be considered include the nature of the position, the employee's duties, and the employee's seniority level.

For more information see:

• Boulé v. Ericatel Ltd., 1998 CarswellBC 1273 (B.C. S.C.).
• Wiebe v. Central Transport Refrigeration (Man.) Ltd., 1994 CarswellMan 130 (Man. C.A.).