As the practice of using employment contracts to minimize
termination obligations has become increasingly common in Canada,
so has the creativity of employee counsel in attempting to set
aside these contracts. In recent years, we have seen the
omission of the words "and benefits" with reference to a
statutory notice period and the possibility that a termination
clause might, in the future, contravene employment standards
legislation suffice to set aside contractual termination
provisions. Where such termination provisions are set aside,
a court will substitute common law – which is the very result
the employer intended to avoid, and the employee likely understood
the employer intended to avoid, by drafting the contractual
termination provision in the first place. Employer counsel
have become very accustomed to defending drafting omissions
challenged by employee counsel. A recent British Columbia
Court of Appeal decision with respect to which the Supreme Court of
Canada denied leave to appeal last week provides employer counsel
with assistance in this endeavour.
In Miller v. Convergys CMG Canada Limited, 2014 BCCA
311 (CanLII), the employee worked for approximately seven years
with Convergys. At the time of his first promotion, he signed
a new employment contract containing a 90-day probationary period
during which his employment could be terminated without notice or
pay in lieu of such notice. The employment contract also
contained a termination clause that permitted termination by
Convergys for cause or "with notice, or pay in lieu of notice
in accordance with the Employment Standards Act of British
Columbia" ("ESA") and a severability clause.
The employee received a further promotion, but did not sign a new
contract of employment at that time. At the time of
termination of employment, the employee was entitled to seven
weeks' notice under the ESA and the employment contract.
Convergys offered that seven weeks plus an additional seven
weeks' pay and benefits in exchange for a release.
At trial, the judge rejected the employee's arguments that
Convergys' offer on termination constituted a waiver of
reliance on the contractual termination provision and that the
probationary language – which was contrary to the ESA because
it purported to apply after the employee already two years of
service – rendered the contractual notice period void.
With respect to the latter point, the trial judge found that the
probationary clause did not apply and that, even if it did, it was
severable from the employment contract.
In a unanimous decision, the B.C. Court of Appeal dismissed the
appeal endorsing the trial judge's decision. As
important, in its decision, the B.C. Court of Appeal, set out a
number of guiding principles for interpreting employment contracts
and, specifically, termination provisions. The B.C. Court of
Appeal's sensible analysis included the following:
The court should strive to give effect to what the parties
reasonably intended to agree to when the contract was made.
The language of the contract should be given its plain and
literal meaning, and be interpreted in the context of the entire
agreement. Consideration also may be given to the factual
matrix surrounding the creation of the contract.
If the contractual language reveals two possible
interpretations, the court should seek to resolve this ambiguity by
searching for an interpretation that reflects the true intent and
reasonable expectations of the parties when they entered the
contract, and achieves a result consistent with commercial efficacy
and good sense. Considerations of reasonableness and fairness
inform this exercise.
If these principles do not resolve the ambiguity, then
extrinsic evidence may be admissible to assist in ascertaining the
As a last resort only, the principle of contra
proferentem may be invoked to favour construction of the
ambiguity against the party who drafted the agreement. The
principle of contra proferentum may not be used, however,
to create or magnify an ambiguity.
Employment contracts should be interpreted in a manner that
favours employment law principles, specifically the protection of
vulnerable employees in their dealings with their employers.
Even so, the construction of an employment contract remains an
exercise in contractual interpretation, and the intentions of the
parties will generally prevail, even if this detracts from
employment law goals that are otherwise presumed to apply.
The B.C. Court of Appeal's analysis provides welcome relief
for employers who, despite their best efforts, have seen
contractual termination provisions set aside on the basis of minor
technicalities in recent years.
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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