Transfer voids contract’s termination provision

Bill Waddell was an employee with Cintas Corporation in its Ontario offices. Mr. Waddell and Cintas entered into an employment agreement containing a termination clause which provided that upon termination Mr. Waddell would be entitled to severance pay in accordance with the Ontario Employment Standards Act but not less than four weeks.

After a few years of employment, Mr. Waddell accepted a transfer to Vancouver. While there Mr. Waddell’s employment was terminated upon which he brought an action for wrongful dismissal in the British Columbia Courts.

The trial judge dismissed the action for wrongful dismissal and damages were not assessed. The case revolved around the termination clause in the contract of employment. Cintas argued successfully that it satisfied the conditions of the termination clause when terminating Mr. Waddell and therefore the termination was not wrongful. Mr. Waddell appealed this decision.

On appeal Mr. Waddell argued that the termination provision of the employment was void and not enforceable because of the reference to the Ontario Employment Standards Act. If the Ontario Act did not meet the requirements of the British Columbia Employment Standards Act, the termination clause in the contract was void and Mr. Waddell was entitled to reasonable notice as determined by common law.

In determining if the termination clause was void, the Court compared the provisions of both provincial acts. The number of weeks notice for years of service is the same in both acts. However the formula for calculating the payment in lieu of notice is different. The Court held that the difference could be significant if the compensation of the employee includes commissions in addition to a regular wage or salary. Mr. Waddell was employed as a sales manager and part of his remuneration was in the form of commissions.

The B.C. Act looks back to the eight weeks prior to dismissal to arrive at the weekly figure, whereas the Ontario Act looks forward to the weeks ahead to determine that amount. If the previous eight weeks fell during a period of high sales volume and the next four weeks were in a slump, the B.C. formula would produce greater compensation than its Ontario counterpart. The reverse was also true.

The Court held that it was sufficient to demonstrate the possibility that the termination clause could fail to meet the requirements of the B.C. Act in order to nullify the clause.

Cintas argued that Mr. Waddell could not raise this argument on appeal as he had admitted at trial that the notice and termination provisions were the same in both Acts. The Court disagreed. It held that Mr. Waddell only conceded that the notice periods were the same; he said nothing about the other termination provisions.

The Court allowed the appeal set aside the dismissal of the action and remitted the case back to the trial judge to decide liability.

For more information:

Waddell v. Cintas Corp., 2001 BCCA 717.

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