Another ESA Termination Clause Bites the Dust:

In Nogueira v Second Cup ( 2017 ONSC 6315) Justice Morgan was faced with determining the validity of this termination clause :

If the Second Cup terminates your employment, it will comply with its obligations under the employment standards legislation in the province in which you work (the ‘Employment Standards Act’).

The judge held that this clause did not oust the common law term of reasonable notice. This is what he said on that issue :

10]           It is evident that the clause in Machtinger is considerably more explanatory than that in the case at bar. In Machtinger, the employer went out of its way to advise the employee of what he would get (or, more accurately, what he would not get) upon termination. Likewise, in Roden v. Toronto Humane Society, 2005 CanLII 33578 (ON CA), 2005 CanLII 33578, the Court of Appeal found a termination clause displaced the common law where it provided that the employee would receive “the minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation”. Along similar lines, in Farah v. EODC Inc., 2017 ONSC 3948 (CanLII), the contract provided that, “Upon termination, the Applicant would only be entitled to the statutory entitlements prescribed under the Employment Standards Act” [emphasis added].

[11]           No such explanation or warning sign appears in clause 13 of the Employment Agreement here. Using the barest possible language, it says nothing more than that the employer will obey the statute. The new employee being asked to sign this contract could be forgiven for assuming that the clause is there to reassure her that none of her rights are being curtailed, when in fact the very opposite is true.

[12]           It is evident that the Defendant, as employer, is responsible for drafting the Employment Agreement. It is addressed to the Plaintiff in the form of a letter agreement and refers to the employee as “you”. To the extent that an ambiguity exists in interpretation, the Employment Agreement should be interpreted contra proferentem against the employer as drafter. As Stinson J. stated in Singh v. Qualified Metal Fabricators Ltd. [2010] OJ No 4219, at para. 15, “I am not prepared to find that the Employment Agreement operated to nullify or detract from the implied common law requirement of reasonable notice of termination”…especially “having regard to the power imbalance that exists between an employer and employee as a matter of course.”

[13]           In my view, the words of the Employment Agreement are ambiguous at best. They do not convey the meaning that the Defendant attaches to them, and I do not see them as curtailing in any way the common law principal of reasonable notice or pay in lieu thereof.

There now seems to be at  least three basic attacks on ESA contracts that the Ontario Court of Appeal  has endorsed.

  1. Failure of consideration. ( Hobbs v TDI Canada Ltd , 2014 ONCA 44783)
  2.  Finding of an ambiguity in the wording. ( Wood v Fred Deeley Imports Ltd ( 2017 ONCA 158)
  3. Finding that any part of the  termination clause is contrary to the ESA and thus the whole provision is held to be invalid even if there is a severability clause. ( North v Metaswitch Networks Corp, 2017 ONCA 790)

What future grounds for attack exist in the future?

If and when it happens you will read about it first on this blog.

Unproven Allegations of Sexual Assault and Sexual Harassment Extend Notice Period:

In Smith v Vauxhall Co-Op Petroleum Limited ( 2017 ABQB 525) Justice Dario had a situation where she had to determine the proper notice period for a 57 year old Divisional Manager of 22 years service who made $70,000 per year.

The employer had alleged just cause , including an allegation of sexual assault and sexual harassment. .The Judge found that these particular allegations  were unproven.

In assessing the proper notice period ( which she found to be 20 months ) the Judge commented as follows:

[ 152] Based on the Bardal Factors, I find Mr. Smith would be entitled to a notice period of 20 months. He is entitled to such an award given his length of service, level of seniority, and the difficulty he may have had securing comparable employment.

[153]      In calculating Mr. Smith’s notice period, I have also taken into consideration Ms. AM’s allegations of sexual harassment and sexual assault: see Elgert at para 68. Consequently, I have assessed the notice period as higher than it would normally be for someone in similar circumstances. This is due to the impact the allegations may have had on Mr. Smith’s ability to find new employment.

Here is the kicker. This assessment of 20 months was a provisional assessment solely for the purpose of a potential appeal.

In fact the Judge upheld the discharge for just cause on the basis that the Plaintiff had engaged in a pattern of personal harassment of, but not sexually assaulted or sexually harassed,  his female subordinate. The other element of just cause was that he lied to his employer during the investigation about the nature of his relationship with the female subordinate.

That is what you call a Pyrrhic Victory.

Quite frankly, 20 months notice would see to be the correct notice period under normal circumstances so it is odd that the judge emphasized that she would have  awarded  an increased notice period because of the unproven allegations of sexual assault and sexual harassment.