What's the Issue?
On October 7, 2024, the Ontario Superior Court of Justice in the case of Bertsch v. DatastealthInc., 2024 ONSC 5593, upheld the enforceability of a termination clause in an employment agreement, affirming that it limited the employee's entitlements upon termination to the minimum standards prescribed by the Ontario Employment Standards Act, 2000 ("ESA").
The Case
In this case, the employee worked for Datastealth Inc. for 8.5 months when his employment was terminated on a without cause basis. Upon termination, the employer provided the employee with his ESA entitlements in accordance with the employee's employment agreement, plus a gratuitous three (3) additional weeks' pay in lieu of notice, without requiring the employee to execute a release, inclusive of his minimum entitlement to one (1) week pay in lieu of notice. The employee sued for wrongful dismissal and sought twelve (12) months of reasonable notice at common law. The employee claimed the termination clause was unenforceable as it was ambiguous and in breach of the ESA. The clause said this:
5. Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the [ESA] and its Regulations,...including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation.
You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation. You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
The Court held that the clause was enforceable. It determined that the termination clause was clear, unambiguous, and compliant with the ESA. The Court dismissed the employee's argument that the clause could be construed in a way that would contravene the ESA and subsequently struck the employee's statement of claim without leave to amend.
Takeaways for Employers
Employers can in fact limit their liability on termination of employment. Termination clauses must be clear, unambiguous, and comply with the minimums under the ESA. If you need help drafting these clauses, please reach out to a member of our employment team.
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.
