Sophistication of the Employee Does Not Affect Legality of Termination Provision :

In Livshin v The Clinic Network Canada ( 2021 ONSC 6796) Black J. had situation where the termination clause breached the ESA in that they referenced ” just cause ” as a a ground for paying no severance , which following Waksdale v Swegon, ( 2020 ONCA 391) is illegal and voids the entire termination clause, including the “not for cause” provision. In this case the Plaintiff was not only very sophisticated and was represented by counsel throughout the negotiation process, but this employment contract was part of a larger corporate deal. The Judge found that this was not relevant in determining the enforceability of the clause.

The following are some quotes from this case on this point:

[52] In the case before me, the “just cause” provision is difficult to link to anything other than the Employment Agreement itself. There is no evidence to suggest that there were specific commercial imperatives arising in the transaction specifically or the industry more generally that required TCN to be able to dismiss Livshin for just cause without notice and without regard to the provisions of the ESA. 

[53] As such, and notwithstanding the relative sophistication of the plaintiff and his representation by counsel in the Share Purchase, in my view there is no compelling reason why TCN should be permitted to rely on termination provisions that do not comply with the ESA 

[55] While, as noted, I appreciate that these principles start from a presumed power imbalance, they strike me as providing guidance which, generally speaking, is not onerous for employers to follow. 

[56] Looking to Payette, if there is some commercial imperative driving the need for a particular provision, linked to, and necessitated by, a commercial transaction out of which the employment relationship arises, and if the reason for that provision is primarily related to the commercial transaction, then it may be that there is more latitude for a provision that is on its face at odds with protective legislation. However, I expect that this will rarely be the case and, indeed, am hard-pressed to come up with examples which would permit a breach of the ESA. 

[57] In any event, there are no such imperatives here. While Livshin may be more sophisticated than many employees, and notwithstanding that he was represented by counsel, I can see no reason why the clause at issue had to be drafted in a way that on its face contravenes the ESA. Further, in my view the goal that employers be encouraged to draft clauses that comply with the ESA trumps the suggestion that Livshin may have been better able than many or most employees to recognize the potential peril.

TCN’s argument that Livshin’s representation by counsel should result in him being taken to understand the potential pitfalls of the Employment Agreement at issue here might be turned back on TCN to suggest that an employer, represented by counsel, particularly in the period after the Court of Appeal’s decision in Fred Deeley, ought to know better than to draft a termination provision that fails to comply with the ESA.

[68] Ultimately, I come to the same landing as Justice Feldman’s conclusion above in Metaswitch. That is, the employer here was free to make a legal contract that limited the plaintiff’s rights on termination to the standards set by the ESA. The employer failed to do so, and there was no commercial imperative arising from the Share Purchase that would justify such failure. To me, the encouragement of employers to comply with the ESA is the overriding goal, and if compliance is achieved it is not necessary to undertake subjective assessments of sophistication. Accordingly, I find that the termination provisions in the Employment Agreement are void. 

The Judge also found that the savings or severance clause did not work to legalize the illegal clause.

As this was a fixed term contract of three years, and because the termination clause was void , the Judge awarded the Plaintiff the balance of the fixed term , with no duty to mitigate , following the ONCA in Howard v Benson Group. ( 2016 ONCA 256).

Then without any reasons ( which may be because the Plaintiff did not argue the point) the Judge deducted the CERB payments that the plaintiff received during the balance of the term.

My Comments:

This case stands in contradiction to a case from a few weeks back from Justice Dunphy called Rahman v Cannon Design Architecture ( 2021 ONSC 5961) which I blogged about. If both cases are appealed, the Court of Appeal will have to sort this out . Otherwise we will will two cases with two different outcomes. You gotta love the common law.

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