Our Ontario clients are aware that a Court of Appeal decision from 2020, Waksdale, prompted many employers to revise many of their employment contracts. Waksdale confirmed that if any provision of an employment agreement that is relevant to termination of employment violates the Employment Standards Act, 2000 (the "ESA"), then all termination provisions are void and unenforceable. Since Waksdale, this conclusion has most commonly been used to attempt to invalidate "without cause" termination provisions in employment agreements that contain a "just cause" termination provision that does not comply with the ESA.
In a newly published case, Henderson v Slavkin et al (2022 ONSC 2964), the Ontario Superior Court of Justice applied similar reasoning to confidentiality and conflict of interest clauses in an employment agreement. The employment agreement in question included a confidentiality clause and a clause prohibiting conflicts of interest. Each clause further included a warning that a breach of the clause would result in termination "without notice or compensation in lieu of notice". Breach of confidentiality or a conflict of interest are not necessarily grounds for termination without notice or pay in lieu under the ESA.
The Court concluded that the confidentiality provision was an attempt to contract out of the ESA's termination entitlements, and as a result, it and the balance of the termination provisions were void and unenforceable. The court made similar comments about the conflict-of-interest provision. This result is not surprising, given Waksdale. But employers – and employment counsel – should carefully reflect on the far-reaching impact of the principle that a single ESA-violating clause can threaten the enforceability of an otherwise enforceable termination provision. Employers may want to have their confidentiality, conflict of interest, equity/stock options, and bonus language reviewed, in addition to any employment policies governing termination of employment, to ensure that there are not any lingering terms relevant to termination that violate the ESA.
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