The Case
The employee in Nogueira v. Second Cup was a 47 year-old manager, terminated without cause after eight and a half months of employment. Her employment agreement contained a termination clause which stated as follows:
If the Second Cup terminates your employment, it will comply with its obligations under the employment standards legislation in the province in which you work (the ‘Employment Standards Act’).
The employer argued that this clause displaced the employee’s entitlement to common law reasonable notice, and limited her entitlement to one-week of pay under the ESA. The employee argued that the clause merely confirmed that the employer would comply with all relevant laws upon termination, and that, given that the employer operates nationally, the law of the employee’s particular province of residence and employment would be applied.
The Decision
The Court found that the clause in question was capable of two interpretations – one which would remove the employee’s common law entitlement, and one which would preserve it. It was reasonable for the employee to have understood the clause as an assurance that none of her rights were being curtailed. Where there is an ambiguity in a contract drafted by an employer, the courts will generally interpret the ambiguous language against the employer.
The Court found that the clause in question was ambiguous at best. Rather, on its face, the Court found that it did not convey the meaning the employer ascribed to it – it did not contain any language to suggest the employee’s entitlements under the common law were being limited. As such, the Court awarded the employee four months’ pay in lieu of reasonable notice.
The Takeaway
The law regarding the enforceability of termination clauses is constantly evolving and changing. This case underscores the need to have such clauses drafted or reviewed by an employment lawyer. When termination clauses fail, employers are faced with unexpected uncertainty regarding a terminated employee’s entitlements under the common law.
Some employers erroneously believe that there is a “rule of thumb” in the common law that employees are entitled to a month of notice per year of service. The Ontario Court of Appeal has held that there is no such rule, and that determinations of reasonable notice must be based on an assessment of all relevant factors such as age, length and character of employment, seniority, and the availability of similar employment, having regard to an employee’s experience, training, and qualifications. Short-service employees, especially skilled employees in relatively senior positions, are often awarded terms of reasonable notice far in excess of their tenure with the employer.
This post was first published on First Reference Talks.
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