In a good news decision for employers, the Ontario Court of
Appeal recently dismissed an appeal of the summary judgment
decision of Justice Sean Dunphy which upheld a termination
provision that permitted the employer to terminate the employee by
providing the "minimum notice required under the
Employment Standards Act". Notably, the termination
provision in question in Oudin v Le Centre Francophone de
Toronto did not include any reference to severance pay or
continuation of benefits, which employee counsel will typically
argue renders a termination provision invalid. Copies of the Court
of Appeal's decision and the underlying decision of Justice
Dunphy can be found
In upholding the termination provision, the Ontario Court of
Appeal found that Justice Dunphy had considered the circumstances
of the parties, the words of the agreement as a whole and the legal
obligations between the parties, and did not err when he held that
the parties had intended to apply the Employment Standards Act,
2000 ("ESA"): Specifically, the Court of Appeal
upheld Justice Dunphy's following conclusion:
Contracts are to be interpreted in
their context and I can find no basis to interpret this employment
agreement in a way that neither party reasonably expected it would
be interpreted when they entered into it. There was no intent to
contract out of the ESA in fact; to the contrary, the intent to
apply the ESA is manifest.
Justice Dunphy in fact went even farther and in his lengthy
underlying decision rejected the employee's argument that any
potential interpretation that would result in a hypothetical
contravention of the ESA was sufficient to render a termination
provision invalid. Instead, Justice Dunphy focused on the true
intentions of the parties and held that they had intended notice of
termination to be limited to the notice prescribed by the ESA, and
that in any event, any technical objections could be cured by the
employment agreement's severability provision.
The Court of Appeal did not conduct an independent analysis of
the termination provision but instead dismissed the appeal on the
basis that Justice Dunphy's interpretation of the contract was
entitled to deference and that he had not erred in concluding the
termination provision was enforceable. Nonetheless, this decision
is a useful tool for employers as it emphasizes the importance of
the reasonable expectations of the parties when interpreting a
contract (including employment contracts), and may represent a move
away from extreme interpretations or hypothetical scenarios being
used to invalidate termination provisions contrary to the
intentions of both employers and employees.
Of course, regardless of whether a termination provision is
ultimately held to be enforceable, there is no substitute for a
carefully-drafted employment agreement. Indeed, a clear,
unambiguous termination provision can go a long way in avoiding
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