Legal entitlements to benefits, notice must be spelled out or contract could be declared null and void – even if the employee agrees to it
By Jeffrey R. Smith
When two parties — such as an employer and an employee — sign a contract, that contracting is binding.
Except when it’s not.
Though having an employment contract can help ease uncertainty when it comes to things such as when and how the employment relationship ends, it’s not always 100 per cent definite.
If the terms don’t measure up to legal requirements, the contract may not be worth the paper it’s written on. Employment contracts can be useful in limiting the notice — or pay in lieu of notice — the employer has to give when terminating the employee. Without a specific termination clause, an employer could be on the hook not only for the employment standards minimums, but also common law notice, which can be a lot more based on factors such as the employee’s age, length of service, position and the market for similar positions.
An employment contract can limit the notice to just the legal minimum and eliminate any common law entitlement, for example.
However, the language used — or what’s absent — is key to a contract’s effectiveness and sometimes its enforceability. More often than not, non-competition and non-solicitation clauses have been declared unenforceable because of wording that is too vague or too restrictive. The same sometimes happens when it comes to termination clauses.
Last year, the Ontario Superior Court of Justice in Stevens v. Sifton Properties Ltd. (2012 CarswellOnt 16792) found the termination provision in an employment contract between a golf professional and a golf community was invalid.
The clause, which stated: “The corporation may terminate your employment without cause at any time by providing you with notice or payment in lieu of notice, and/or severance pay, in accordance with the Employment Standards Act of Ontario.”
The golf professional successfully sued for wrongful dismissal and had the provision declared null and void because the provision didn’t mention benefits as part of the payment in lieu of notice and severance pay entitlement.
Though the employer argued benefits were implied in the words “in accordance with” employment standards legislation and another mention of “in satisfaction of all claims and demands” associated with legislative and common law entitlements, the court found a reasonable reading of the provision seemed to take away the employee’s right to benefits continuation under employment standards by only paying severance and pay in lieu of notice.
It seems anything other than exact wording will be interpreting unfavourably towards employers by the courts.
In a 2011 case, Wright v. Young & Rubicam Group of Cos. (2011 CarswellOnt 10754), the same court found a termination provision that stated “this payment will be inclusive of all notice, statutory, contractual and other entitlements” excluded benefits because no mention meant there was no contemplation of them in the contract. Without specifically including this legal requirement, the provision was void, said the court.
Contracts can be useful tools to protect employers and employees, but they’re only as good as their wording. But one could wonder if the courts in the above cases, particularly in Wright, went a little too far.
Does a lack of specific wording really mean benefits weren’t contemplated in the contract? Wouldn’t a provision that stipulates entitlement to be inclusive of all statutory entitlements logically include benefits, which is a statutory entitlement? Is it vague enough to render a provision completely null and void?
Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. He can be reached at [email protected] or visit www.employmentlawtoday.com for more information.