Recent decision confirms that a termination clause must be read as a whole to assess its meaning
Recently there have been several cases in which courts have considered whether a termination clause is compliant with the applicable employment standards legislation and, ultimately, whether it successfully displaced the employee’s right to common law reasonable notice.
We have written on this topic often for Canadian HR Reporter, including here and here.
In many of these decisions, the courts have found creative ways to help employees avoid the consequences of these clauses. However, in the recent case of Vienneau v. Joy Global (Canada) Ltd., the New Brunswick Court of Queen’s Bench upheld a termination clause despite being “puzzled” by parts of the clause.
This decision is unusual because although an employer and an employee can contract out of common law reasonable notice, clear and unambiguous language is normally required to do so. Where the language can be interpreted in more than one way, the court typically adopts the interpretation most favourable to the employee.
Stephane Vienneau was employed by Joy Global (Canada). In 2014, Vienneau signed an employment contract which contained the following termination clause:
“The Company shall be entitled to terminate your employment without just cause for any reason upon the provision of reasonable notice or payment in lieu that meets the requirements of the applicable employment or labour standards legislation. By signing this Employment Agreement, you agree that upon the receipt of your entitlements and benefits in accordance with such legislation, no further amounts will be due and payable to you whether under statute or common law. Specifically, you understand and agree that your acceptance of this Employment Agreement limits your ability to claim any further damages for termination pay, termination notice, severance pay, payment in lieu of reasonable notice, or any other damages, other than as provided for in this Employment Agreement and that you are giving up any right to claim reasonable notice under common law. In the event the Company elects to pay you compensation in lieu of notice, the Company reserves the right to require you, prior to receipt of the payment, to sign the Company's form of Release for the amount of the payment that exceeds the minimum termination pay required by the applicable employment or labour standards legislation.”
On July 18, 2018, Vienneau was notified that the company would be relocating from New Brunswick to Ontario, effective Aug. 18, 2018. Vienneau elected not to relocate with the company and his employment was terminated without cause. He was paid four weeks’ salary in lieu of notice as per employment standards.
Vienneau commenced an action against Joy Global seeking damages as payment in lieu of reasonable notice and then subsequently brought a motion for summary judgment against them. Vienneau argued that the termination clause in his employment contract was ambiguous and should be interpreted in his favour.
Joy Global also sought summary judgment against Vienneau, arguing that the termination clause contained in Vienneau’s employment contract was clear and unambiguous and set a ceiling for notice which is equivalent to the requirements of the New Brunswick Employment Standards Act.
Vienneau argued that if the termination clause clearly and unambiguously created a ceiling equivalent to the minimum period under the legislation, then why would Joy Global specifically contemplate payment to him in respect of compensation in lieu of notice which exceeds that ceiling?
The judge agreed that it was a “good question.” When asked about it, Joy Global explained that it reserved the right to gratuitously make a payment over and above the ceiling provided under the contract. It argued that it did not mean that there was a contractual or statutory requirement to make such a payment.
In determining whether or not the clause was ambiguous, the judge considered the decision in Amberber v. IBM Canada Ltd. In that case, it was affirmed that “ambiguity means something more than the mere existence of competing interpretations.” Whether ambiguity exists must be determined by an “objective evaluation of whether there are two or more reasonable interpretations.”
The judge held that, when read in its entirety, the termination clause confirmed the parties’ intentions that the reasonable notice to which Vienneau was entitled was not reasonable notice at common law, but the minimum notice provided for by statute.
The judge concluded that it would be “nonsensical to conclude that Vienneau had a legitimate expectation that upon termination without cause, he was entitled to reasonable notice at common law.” The Judge noted that the termination clause clearly stated that Vienneau was “giving up any right to claim reasonable notice under common law.”
Although the judge remained “somewhat puzzled” by the inclusion of the last sentence of the termination clause, he concluded that when read in its entirety, it was more logical to accept that Joy Global may wish, in some circumstances, to make an additional gratuitous payment, and under those circumstances, they would expect the employee to sign a release. The judge concluded that this made more sense than accepting that Vienneau had a reasonable expectation of reasonable notice at common law upon termination without cause.
This decision confirms that a termination clause must be read as a whole, rather than being broken up into individual parts to assess its meaning. In the above case, although the termination clause arguably had two potential interpretations, the judge concluded that one interpretation just did not make sense when the termination clause was read as a whole.