In keeping with the New Year's tradition of making
resolutions, we suggest that employers, their counsel and human
resources personnel add one more to their lists: a review of
existing employment contracts. Over the past year or so, Ontario
courts rendered a number of decisions that impact the
enforceability of written employment agreements and provide good
reason for employers to take a fresh look at such contracts to
ensure that they are enforceable and in compliance with applicable
The following is a brief summary of these decisions and their
consequences. One case that has elicited quite a reaction within
the employment law community is Wright v. The Young and Rubicam Group of
Companies (which we discussed
here), in which an Ontario court struck down a termination
provision contained in an employment contract based on the fact
that it did not comply with the requirement in the Employment
Standards Act, 2000 (Ontario) to continue benefits throughout
the statutory notice period. Even though the termination clause
provided the employee with more notice than he was entitled to
under the Act at the time of termination, the Court found that the
fact that benefit continuance was not specifically referenced in
the agreement, in addition to the fact that the agreement had the
potential to provide for less than the minimum notice and severance
pay entitlements contained in the Act at some point in the future,
rendered the clause unenforceable. The employee walked away with
twelve months' pay.
Another case that was decided in 2012, Bowes v. Goss Power
Products, confirmed that an employee who has
specific contractual termination entitlements is not required
mitigate such entitlements upon termination without cause, unless
the contract specifically contains a duty to mitigate. In
Bowes, which is described in more detail in our
previous post, a terminated employee received six months'
pay in lieu of notice, despite finding work two weeks after he was
terminated. The Court in Bowes made it clear that where a
contract provides for an amount to be paid to the employee in lieu
of notice upon termination without cause, the employee will receive
that amount regardless of how long it takes him or her to find a
new job, absent language to the contrary.
Other cases, including Martin v. ConCreate USL Ltd.
Partnership which we discussed in a
previous post, provides a reminder that restrictive covenants
(such as non-competition and non-solicitation clauses) in
employment agreements are viewed skeptically by our courts and are
prima facie illegal and unenforceable. In order to be enforceable,
such covenants must be clearly drafted, contain a reasonable (and
limited) term and geographic scope and only go as far as necessary
in order to protect the employer's legitimate business
interests. It is also important when drafting restrictive covenants
to ensure that the prohibited activity be clearly defined and not
act as a barrier which would prevent the employee from working
following his or her termination from employment.
These cases are just a few examples of why having proper
employment contracts in place is crucial. The law relating to
employment contracts is fluid and employers would do well to review
their contracts periodically to ensure they are up to date and
enforceable. Specifically, employers should review their employment
contracts and ask the following questions:
Is the contract clear and unambiguous?
Does the contract contain a provision which provides for the
employee's entitlements upon termination without cause? Does
the clause meet the minimum statutory requirements (including
reference to notice, severance pay and benefits) pursuant to
applicable employment standards legislation?
Was the contract signed before the employee commenced
If the contract contains a non-solicitation or non-competition
clause, has the clause been recently reviewed by or with the advice
of legal counsel?
If you answered "no" to any of these questions,
consider seeking advice on your current contracts and how to
address any issues of concern.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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