Ontario Court of Appeal Rules Termination Provisions Must be Read Together

In a decision released June 17, 2020, the Ontario Court of Appeal has ruled that if any element of a termination provision in an employment contract runs afoul of the Employment Standards Act, the whole termination provision is invalid.

In Waksdale v. Swegon North America Inc. the Plaintiff sued his employer after he was dismissed with two weeks’ pay in lieu of notice following eight months of service. The Plaintiff’s employment contract had a termination with notice provision, and also had a termination for cause provision. On a summary judgement motion, the Defendant Employer conceded that the termination for cause provision violated the Employment Standards Act and was invalid, but argued that it was separate from the termination with notice provision that the employer was relying on in the case. The employer also relied on a severability clause contained in the agreement.

The motions judge found that the two provisions were sufficiently separate that the termination-for-cause provision did not cause the termination with notice provision to be invalid despite its violation of the Employment Standards Act.

The Court of Appeal overturned that finding. The Court found that an employment agreement must be interpreted as a whole. The fact that two termination clauses are contained in different paragraphs in the contract, or under different subheadings, does not affect the interpretation of the contract. The termination provisions must be read as a whole if the policy goal of discouraging employers from drafting contracts that violate the Act is to be met. Additionally, the Court of Appeal found that the employer could not rely on a severability provision to cure otherwise illegal contract clauses.

This decision clarifies a somewhat unsettled area of the law of wrongful dismissal. It reaffirms the principle that a termination provision in an employment contract may be invalidated if any termination situation would result in the employee receiving less than they are entitled to under the Employment Standards Act.

The Court of Appeal’s decision also serves as an important reminder that employment contracts will not be enforced where they violate the basic protections in the Act. If you have been terminated, you should seek legal advice and not rely solely on the words in your employment contract.

[This article is for informational purposes only and does not constitute legal advice, which cannot be given without consideration of your individual circumstances.]



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