In Bertsch v. Datastealth Inc., 2025 ONCA 379, the Ontario Court of Appeal delivered an employer-friendly decision in upholding a termination clause in an employment agreement that limited an employee's entitlement to the statutory minimums under the Employment Standards Act ("ESA").
Background
The plaintiff had been employed by the defendant for about eight and a half months when he was terminated on June 7, 2024. The plaintiff had been hired as a vice-president, earning a base salary of $300,000 per year under an employment agreement that contained the following termination clause that limited his rights on termination to the minimal entitlements under the ESA and provided that the plaintiff contracts out of common law notice requirements:
"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 [emphasis added].
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."
On a termination without cause, the plaintiff received four weeks' pay in lieu of notice, which was higher than the one week's pay he would have been entitled to under s.57(a) of the ESA. The plaintiff commenced an action seeking common law damages for wrongful dismissal. The employer brought a motion under Rule 21.01 of the Rules of Civil Procedure for the interpretation of the termination provision in the employment agreement and to strike the plaintiff's claim as disclosing no tenable cause of action.
Superior Court of Justice
The sole issue before the judge on the original motion was the proper interpretation of the termination provision in the employment agreement and whether it breached the ESA. The plaintiff argued that the termination provision was void and unenforceable because it failed to properly reference the employer's obligation to pay termination pay and severance, unless the employee engaged in "wilful misconduct, disobedience or wilful neglect of duty".
The defendant employer argued that the termination provision did not contravene the ESA, and that the plaintiff's claim was untenable and should be dismissed.
The motion judge rejected the plaintiff's argument that the termination provision in the employment agreement would permit the employer to terminate employment for cause short of "wilful misconduct, disobedience or wilful neglect of duty", without payment. The motion judge concluded that the termination clause excluded any claim for common law wrongful dismissal damages beyond what was provided under the ESA. The motion judge found that the termination clause was clear and unambiguous, and struck out the claim without leave to amend.
The Court of Appeal
On his appeal from the dismissal of his wrongful dismissal claim, the plaintiff argued that the motion judge erred when he refused to find that the termination clause was ambiguous because an ordinary person not trained in law may interpret it to mean that they could be terminated from their employment without notice for conduct such as negligence.
The Court of Appeal disagreed, noting that this was not a case where the employment agreement used legal terms that were confusing to a person not versed in the law. The plaintiff's interpretation would require ignoring the words "with or without cause" in the termination provision. The Court of Appeal indicated that the issue was how the agreement can be reasonably interpreted and that when reasonably interpreted, the employment agreement did not depart from the minimum standards guaranteed by the ESA.
The appeal was dismissed, and the termination provision was enforceable, precluding the plaintiff's claim for common law damages.
Takeaway
This decision confirms that courts may enforce well-drafted termination clauses that limit an employee's entitlement to ESA statutory minimums, provided the provisions are clear and unambiguous. This decision further demonstrates that employers may initiate a Rule 21 motion to determine the enforceability of a termination provision and potentially dispose of a wrongful dismissal claim at an early stage of an action.
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