Canada: Yes, Employers — Employment Agreements Really Work (Even When They Contain A Glitch)

We always recommend that our clients use employment agreements with termination clauses to define and limit their severance obligations. Often clients ask: do they really stand up in court? The recent B.C. Court of Appeal decision in Miller v. Convergys CMG Canada Limited confirms that they do — even when the agreement contains a provision which offends employment standards legislation. 

Gerry Miller was dismissed from his employment after seven years. He started out as a telephone agent and quickly worked his way up. He signed three contracts with his employer over the years, the most recent of which when he was promoted to Client Services Manager in 2006.

The last employment agreement Mr. Miller signed when accepting the Client Services Manager position provided that his employment was terminable on "for cause, or by providing you with notice, or pay in lieu of notice in accordance with the Employment Standards Act of British Columbia". The agreement also provided for a probationary period in the new position during which Mr. Miller could be terminated without notice or pay in lieu.

Mr. Miller argued against the enforceability of the termination provisions on three main grounds: (i) that the probationary clause was non-complaint with the Employment Standards Act, and therefore the entire agreement (or at least the termination provisions) was unenforceable. On this point, it was conceded that Mr Miller could not be terminated without notice or pay in lieu required under the ESA during the probation period if he did not prove suitable. Thus that part of the termination clause was invalid; (ii) that his job duties changed so drastically when he was promoted further to Senior Manager that the former contract no longer applied, and (iii) the termination clause was ambiguous and therefore unenforceable. Specifically, the comma created ambiguity (yes lawyers make these arguments).

The trial judge disagreed with all arguments, and found that the invalid probationary clause could be severed from the agreement and that his promotion was a natural progression within the same role and the employment agreement was applicable. On this point, the judge noted that the agreement specifically provided that its terms would still apply even after a promotion.

Regarding the alleged ambiguity of the termination clause, the trial judge found that despite the fact that it could have been more clearly worded (or punctuated), its meaning was clear: Mr. Miller's employment could be terminated without cause on providing Employment Standards Act minimum notice or pay in lieu. The employer had provided Mr. Miller with his ESA minimum pay in lieu in accordance with the agreement and therefore Mr. Miller's claim was dismissed.

Mr. Miller appealed the decision to the Court of Appeal and the Supreme Court of Canada. The Court of Appeal agreed with the trial judge and dismissed his appeal. The Court of Appeal pointed out the contract had a "severability" clause, a standard type clause which says if any part of contract is invalid, the rest remains in force. The Court of Appeal relied on that to uphold the trial judge's refusal to throw out the balance of the termination clause because of the illegal probation provision. We believe a similar result might have applied even without such a severability clause.

The Supreme Court of Canada has refused to hear Mr. Miller's appeal.

This case confirms that employers can rely on employment agreements to limit severance, even to employment standards' minimum levels. This case also shows that sometimes "boilerplate" clauses such as a severability clause, which may not be given much thought, can prove useful. That being said, the case underlines the need for employers to have their termination and probation clauses reviewed by experienced counsel.

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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