In Rahman v Cannon Design Architecture ( 2021 ONSC 5961 Justice Dunphy had to consider whether the following clause was illegal in light of the Waksdale v Swegon North America Inc ( 2020 ONCA 391) decision of the Ontario Court of Appeal:
“CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.”
In Waksdale it was found that language of this sort was contrary to the ESA as just cause was a lower standard than wilful misconduct as set out in the ESA and as such the entire termination clause is a nullity and therefore common law notice would apply.
Somewhat surprisingly Mr Justice Dunphy found that this case did not fall within Waksdale for the following reasons:
- The Plaintiff obtained competent legal advice before signing the agreement.
- The Plaintiff negotiated an improved termination provision and at no time objected to the just cause language. ( Note: the contract was negotiated years before the Waksdale decision )
- The contract provided for more than the ESA if she signed a release, but presumably less than the common law.
- She had a senior role, make lots of money and ” was a woman of experience and sophistication”.
- “The offer letter contains an explicit “for greater certainty clause” recognizing that the employer’s “maximum liability … for common law notice, termination pay, benefits continuation, severance pay, or payment in lieu of notice” shall be limited to the greater of the notice required in the Officer’s Agreement or the minimum amounts specified in the ESA
- The Judge emphasized that the agreement represented the mutual intention of the parties, was unambiguous and provided a benefit in excess of the ESA minimums.
With the greatest of respect, I think that Mr Justice Dunphy approached the whole issue from the wrong perspective. Waksdale is a finding that the use of the words ” just cause ” is illegal as it contradicts the ESA standard. It also found that such a clause poisons the entire termination provision, even the “without cause ” provision.
Illegality leads to nullity says the Supreme Court of Canada in Mactinger v. HOJ Industries Ltd.,  1 S.C.R. It is therefore decidedly not an issue of what was in the minds of the parties when they entered into the contract nor is it relevant whether the clause is clear and unambiguous.
You could have a properly drafted and legally reviewed agreement with a Mafia hitman to kill your business rival. When he or she refuses to do the hit you cannot sue him or her in the Superior Court because the contract is illegal and our courts will not enforce an illegal contract as a matter of public policy.
Moreover, as an illegality is a legal nullity, we are instructed to read the contract as if the affected clause is not there at all. It is legally incorrect to look at or to refer to an illegal clause as a way to uncover the true intentions of the parties.
Therefore all the reasons given by Mr Justice Dunphy should be irrelevant as they relate to traditional ways of attacking the formation of the contract which focuses on the intention of the contracting parties.
I would not be surprised if this matter were appealed.
If you like a copy of this decision please email me at firstname.lastname@example.org.