Canada: Christmas Comes Early! BLG Wins Summary Judgment Motion For Employer In Contract Enforceability Case

Last Updated: December 3 2015
Article by Naomi E. Calla

Most Read Contributor in Canada, September 2016

In a decision released this past month, Oudin v. Le Centre Francophone de Toronto, 2015 ONSC 6494, our very own Daniel Girlando won a summary judgment motion on behalf of the defendant employer, Le Centre Francophone de Toronto ("the Centre").

The plaintiff, Francois Oudin, was a 68 year old Project Manager with 12.67 years of service, who was in charge of producing an annual magazine on behalf of the Centre. His employment was terminated without cause, and the Centre sought to rely on Mr. Oudin's employment agreement which contained a termination clause that limited his entitlement upon termination to his Employment Standards Act, 2000 ("ESA") minimum. The material portions of his employment agreement read as follows (translated from French):

s. 4 Termination of agreement: During the period of employment, CFT may terminate the employment of the employee without notice or payment of indemnity for all serious incidents (see Policy on disciplinary measures RH-8020), gross negligence or continuing incapacity considered permanent, incompetence in the exercise of his functions or breach of article 10 of this agreement (confidentiality and exclusivity).

s. 9.2 Termination and contractual rescission: This agreement may be terminated without notice or compensation by CFT for the reasons mentioned in article 4 of this agreement. The CFT may also terminate this agreement for any other reason by giving the employee 15 days notice or the minimum prescribed by the Employment Standards Act or by paying an amount of salary equal to the salary the employee would have had the right to receive during the notice period (after deduction and/or withholding at source), in the entire discretion of CFT.

s. 12.2 If any of the provisions of the present agreement is invalid or unable to be performed by virtue of any law, regulation, order or any other requirement or other principle of law, this modality shall in such case be considered to be modified or nullified, but only to the extent necessary to comply with the statute, regulation, order, legal requirement or principle and the other dispositions of the present agreement shall remain in force.

Mr. Oudin argued that the termination clause was void for failing to comply with the ESA and he was therefore entitled to common law reasonable notice. He provided several reasons why he believed the clause was void, two of which are of particular interest. First, he argued that s.9.2. was null and void because the first sentence referred to s.4, which the CFT conceded was contrary to the ESA. Justice Dunphy found the divisibility clause (s. 12.2) applied and that s. 9.2 should be modified to the extent necessary so that s. 9.2 did not have to be struck in its entirety. The court concluded the termination clause could readily be construed without reference the first sentence.

Second, Mr. Oudin argued that the termination clause was void for ambiguity since one possible interpretation of s. 9.2 is that it permitted only 15 days' notice of termination whereas the ESA requires a greater number. At the time the agreement was entered into, Mr. Oudin was already entitled to more than 15 days' notice pursuant to the ESA. He advocated for the position that any possible interpretation of a termination clause that might in some hypothetical situation create a potential violation of the ESA, renders the entire section of the agreement void. This is an argument commonly used by employee counsel in recent years, with some success.

Justice Dunphy disagreed with Mr. Oudin's position. First, he noted that the first task in contractual interpretation is to ascertain the objective intention of the parties. Justice Dunphy found that a fair construction of the employment agreement does not permit the Centre to provide Mr. Oudin with anything less than his ESA minimum. He wrote: "The only reasonable interpretation of the language employed in s. 9(2) was that the parties — both parties — fully intended the greater of the two notice periods to apply and the very law they incorporated by specific reference so required... I do not accept that I should strive to find the least plausible interpretation the language will bear simply because the outcome happens to favour one party or another in hindsight" Second, s. 12.2 of the agreement permits the excision of the superfluous reference to 15 days in s. 9.2 of the agreement. As a result, the Centre was able to rely on its termination clause and Mr. Oudin's entitlement upon termination was limited to his ESA minimum.

Justice Dunphy considered what Mr. Oudin's common law reasonable notice period would have been in case he was wrong on the enforceability of the termination clause. He decided that Mr. Oudin would have been entitled to 38 weeks (approximately 8.8 months), a period in the lower end of the reasonable spectrum. Justice Dunphy found that Mr. Oudin's age (68) was not an aggravating factor in extending the notice period absent some tangible evidence. Justice Dunphy also found that "forewarning", the fact that Mr. Oudin was clearly aware that his job was in jeopardy some time before he was actually dismissed, is a factor that may be taken into account in mitigating the amount of notice required. This factor is certainly fact-dependent, but is something that may be considered by employers when assessing the reasonable notice period for an employee.

This is a great decision to keep in an employer's tool box should you be faced with any of these issues going forward. You can have access to the full text of the decision.

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