THE EMPLOYERS' EDGE
Hope Springs Eternal - Ontario Court Finds Termination Provisions Enforceable
In Bertsch v. Datastealth Inc., 2024 ONSC 5593, the employee commenced a wrongful dismissal action when his employment was terminated on a without cause basis after being employed with the employer for approximately eight and a half months. The employee had signed a written employment agreement, which contained termination provisions that limited his entitlement to the statutory minimums provided by the Employment Standards Act, 2000 (“ESA”). The employer provided the employee with four weeks’ pay in lieu of notice upon dismissal, which is more than the one week’s pay required by the ESA.
The employee alleged that the termination provisions contained in the agreement were unenforceable because they purported to allow termination for cause, without notice, whether or not there was “wilful misconduct, disobedience or wilful neglect”, and sought twelve months pay in lieu of notice. The employer brought a rule 21.01(1) motion to determine the interpretation of the relevant termination provisions as a matter of law and to strike out or dismiss the claim as disclosing no tenable cause of action. Accordingly, the only issue was the interpretation of the following termination provisions:
5. 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.”
11.(a) If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owning under the [ESA] …you shall instead receive your minimum entitlements under the [ESA]…
(h) This Agreement constitutes the complete understanding between you and the Company with respect to your employment, and no statement, representation, warranty or covenant have been made by you or the Company with respect to this Agreement except as expressly set forth herein. The parties have expressly contemplated whether there are any additional implied duties owed by the Page: 3 Company to you, at common law or otherwise, outside the written terms of the Agreement or under statute and confirm that there are no such obligations. This Agreement shall not be altered, modified, amended or terminated unless evidenced in writing by the Company.”
(k)… The invalidity, for any reason, of any term of this Agreement shall not in any manner invalidate or cause the invalidation of any other term thereof…”
The Court found that termination provisions above did not breach the ESA and were valid and enforceable. The Court wrote that “… there is no reasonable interpretation which would be contrary to the minimum requirements of the ESA and regulations” (para 21). The Court further noted while the termination provisions were not simple, they were clear and unambiguous. Accordingly, the employee’s claim was struck without leave to amend.
Employer Takeaways
Not only is this a great case for employers because the Court found the termination provisions enforceable, but it also demonstrates how employers can effectively use a rule 21.01(1) motion in a wrongful dismissal action where the enforceability of the termination provisions are at issue.
CCPartners has extensive experience advising employers on how to create enforceable employment agreements for new and existing employees as well as navigating wrongful dismissal claims. Click here for a list of lawyers who can help you determine if your contracts are enforceable and if not, how to ensure they are in the future.
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