You make the call
This edition of You Make the Call features a worker’s challenge to the termination clause in her employment contract.
The 37-year-old worker — who was a chartered accountant — started employment as an assistant controller for J.L. Richards & Associates, an Ottawa-based firm providing engineering, architectural, and planning services, in November 2013. Soon after, she was promoted to the position of controller, where she supervised a staff of eight people. She was responsible for the company’s accounting and reported to the vice-president.
The worker’s employment contract included a termination clause that stated after the completion of a six-month probationary period — during which the company could terminate her for any reason with statutory notice or pay in lieu of notice, if required — her employment “may be terminated for cause at any time, without notice.” It also stated that “in the event that employment is terminated for any other reason, it is understood that you will have no entitlement to common law notice of termination” and she would be provided with notice of termination or pay in lieu of plus severance pay “in accordance with the Employment Standards Act of Ontario [ESA] or any successor legislation.” The clause concluded with the statement that the “minimum period of notice or pay in lieu thereof specified in the act will constitute your complete entitlement to notice or pay in lieu thereof.”
J.L. Richards & Associates terminated the worker’s employment on Feb. 19, 2020. The company paid her the balance of her outstanding pay along with pay in lieu of notice equal to the minimum required under the ESA — six weeks’ pay for service of more than six years and fewer than seven.
The worker filed an application to determine if the termination clause in her employment contract was enforceable and claimed she was entitled to 15 month’s pay in lieu of notice, including a bonus, overtime pay, benefits, and retirement plan contributions.
You Make the Call
Was the worker entitled to common law reasonable notice?
OR
Was the termination clause enforceable?
IF YOU SAID the worker was entitled to common law reasonable notice, you’re right. The court noted that the presumption at common law of reasonable notice of termination could only be “rebutted by clear language that complies with the minimum statutory notice provisions of the ESA; if it does not, then the presumption of reasonable notice is not rebutted.”
The court also pointed out that employment contracts must be interpreted in the context that terminated employees are vulnerable and in need of protection, while employees usually have less bargaining power than employers when employment agreements are made. As a result, the ESA is intended to protect the interests of employees and employers should be encouraged to draft agreements that comply with it. In addition, any ambiguity will be interpreted in a way that gives the greater benefit to the employee, the court said.
The court added that if a termination clause violated the ESA or tried to contract out of an employment standard without clearly substituting a greater benefit, the entire termination clause would be void.
In this case, the court found that the termination clause was unenforceable because the provision for termination for cause breached the ESA. The statement that termination for cause at any time could happen without notice referred to the concept of “for cause” in both common law and legislation. However, incorporating the common law “just cause” concept meant that an employee could be terminated without notice for conduct that was not “willful” or “bad on purpose” — the only reasons employer can legally forego statutory notice entitlement.
In addition, the “without cause” provision specifically referred to severance pay, while the next sentence said that the notice entitlement or pay in lieu constituted the complete entitlement to notice or pay in lieu thereof. The inconsistency of specific references meant it was an attempt to contract out of the requirement to pay benefits and bonuses during the notice period and was also illegal, said the court.
Since the termination clause was illegal, J.L. Richards & Associates was ordered to pay the worker 10 month’s pay in lieu of notice, including base salary, retirement contribution, bonus, overtime pay, and benefits. After subtracting mitigation income and amounts already paid, the total award was $40,273.40.
For more information, see:
- Lamontagne v. J.L. Richards & Associates Limited, 2021 ONSC 2133 (Ont. S.C.J.).
