The recent decision of Bertsch v. Datastealth Inc.1 is a welcome jurisprudential development for employers in Ontario who — at least since the appellate court's Waksdale v. Swegon North America Inc.2 decision (as discussed in a previous post) — have had to contend with employee-friendly case law in the drafting of employment agreement termination provisions.
In Bertsch, the plaintiff brought a wrongful dismissal claim alleging that his written contract failed to limit his termination entitlements because the termination provisions were "ambiguous and fail[ed] to properly reference the statutory exemptions from compensation on dismissal" in contravention of Ontario's Employment Standards Act, 2000 (the ESA). The plaintiff claimed in particular that the termination provisions in question, excerpted as follows, failed to track the statutory definition of "cause" and were therefore void and unenforceable pursuant to Waksdale:
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.
11. (a) If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owning under the [ESA] ...you shall instead receive your minimum entitlements under the [ESA]...
(h) This Agreement constitutes the complete understanding between you and the Company with respect to your employment, and no statement, representation, warranty or covenant have been made by you or the Company with respect to this Agreement except as expressly set forth herein. The parties have expressly contemplated whether there are any additional implied duties owed by the Company to you, at common law or otherwise, outside the written terms of the Agreement or under statute and confirm that there are no such obligations. This Agreement shall not be altered, modified, amended or terminated unless evidenced in writing by the Company.
(k) [...] The invalidity, for any reason, of any term of this Agreement shall not in any manner invalidate or cause the invalidation of any other term thereof...
In response, the defendant employer brought a motion under Rule 21 of the Rules of Civil Procedure seeking the Court's interpretation of the relevant contractual terms and to strike or dismiss the claim for failure to disclose a tenable cause of action. Rule 21 states, among other things, that a party may move before a judge "for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs."
Despite the plaintiff's protest that a Rule 21 motion was inappropriate in the circumstances, the Court agreed with the defendant employer that the matter was appropriate for a Rule 21 motion. It confirmed, in fact, that the Bertsch matter was "a good example where the court's interpretation of the agreement at this stage will be useful, efficient and just."
Reiterating the trite law that employment termination provisions must "clearly comply with the ESA", "must not potentially contravene the ESA and its regulations" and must "properly exclude common law notice", the Court ultimately decided in the defendant employer's favour. It said that the Bertsch termination provisions are clear and unambiguous and do not result in a breach of the ESA pursuant to any reasonable interpretation. Further, the Court noted that while "the contractual terms ... [were] not simple", they were nevertheless enforceable, and suggested that employees "would benefit from legal advice before signing" an employment contract containing such terms. It was also the Court's view that "where the proper meaning of the clause is clear," a presumed power imbalance between the employer and the employment candidate does not change the evaluation of its enforceability.
In the result, the claim was struck without leave to amend and the defendant employer was awarded partial indemnity costs in the amount of $6,000.
Takeaways for employers
This case serves as a reminder that courts will continue to review termination provisions in close technical detail to ensure compliance with the ESA in all potential scenarios. As Bertsch demonstrates, however, courts may uphold termination provisions crafted in accordance with controlling jurisprudence and the text of the ESA even in light of the presumed power imbalance between employer entities and employment candidates.
Further, Bertsch demonstrates that, in cases involving wrongful dismissal, there is no need to incur time and resources on lengthy litigation. Instead, a Rule 21 motion can be a simple, quick and effective response when the only issue in dispute is the interpretation of a termination clause.
Footnotes
1. 2024 ONSC 5593.
2. 2020 ONCA 391.
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.
