A recent Ontario Court of Appeal decision means that a properly
drafted employment contract can protect employers and
their employees from personal liability when carrying out a
In Richards v. Media Experts M.H.S.
Inc., Lauren Richards, the CEO of Media Experts, was
terminated for cause less than one year after she was hired.
Richards sued Media Experts for wrongful dismissal and personally
named its founder and executive chairman, Mark Sherman, claiming
his actions during termination caused her to suffer intentional and
negligent infliction of nervous shock.
The defendants sought to strike the claim against Sherman on the
basis of an exclusion clause in Richards' employment contract.
The exclusion clause stated that aside from 12 months' pay upon
termination, Richards would have no other rights to any severance
payment, damages or indemnity. Richards argued that the employment
contract did not preclude her from bringing an action against
Sherman personally as he was not party to the contract between
herself and Media Experts.
At trial, the Superior Court found that the exclusion clause
protected Sherman and struck the claims against him. The Superior
Court held that to find otherwise would allow Richards to
circumvent or escape the contractual exclusion clause that she had
Richards appealed the Superior Court's decision, but the
Court of Appeal upheld the decision and agreed that the exclusion
clause extended to Sherman even though he was not a party to the
The Court of Appeal found that both requirements of the test set
out by the Supreme Court of Canada in in London Drugs Ltd. v. Kuehne & Nagel
International Ltd. were met. In that case, the Supreme
Court held that one employee could benefit from an exclusion clause
between the employer and another employee if (1) the clause
expressly or impliedly extended its benefit to the employee seeking
to rely on it, and (2) the employee seeking the benefit was acting
in the course of their employment and performing the very services
provided for in the contract. With respect to the first
requirement, the Court of Appeal held that the clause impliedly
extended to Sherman as he negotiated the agreement with Richards
and became her boss. As such, the parties would not have
contemplated that Richards could make claims against Sherman
personally that she could not make against Media Experts. With
respect to the second requirement, the Court of Appeal found that
Sherman was acting on behalf of Media Experts when he terminated
A properly drafted termination provision provides certainty to
the employer and the employee and can avoid time consuming and
costly litigation. It can also be drafted to protect the employees
involved in carrying out the termination from the risk of personal
liability. Field Law can help employers draft such exclusion
clauses to protect themselves and their employees from personal
claims arising out of terminations.
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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