EMPLOYERS’
•Issue 62 June 2015
Employers rely on termination provisions in employment
agreements to limit the financial costs of terminating employees
by contracting out of lengthy common law notice periods.
However, there is always the risk that a court will strike down
these provisions as being unenforceable. The recent cases of
Miller v. A.B.M. Canada Inc. 2015 ONSC and Howard v. The
Benson Group Inc. 2015 ONSC reflect a continuing trend towards
rendering termination provisions null and void for failing to
clearly comply with employment standards legislation.
Courts continue to strike down
termination provisions
Miller v. A.B.M. Canada Inc.
Prior to commencing employment with A.B.M., Mr. Miller
signed an employment agreement with the following termination
provision:
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“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”. [Emphasis added]
A.B.M. advised Mr. Miller in his termination letter that he was
entitled to two weeks’ base salary in lieu of notice. Mr. Miller
declined an “enhanced separation offer” of four weeks’ base
salary plus car allowance, and commenced an action for wrongful
dismissal. The Ontario Superior Court of Justice awarded Mr.
Miller his common law reasonable notice on the basis that the
termination provision was not enforceable.
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We are proud to announce
that Janice Rubin has
been nominated as a
finalist in Canadian
Lawyer magazine’s
survey of the Top 25 Most
Influential Lawyers.
The “Top 25” recognizes
Canadian lawyers who
have played a significant
role in the legal profession
and Canadian and
international society in
the last year to year and a
half.
Mr. Miller had been employed by A.B.M. Canada Inc. (“A.B.M.”)
for approximately a year and a half in the position of Sales
Development Manager at the time of his termination without
cause. As Sales Development Manager, he received a base salary,
a car allowance, and 6 percent pension contributions.
A.B.M. appealed the Superior Court’s decision at the Ontario
Divisional Court, arguing that the employment agreement’s
Janice Rubin
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Lawyer magazine’s
Top 25 Most
Influential Survey
Voting closes on June 9
and the results will be
published in the August
2015 issue.
This alert is prepared as a service for our clients and other
persons dealing with employment issues. It is not intended
to be a complete statement of the law or an opinion on any
subject. Although we endeavour to ensure its accuracy, no
one should act upon it without a thorough examination of
the law after the facts of a specific situation are considered,
and without seekeing the advice of legal cousel. No part of
this pubilication may be reproduced without prior written
permission of Rubin Thomlinson LLP. This has been sent
to you courtesy of Rubin Thomlinson LLP.
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Employers’ Alert
Courts continue to strike down termination provisions
Continued...
silence in paying benefits during the notice period should lead to
a presumption that benefits would be paid.
The Divisional Court upheld the Superior Court’s decision
that the provision was null and void because it only referenced
continuing his “salary” for the statutory period, not the totality
of his remuneration, in contravention of the Employment
Standards Act, 2000 (the “ESA”). The Divisional Court noted
that the employment agreement distinguished between salary,
pension contributions and car allowance. Accordingly, the
Divisional Court stated that the provision was, in fact, not
silent on paying benefits. At best, A.B.M.’s argument led to the
conclusion that the termination provision was ambiguous. The
Divisional Court applied the contra proferentem principle of
contractual interpretation, which states that ambiguity ought to
be read against the party who drafted the contract, particularly
employment contracts where employees are vulnerable and need
protection.
Howard v. The Benson Group Inc.
The Plaintiff, Mr. Howard, had entered into a five-year term
employment agreement with The Benson Group Inc. (“The
Benson Group”). The Benson Group terminated Mr. Howard’s
employment without cause less than two years into his term, and
provided him with two weeks’ pay in lieu of notice.
The termination provision in question read:
“Employment may be terminated at any time by the Employer
and any amounts paid to the Employee shall be in accordance
with the Employment Standards Act of Ontario”. [Emphasis
added]
In an action for wrongful dismissal, the Plaintiff argued that
the termination provision had three ambiguities that were fatal
to its enforceability: 1) the term “amounts paid” was unclear
as to whether it included base salary as well as benefits or any
bonuses, or base salary alone; 2) the word “any” in the phrase
“any amounts paid” suggested that The Benson Group retained
the discretion to decide whether or not it would provide any
payments upon termination; and 3) the payment of “amounts”
could extinguish all The Benson Group’s obligations to Mr.
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Ontario Ministry
of Labour issues
new Employment
Standards Poster
As of May 20, 2015
employers are
required to post
the most recent
version (6.0) of
the Employment
Standards Poster
in the workplace
in a location where
it is likely to come
to the attention of
employees.
Employers must
provide all current
employees with a
copy of version 6.0
of the Employment
Standards Poster by
June 19, 2015. Any
new employees hired
after May 20, 2015
must be given a copy
within 30 days of
their date of hire.
A copy of version
6.0 of the poster can
be found by clicking
here and a summary
of the new posting
requirements can
be found by clicking
here.
20 Adelaide St. East • Suite 1104 • Toronto, Ontario • M5C 2T6
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Employers’ Alert
Courts continue to strike down termination provisions
Continued...
Howard on termination, including full satisfaction of obligations
arising out of the ESA.
The Ontario Superior Court of Justice found the termination
provision to be sufficiently ambiguous as to the true extent of
Mr. Howard’s entitlement under the ESA, and construed the
ambiguity against The Benson Group. While the Court rejected
Mr. Howard’s claim that he should therefore receive payment for
the three year balance of his contract term, the Court did find that
he was entitled to a common law reasonable notice period.
What does this mean for employers?
Terminations provisions must be drafted to clearly
comply with all entitlements the employee has under
the ESA. Even though the provisions above did not explicitly
exclude any ESA entitlements, they were still held to be
ambiguous, and were interpreted unfavourably to the employer.
Courts have also found that ambiguous provisions cannot
be saved by voluntarily providing all ESA entitlements upon
termination.
All remuneration must be continued for the statutory
notice period. Remuneration may include, but is not limited
to, commission, non-discretionary bonus, group benefits,
vacation pay accrual, pension contribution and car allowance.
Do not rely on the same old employment agreement
template. The Court in Miller v. A.B.M. specifically noted that
the employment agreement was prepared by a non-lawyer who
used precedents obtained by a legal department. Employment
agreements must be drafted with care during the hiring
process, and reviewed periodically throughout the employment
relationship to ensure compliance with legal developments.
“Even though the provisions above
did not explicitly exclude any ESA
entitlements, they were still held to
be ambiguous, and were interpreted
unfavourably to the employer. ”
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RT Law at Work
Blog
Here’s what we’ve been
blogging about:
Human Rights Tribunal
Awards Record General
Damages for Sexual
Harassment of Migrant
Workers
Notice No-Nos: Some
Basic “Don’ts” When
Providing Notice of
Termination
“FHRITP” = CareerLimiting Move
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