Employee with termination provision not entitled to common law reasonable notice: Court

Employee argued reference to ‘reasonable notice’ in provision opened the door to common law notice but it clearly meant statutory minimums, court says

An Ontario worker’s attempt to throw out his termination provision giving him no more than the statutory minimum of severance has been turned down by the Ontario Court of Appeal.

Robert Clarke worked for Insight Components, a supplier of technology solutions in Mississauga, Ont. When he began working for Insight in 1995, he signed an agreement setting out his terms of employment. In 2000, Insight implemented a company-wide policy that all employees at Clarke’s level should be subject to a termination provision added to their employment contracts. The provision specified Insight could terminate him without cause at any time as long as it provided him with “reasonable notice equal to the requirements of the applicable employment or labour standards legislation.”

In April 2001, Clarke was promoted to the position of managing director for Canada. He signed a new written memorandum outlining the terms of the job, which included the termination provision rolled out the previous year.

However, some time later Insight decided to fire Clarke and gave him the equivalent of the minimum notice required under the Ontario Employment Standards Act, 2000 (ESA). The company offered Clarke a severance agreement worth slightly more than the statutory minimum in accordance with company policy, but Clarke rejected it and claimed wrongful dismissal. He argued the termination provision was ambiguous because it referred to “reasonable notice.” Since the ESA allowed for greater than the minimum benefits in contractual provision, Clarke argued the “reasonable notice” in his employment contract entitled him to the common law standard of reasonable notice.

Clarke also said the termination provision was introduced after his signed his original employment contract and he signed his new managing director contract after he started work in the position, meaning the provision was unilaterally imposed on him without consideration in both cases.

Clarke further argued Insight couldn’t rely on the termination provision because it didn’t give him the time outlined in the company severance policy to decide on it and therefore repudiated the employment contract.

The Ontario Court of Appeal upheld the trial court’s affirmation of the termination provision. It found the term “reasonable notice” in the provision was clear when read in the context of the whole clause. It referred to the minimum reasonable notice period of employment standards legislation. This was further made clear by the final words of the provision, which excluded any further amounts “whether under statute or common law.”

The court also disagreed there was no consideration in exchange for the addition of the termination provision. When the policy was implemented in 2000, Insight adjusted Clarke’s pay, including a raise. And, even though he started his managing director position before he signed the agreement, he was well aware of the company’s policy and it was “a necessary part of his employment package.”

“There is no doubt the enhanced position and remuneration attached to the position of managing director was capable of providing any consideration that might be necessary to support the enforceability of the termination clause,” the court said.

Finally, the court disagreed with Clarke’s claim Insight didn’t provide him with enough time to consider the severance offer. He rejected it immediately before pursuing his wrongful dismissal claim. He couldn’t argue he didn’t have enough time, the court said, if he didn’t ask for more time to consider the offer.

Clarke’s appeal was dismissed and Insight had no further obligation to pay addition severance beyond the statutory minimum. Clarke was ordered to pay $30,000 in costs.

For more information see:

Clarke v. Insight Components (Canada) Inc., 2008 CarswellOnt 7453 (Ont. C.A.).

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