Termination Clause in Agreement Struck Down

By Jeff Palamar on 2015/06/24

The recent decision from the Ontario Divisional Court in Miller v. ABM interpreted an employment agreement which had a termination clause in it which stated:

Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.

The agreement did not expressly state that benefits would be continued during this statutory notice period, as was required under the Ontario Employment Standards Act.  As a result, the Court found that the termination clause was contrary to the Act, and so void, with common law reasonable notice required in the circumstances.  The Court’s logic was that because the agreement was silent on providing benefits during the notice period, there was no presumption that benefits would be provided.  The Court held that, at best, there was an ambiguity.  As the agreement had been drafted by the employer, the ambiguity was interpreted against it.  The end result was that the employment agreement was set aside and the employer liable for much more than anticipated.

Manitoba’s legislative requirements are somewhat different and benefits are not required to be continued during the notice period.  However, if an employee is terminated less than four weeks before a general holiday the employee is still entitled to holiday pay for that holiday equal to 5% of his/her wages, excluding overtime, for the four week period immediately preceding the holiday.  In Manitoba, clauses which purport to limit what an employee gets in the case of termination have to respect the minimum standards set forth by The Employment Standards Code, including this holiday pay entitlement too.  If the logic in the Miller case applies here, an employment agreement would be invalid unless it specifically addressed the holiday pay issue.

The Miller case is just one example of a continuing trend where courts interpret documents written by employers, against employers.  Care should be taken then in drafting to ensure that not only is the agreement consistent with the law as it stands today, but what is stated is clear and unambiguous.  This particularly would be relevant in the context of organizations that at one stage may have felt they were under federal jurisdiction, but now with the changing case law, might find themselves under provincial jurisdiction.

Jeff is a partner with Taylor McCaffrey LLP and practices in the area of labour and employment law and first nations. His direct line is 204.988.0364 or email  jpalamar@tmlawyers.com.

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