In a somewhat surprising turn of events, the Supreme Court of Canada (“SCC”) has denied an application for leave to appeal the Ontario Court of Appeal’s decision in Swegon North America Inc. v. Waksdale, 2020 ONCA 391 (“Waksdale”).
On June 17, 2020, the Ontario Court of Appeal released a game-changing decision which dramatically altered the landscape relating to the enforceability of termination clauses in employment agreements. The Court of Appeal in Waksdale ruled that a contract’s termination provisions must be read as a whole, to the effect that if any aspect of the termination clause is found to contravene the Employment Standards Act, 2000 (“ESA”), the entire clause will be rendered null and void for all purposes, despite the existence of a severability clause.
The facts before the Ontario Court of Appeal were that the employer acknowledged the “with cause” termination language violated the ESA, but argued that the severability language saved the “without cause” termination language that it was seeking to rely on.
The Court of Appeal rejected that argument and refused to give any effect to the severability language found in the contract, rationalizing that a severability clause cannot have any effect on clauses of a contract that have been made void by statute.
The employer applied for leave to appeal, which was rejected yesterday by the Supreme Court of Canada, therefore leaving the Court of Appeal’s decision undisturbed. This is somewhat surprising as this case has the potential for nation-wide implications if courts in other provinces and territories adopt this approach also.
The Waksdale decision has had, and will continue to have, a profound effect on many employers seeking to rely on termination language which has the potential to violate the ESA, as any potential violation of the ESA can negate the intended effect. Where a termination clause is struck from a contract, any attempt to terminate an employee will be governed by the common law, which is generally significantly more generous to employees than the statutory requirements.
All employers across the country are strongly encouraged to have their employment contracts regularly reviewed by a lawyer to ensure compliance with statutory requirements for enforceability purposes. Doing otherwise can leave an employer with fewer (and more expensive) options than they otherwise would have.
For more discussion on the implications of the Waksdale decision, please refer to our previous In A Flash article, Ontario Court of Appeal Changes the Landscape on Termination Clause Enforceability.
If you have any questions regarding this development or any other workplace law issues, please do not hesitate to contact a Mathews Dinsdale lawyer.