In Cormier v 1772887 Ontario Limited cob as St Joseph’s Communications ( 2019 ONSC 587) Justice Perell had to determine the enforceability of the following ESA termination clause:
Termination without Cause
(a) The Company may terminate your employment at its sole discretion, at any time for any reason, without cause, upon providing you the minimum notice, pay in lieu of notice and/or severance pay required by the Ontario Employment Standards Act, 2000, as amended from time to time. You will have no other entitlement to notice of termination, pay in lieu of such notice, and/or severance pay.
(b) In addition to the foregoing and subject to the consent of the Company’s insurers, you will be entitled to continue to receive Company benefits (excluding STD and LTD benefits) during the notice period specified above.
He found that under the ESA , all benefits must be continued during the termination pay period and by excluding STD and LTD , this section violated the ESA and thus under Wood v Fred Deeley, the entire clause was null and void.
As the Plaintiff was a Fashion Studio Manager with 23 years of service , her notice period was 21 months instead of the 31 weeks under the ESA.
This automatic exclusion of LTD and STD during the termination period under the ESA ( which maxes out at 8 weeks ) is a very common clause in termination agreements .
These is the actual words from the decision:
88 The problem, however, for St. Joseph’s Communications is that while some aspects of the termination clause found in the 2012 employment contract were unobjectionable, the treatment of the employee’s benefits during the notice period were contrary to the Act. There was a fatal flaw, an Achilles’ heal so to speak, in the 2012 agreement making its termination clause void and unenforceable.
89 To be more precise, the termination clause in the 2012 employment contract purports to allow St. Joseph Communication upon termination to provide Ms. Cormier with only some of the employee benefits that she received before termination and even then, only subject to the consent of St. Joseph Communication’s insurers. With respect to the employee benefits, the termination clause therefore provides Ms Cormier with a lesser right than the rights set out in the Employment Standards Act, 2000 and therefore, the entire termination clause is void.
90 The case at bar is on all fours with Wood v. Fred Deeley Imports Ltd.. In the Wood case, Ms. Wood’s employment was terminated without cause and her employer relied on a termination clause in her written employment contract to avoid the common law presumption that Ms. Wood was entitled to pay in lieu of reasonable notice. Pursuant to the termination clause, she received thirteen weeks of working notice plus a lump sum equivalent to eight week’s pay. Although some of the payments made to Ms. Wood under the termination clause were superior to what she would receive under the Employment Standards Act, reversing the motion judge, the Court of Appeal ruled that the termination clause was unenforceable because it excluded the employer’s statutory obligation to make benefit contributions during the notice period and the termination provision also did satisfy the employer’s obligation to pay severance pay.
91 The Court of Appeal held that there is a rebuttable common law presumption that if a person who is hired for an indefinite period is dismissed without cause, then he or she is entitled to reasonable notice or a continuation of pay in lieu of reasonable notice. The presumption of reasonable notice can be rebutted by the parties agreeing to a different notice period provided that their agreement is compliant with the minimum employment standards of the Employment Standards Act.50
92 Justice Laskin, who wrote the judgment for the Court, stated out that if the termination clause was not compliant with even one of the employment standards by not substituting a greater benefit for that standard, this would make the termination clause unenforceable and entitle the employee to reasonable notice in accordance with the common law presumption.51 Further, Justice Laskin held that even if the employer ignored the provisions of the termination clause and offered to meet the minimum standards of the Act, the termination clause would be unenforceable. He said that the enforceability of the termination clause depends only on the interpretation of the clause itself and not on what the employer may have done on termination.52
93 As noted above, the termination provision in the 2012 employment contract does not provide benefits better than the minimum standards of the Employment Standards Act, 2000. It follows that the termination clause is unenforceable.
This decision was recently upheld by the Ontario Court of Appeal ( 2019 ONCA 965)