In Bertsch v Datastealth Inc [Bertsch], the Ontario Court of Appeal (the “ONCA”) upheld the decision from the Ontario Superior Court of Justice (the “ONSC”), agreeing that the employee's termination clause was unambiguous, enforceable, and did not contravene the Employment Standards Act, 2000 [ESA].
As discussed in our previous blog, the ONSC found that the termination clause in question complied with the ESA and clearly outlined the circumstances in which the employee would not be entitled to notice, severance pay, or benefit continuation. The court held that the clause aligned with the statutory requirements set out in O. Reg. 288/01 under the ESA.
The employee appealed the decision, maintaining that the clause was ambiguous and unenforceable because it could be interpreted to permit dismissal for cause without meeting the ESA's stricter standard of “wilful misconduct, disobedience or wilful neglect of duty.” The employee also argued that, while a legally trained person might interpret the clause as ESA-compliant, an ordinary person could read it to allow dismissal without notice for less serious misconduct, such as negligence.
The ONCA Decision
The ONCA upheld the lower court's decision that the termination provision was unambiguous. The termination clause stated:
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 Ontario Employment Standards Act, 2000 and its Regulations, as may be amended from time to time (the “ESA”), 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 ONCA clarified that the issue was not whether a layperson might misunderstand the clause, but whether a reasonable interpretation of the agreement could violate the ESA. The ONCA concluded that the clause clearly stated that employees terminated “with or without cause” would receive only the minimum entitlements under the ESA, and found no error in the motion judge's conclusion that the clause was valid and enforceable.
Takeaways for Employers
While courts will continue to scrutinize termination clauses and interpret any ambiguity in favour of employees, Bertsch confirms that a clearly drafted, ESA-compliant termination clause can effectively limit termination entitlements to the statutory minimums.
In light of the decisionin Bertsch, employers should consider the following best practices:
- Draft Termination Provisions with Precision and Update Employment Agreement Regularly: Termination provisions must be clear, specific, and compliant with the ESA and its regulations. Vague or inconsistent language can lead to unenforceability. Given the evolving legal landscape around termination clauses, employment agreements should be reviewed and updated regularly to reflect current legal standards.
- Provide Consideration for Existing Employees: If employers are implementing updated employment agreements, they should ensure they provide fresh consideration—such as a bonus, raise, or other benefit to the employee—to make the new agreement legally enforceable.
- Exercise Caution with Just-Cause Dismissals:Under the ESA, an employee can be dismissed without notice or pay in lieu if their conduct meets the “wilful misconduct” standard, which is a significantly higher threshold than the common law standard for just cause. Before proceeding with a for-cause dismissal, employers should: carefully assess whether the employee's conduct meets this statutory standard; ensure procedural fairness in any investigation process; document their decision-making clearly to support their position, If challenged.
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.
