Employers often enter into written employment contracts with
employees in an effort to define and minimize liability for notice
and severance obligations on termination without cause. Parties are
precluded, however, from "contracting out" of employment
standards minimum protections. Employment contracts that purport to
provide employees with less than minimum standard notice or
severance are not enforceable. The Ontario Superior Court of
Justice tackled in Oudin v. Le Centre Francophone de Toronto, 2015
ONSC 6494 (S.C.J.) an employee's challenge to notice/severance
language that he argued was unenforceable because it undercut his
minimum standard entitlements.
The plaintiff was hired by the defendant, a non-profit society,
in 2000 to manage the production of a magazine published by the
defendant. The plaintiff worked, until 2007, on the basis of a
series of one-year contracts that included a base salary of $28,000
per year and 20 percent of the value of sales of advertisements
placed by him. In 2007, the parties entered into an indefinite term
employment contract under which the plaintiff's base salary
increased to $50,000 and commission increased significantly to
between 50 and 65 percent of the value of sales over certain
The new contract also limited the plaintiff's notice
entitlement to the greater of fifteen days or the notice prescribed
by the Ontario Employment Standards Act ("ESA"). The
Court noted that the 2007 contract followed a template form and the
parties agreed that at the time it was signed, the plaintiff had
already accrued minimum notice/severance entitlements exceeding the
15 days contemplated in the employment agreement.
The plaintiff's employment was terminated in September 2013
after several years of declining sales for the magazine. The
defendant provided the plaintiff with 21 weeks of termination and
severance pay (8 weeks of termination pay and 13 weeks of
severance) under the ESA and offered an additional 12 weeks of pay
in exchange for a release. The plaintiff refused the offer. The
defendant also voluntarily maintained the plaintiff's benefits
until March 31, 2014.
At trial, the plaintiff sought pay in lieu of common law
"reasonable notice" and argued that his written contract
was unenforceable for two reasons: the contract allowed for
termination without notice in case of "continuing incapacity
considered permanent" (based on legislation that was later
amended) and allowed for termination on only 15 days' notice
even though his service at the time entitled him to much more than
15 days' notice under the ESA. The defendant conceded that the
incapacity clause was likely now unenforceable, disputed that the
termination clause was illegal given the mutual understanding at
the time that the plaintiff would receive ESA minimums in excess of
15 days, and further relied on section 12.2 of the contract which
expressly provided that any contract provision that was unlawful
would be modified or nullified to the extent necessary to comply
with the law and allow other contract provisions to remain in
The Court accepted that the parties did not intend to contract
out of the minimum standards of the ESA and held that the
plaintiff's challenges to the contract "represent[ed]
either strained interpretations or [were] easily and reasonably
cured using the curative language contained in the employment
agreement itself". The Court held that the incapacity clause
rendered illegal as a result of legislative change was properly
excised in keeping with section 12.2 of the contract and that the
termination clause could be reasonably interpreted to provide for
the ESA entitlement rather than an illegal 15 day notice/severance
The Court specifically noted that the plaintiff was a
well-educated individual and the employment agreement represented
an opportunity for him to earn substantial additional income. The
Court also commented that it was not appropriate to "strive to
find the least plausible interpretation the language [would] bear
simply because the outcome happen[ed] to favour one party or
another in hindsight". The contract was reasonably interpreted
to provide the plaintiff with the greater of 15 days or the ESA
minimums and this was, in fact, provided to the plaintiff.
This decision confirms the importance of well-drafted employment
contracts and the value of severance clauses which allow for any
terms later rendered illegal to be excised without impacting the
enforceability of the entire agreement.
Previously printed in the LexisNexis Labour Notes
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