In Sewell v Provincial Fruit ( 2020 ONSC 4406) Mandhane J. had to determine if the following clause invalidated the termination provision of an employment contract:
“b) Termination by the Company for Just Cause
The Company is entitled to terminate your employment at any time and without any notice or any further compensation for just cause and the Company will not have any further obligations to you whether at contract, under statute, at common law or otherwise.”
In setting out why this made the whole termination clause, including the not for cause provision, illegal, the Judge said :
 Second, applying Waksdale, I find that the “Termination for Just Cause” provision of the contract was illegal insofar as it contracted around the ESA requirement to provide notice except in cases where an employee engaged in “willful misconduct.” Based on the Court of Appeal’s reasoning, I must read the contract as a whole and set it aside if one or more of the terms are illegal, even if the offending term is not at issue in the instant case.
This case is important because in Waksdale the parties agreed that the for cause termination clause was illegal. That clause was very different from this one as it set all sorts of things as just cause, including breaching any federal or provincial law.
In this case the reference to just cause is in line with most termination clauses which simply reference ” just cause” . More importantly, in this case the Court ruled that the clause was illegal, and thus sets a clear judicial precedent.
This case had a number of other issues :
- Even though the Plaintiff had been contacted by a head hunter the judge found that that did not constitute inducement:
“Rather, the arrangement was mutually beneficial as the plaintiff had tried to change jobs prior to accepting the defendant’s employment offer and seemed ready for a change.”
2. The not for cause provision read as follows
c) Termination by the Company without Just Cause
(A) The Company will be entitled to terminate your employment at any time without just cause by providing you with the following
(ii) a payment, or at the Company’s sole option, notice or combination of notice and pay in lieu of such notice representing termination pay and, if applicable, severance pay, as may be required under the Employment Standards Act, 2000, as amended from time to time (the “Separation Period”);
It is agreed that upon compliance with the above provisions, the Company will be release from any and all obligations to you, whether statutory, under contract, at common law or otherwise.
When I first read that clause it looked fine to me because it looked like you would get both termination pay and severance pay. The Judge saw it differently :
First, a plain reading of the contract supports the plaintiff’s argument that it combines notice and severance pay entitlements in violation of the ESA requirement to pay both notice and severance. The provision states:
The Company will be entitled to terminate your employment at any time without just cause by providing you with … a payment, or at the Company’s sole option, notice or a combination of notice and pay in lieu of such notice, representing termination pay and, if applicable, severance pay
 Indeed, this provision is substantially similar to the one deemed illegal by the Court of Appeal for Ontario in Wood. The Wood termination clauses stated:
[The Company] is entitled to terminate your employment at any time without cause by providing you with 2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment… The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay
 The only substantial difference between the provisions is that the Wood clause specified a notice and severance period of 2 weeks per year, whereas the contract in this case left the amount of notice and severance open. This difference is not significant in terms of the Court’s reasoning in Wood and I find that the contract at issue in this case is void.
It is not entirely clear to me what it is about this clause that ” combines notice and severance pay requirement “.
It appears that the judge read the clause as saying that the employee would get either :
a) a payment of termination pay and severance pay ( this is OK)
b) working notice of the amount of weeks in the termination pay and severance pay provisions ( which is illegal as you cannot be required to work out the severance pay period, rather it must be paid as a lump sum )
3. The Judge made the following comments about the signing of the agreement when the Plaintiff was hired:[
8] I accept the plaintiff’s evidence that he signed the contract expecting that it would accurately set out the main terms of his employment as discussed with the defendant, as well as comply with employment standards legislation. I also accept that he did not understand the full implications of the “termination” clauses and that they were never explained to him.
 Given the power differential between the parties and the good faith basis upon which they had established their relationship, I accept that it was reasonable for the plaintiff to sign the contract without parsing out the potential meaning of the termination provisions or seeking independent legal advice.
First of all, this would seem to be one of the first cases to apply the doctrine of good faith to the initial hiring stage. Secondly it seems to say that unless the Employer clearly explains to the candidate the full legal implications of the termination clause, that they cannot rely upon it . What does this mean? How far does an employer have to go in explaining what the ESA vs the common law will get him upon termination?
Secondly, since it was found that the contract was null and void as a matter of law, it would not matter one way or the other if he had independent legal advice. Even if the greatest employment lawyer in the land told the Plaintiff that the contract was fine, but a Court found that it breached the ESA was thus null and void, it is still null and void.
“In this regard, the trial judge based his award of moral damages on the cumulative consequence of three incidents: (1) the false allegations of theft; (2) the false explanation that Mr. Cooper’s position was to be eliminated; and (3) the false allegations of inappropriate and threatening communications.”
The interesting aspect of this case is that the employer never alleged just cause, instead they told him that his job was being eliminated. The allegation of theft was only discussed in an in-camera meeting of the Board of Directors. However the Court found that because he was employed in a small town, the fact that 9 members of the community (the Bd of Directors) were made aware of these allegations justified the finding of bad faith as his reputation in the community was adversely affected. Moreover as the true reason that the Board voted to fire Cooper was because of the theft allegation, lying to him and telling him it was without cause also constituted bad faith.