Canada: Court Of Appeal Upholds Termination Clause Without The Bells And Whistles

Last Updated: July 7 2016
Article by Andrew Cogswell

The Ontario Court of Appeal has written a very short but potentially impactful decision with respect to the drafting of enforceable termination provisions in employment contracts. This decision offers a divergent perspective, and hope for employers, on whether a termination clause must explicitly particularize each entitlement pursuant to the Employment Standards Act, 2000 ("ESA") to be enforceable and oust an employee's significantly higher common law entitlements.

The decision, Oudin v. Centre Francophone de Toronto, was an appeal of a partial summary judgment from the Ontario Superior Court of Justice. Mr. Oudin commenced an action against his former employer for damages related to an alleged wrongful dismissal. The claim sought salary in lieu of common law notice through a partial summary judgment motion, but was unsuccessful. Justice S.F. Dunphy ruled that the employment contract between the parties limited Mr. Oudin's termination entitlement to the minimums provided by the ESA.

The central issue in this case was the interpretation of the notice provision in the agreement and whether the translation by the motion from French to English was innaccurate. The provision in question is the following:

"...Le CFT peut également résilier la présente entente pour tout autre motif en donnant à l'employé(e) un préavis de quinze (15) jours ou le préavis minimum prescrit par la Loi sur les normes d'emploi, ou en lui versant une indemnité salariale égale au salaire qu'elle aurait droit de recevoir pendant la période de préavis..."

On appeal, both parties agreed that the motion Judge's interpretation was incorrect, but disagreed on the impact of the interpretation. The clause was interpreted to read that the employee could be terminated if provided the minimum required by the ESA; however, the correct interpretation was the relationship could be terminated by providing the minimum notice required by the ESA. The Court of appeal agreed with the employer that the slightly different translation did not assist Mr. Oudin's argument that the contract was an attempt to contract out of ESA requirements. Justice Dunphy was clear in his reasoning that the clause referred only to notice and was not an attempt to contract out of ESA obligations.

In the recent past there have been a number of Ontario and other court decisions which have found contracts to be void when they do not refer to severance requirements or the continuation of benefits in their termination clauses. Generally speaking, the absence of these references has been interpreted as an attempt to provide salary continuance but nothing more – in other words, something less than what the ESA requires. These cases have instructed employers to ensure termination clauses specifically reference these other entitlements (potential entitlements with respect to severance) or risk the entire clause being found unenforceable and common law reasonable notice owing. This decision does not overturn all of the previous jurisprudence which instructs employers to be very careful and detailed in their employment contracts. The decision is short and could be interpreted simply as affirmation that deference should be shown to lower court judges when their reasoning is clear, rather than a significant shift in the case law.

This decision of the Ontario Court of Appeal nonetheless provides hope that at least appellate courts will use a common sense approach when an employment contract references the ESA but fails to outline every entitlement that is to be continued during the statutory notice period. That said, the CCP team will continue to assist employers in drafting easy to understand, comprehensive, and thoughtful employment contracts that ensure termination contract language will stand up to the most exacting standards of our courts.

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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