COVID-19 UPDATE

WHAT'S NEW

“Game-Changing” Case on Termination Clauses Denied Leave to Appeal

February 1st, 2021 in Employment & Severance

As we discussed in a previous blog, the decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391 has an impact on the enforceability of most employment contracts in Ontario. When the decision was rendered, it left many employers scrambling to properly update their employment contracts, while providing a far greater number of dismissed employees with access to common law notice of termination, instead of the minimum entitlements as prescribed by the Employment Standards Act¸ 2000 (“ESA”).  This is a significant development in employment law.

What is the Status of the Law?

Just recently, the defendant was denied leave to appeal to the Supreme Court of Canada. This means that the Ontario Court of Appeal decision in Waksdale now impacts all future wrongful dismissal suits in Ontario.  The good news for employees (and bad news for employers) is that Waksdale creates a strong precedent that will lead to many termination clauses in employment contracts being deemed void.

The precedent set in Waksdale requires that every clause in an employment contract that is related to entitlements upon termination provide for at least the statutory minimums outlined in the ESA.  Essentially, if the employer attempts to limit the employee’s rights upon termination to something less than what the ESA provides, the termination clause must fail and the employee is entitled to common law notice of termination.

Across the legal field, the Waksdale decision is being seen as a huge win for employees. Since there are many employers who use dated contracts, this new precedent will allow many dismissed employees to access common law notice of termination who may not have been able to previously.

 

How is Common Law Notice of Termination Different?

In Ontario, there is a presumption that every employee who is dismissed without cause is entitled to common law notice of termination. Common law notice of termination is based on a variety of factors including the employees age, length of service, and position at the time of termination. Most importantly for employees, however, common law notice of termination often provides for far longer of a notice period than that provided by the ESA.  This is even the case for short term employees.

In an attempt to balance the interests of both employees and employers, Ontario courts have frequently upheld termination clauses that properly rebut the presumption of common law notice of termination. In order to properly rebut the presumption, however, the employer must draft the employment agreement in a manner that adheres to the standards provided by the ESA, at a minimum. More often than not, employment agreements are ambiguous, poorly drafted, and fail to properly rebut the employee’s presumptive right to common law notice of termination.

How Vice & Hunter LLP can Help Both Employees and Employers

The team at Vice & Hunter LLP has vast experience in helping both employees and employers assert their rights upon termination. Led by Partner J.F. Lalonde, a highly qualified lawyer with over 16 years’ experience acting for both employees and employers, our firm knows what you are entitled to and how to assert your rights.  If you are an employee who has been recently dismissed or an employer who is unsure if your employment agreements are enforceable, contact J.F. Lalonde at Vice & Hunter and let us explore your legal options with you.