In Bertsch v DatastealthInc., 2024 ONSC 5593, the Ontario Superior Court of Justice (“ONSC”) determined that the termination provisions in the employment agreement, which limited the employee’s termination entitlements to the statutory minimums, were enforceable.
Background
The plaintiff employee had been employed with the defendant employer for approximately 8.5 months prior to his termination. On termination, the plaintiff was provided with 4 weeks’ pay in lieu of notice, well in excess of his minimum statutory entitlement of 1 week required under the Employment Standards Act, 2000 (“ESA”). The plaintiff sued the employer, seeking 12 months’ reasonable notice, claiming that the termination clause in his employment contract was unenforceable. The relevant clauses read, in part:
- Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the [ESA] and its Regulations,…including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.
You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
The plaintiff alleged that the agreement’s termination provisions were contrary to the ESA and its regulations, arguing that the termination clause failed to properly include the employer obligation under O. Reg 288/01 to provide termination entitlements unless the employee committed “wilful misconduct, disobedience or wilful neglect of duty”.
The employer brought a rule 21.01(1) motion to determine the interpretation of the contractual provisions and to strike out or dismiss the claim as disclosing no tenable cause of action.
Decision of the Court
Rule 21
The Ontario Superior Court of Justice confirmed that this was an appropriate case to be determined by a rule 21 motion as it would be an efficient use of the court process. There were no disputed facts regarding the interpretation of the contractual provisions, and the Court determined that it could readily determine whether the employee’s entitlements were limited to the ESA minimums at this stage.
Enforceability of the Termination Provisions
In reviewing the contract, the Court concluded that there was no contravention of the ESA or its regulations, finding that that there was “no reasonable alternative interpretation of the relevant clauses here that might result in an illegal outcome” or a result that was contrary to the ESA minimums. The Court was satisfied that while presumptively any ambiguity would be read to the benefit of the employee, the termination clauses were unambiguous, clearly excluded common law reasonable notice and limited the employee’s entitlements. On this basis, the Court upheld the enforceability of the termination clauses and struck out the plaintiff’s claim.
Takeaway
Refreshingly, the Ontario Superior Court of Justice correctly applied the applicable legal principles and upheld the enforceability of a termination clause which, while perhaps not simple in its wording, was unambiguous in its meaning.
As this case demonstrates, careful drafting regarding the limiting and exclusionary language with respect to ESA minimums and common law reasonable notice is essential. These provisions must be clear and unambiguous, and consistent with the requirements of the ESA, in order for employers to rely on them upon the termination of employment.
Employers are encouraged to regularly have their employment contracts reviewed to ensure they contain appropriate language dealing with entitlements on termination. Due to recent developments in the law, termination clauses once considered enforceable may no longer be providing the intended protections.
If you have any questions about this decision or workplace law, please do not hesitate to contact a Mathews Dinsdale Lawyer.
