If a Termination Clause Limits Insurance Coverage for the ESA Period to Only When Coverage is Available from the Insurer, the Clause is Illegal:

In Ramotar v Trader Corporation ( No Canlii cite yet ) Deputy Judge K. Qureshi of the Toronto Small Claims Court reviewed a termination provision which had the following language :

“If your employment is terminated without cause, the Company will continue your group insurance benefit coverage for such period as the Employment Standards Act, 2000 shall require, provided such coverage is available from the insurer.”

The Deputy Judge found that as the employee would still be entitled to payment in lieu of such benefits if the insurance company did not cover the claim, the whole clause was illegal as it was not in compliance with the ESA.

My Commentary;

Presumably the Deputy Judge was referring to Section 60 (1) (c) and (3) of the ESA which reads as follows:

60.(1) Requirements during notice period. During a notice period. required under Section 57 or 58, the employer,

(c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee’s benefits under the plan until the end of the notice period .

(3) Benefit Plan Contributions : If an employer fails to contribute to a benefit plan contrary to clause (1) (c), an amount equal to the amount he employer should have contributed shall be deemed to be unpaid wages for the purpose of Section 103.

Note that the employer is not required to provide the coverage, only to pay the premium cost to the insurance company.

But if the employer fails to make the necessary premium payment and as a result the employee incurs an expense or a loss that would have been covered , then the employee can pursue a civil action against the employer. I once had a case where the employer failed to continue my clients’ $100,000 life insurance policy after his termination. My client died during the ESA notice period and after the insurance company denied coverage, we successfully sued the employer and got them to pay the $100,000.

This obligation to maintain benefits continues under the common law throughout the reasonable notice period. This can lead to huge negative consequences when an employee becomes disabled during the common law notice period. The employer cannot, under the terms of most group disability plans , continue to provide for LTD coverage after the statutory notice period. Therefore if the employee were to become totally disabled during the common law notice period, the employer steps into the shoes of the LTD insurer and is on the hook for what could be a sum well in excess of responsible notice.

See Prince v. T. Eaton Co. Limited, 1992 CanLII 5968 (BC CA)

For a copy off this case, email me at barry@barryfisher.ca

To book a mediation go to www.barryfisher.ca

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Trial Judge Must Follow Trial Ruling in Dufault v Township of Ignace:

In Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 (CanLII) Justice Sproat made two important rulings on the enforceability of a termination clause :
1) The “without cause” clause had a fatal error of saying ” we may terminate your employment at any time,”. applying the law of stare decisis , Justice Sproat applied the trial decision in Dufault v. The Corporation of the Township of Ignace and said :
12]       ” I must apply Dufault, as none of the reasons to depart from a prior decision referenced in Spruce Mills are applicable. As such, the “without cause” termination provision is unenforceable.”This should put to rest  the argument that because the Court of Appeal in Dufault did not address the issue of “at any time ” it somehow is not the law of the land. This case confirms that the law is made by trial judges , unless overturned by a higher court .

2) The “with cause” clause was as follows:

3.   Termination with cause: we may terminate your employment at any time for just cause, without prior notice or compensation of any kind, except any minimum compensation or entitlements prescribed by the Employment Standards Act. Just cause includes the following conduct:
a.   Poor performance, after having been notified in writing of the required standard;
b.   Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
c.   Theft, misappropriation or improper use of the company’s property;
d.   Violent or harassing conduct towards other employees or customers;
e.   Intentional or grossly negligent disclosure of privileged or confidential information about the company;
f.    Any conduct which would constitute just cause under the common law or statute.

Justice Sproat found that the clause was not saved by the addition of the language ” except any minimum compensation or entitlements prescribed by the Employment Standards Act. ”

Instead he said :

[19]       ” The potential unfairness of a termination provision of the sort at issue is that the employer has described in detail the contractual standard of just cause but given no detail or explanation of the ESA wilful misconduct standard, and that it differs from the contractual standard. Given that many employees will not be familiar with the ESA provisions, many employees would assume that they had no entitlement if they breached the contractual standards.”

The lesson here is for a clause to be enforceable, it must be compliant with the ESA on its face. You cannot say something illegal and try to cover it up with a provision that says except or unless the ESA says otherwise.

For a copy of this case, email me at barry@barryfisher.ca
To book a mediation, go to www.barryfisher.ca
To access the Wrongful Dismissal Database go to www.wddonline.ca

Barry B. Fisher LL.B.

barryfisher.ca

Employer May be Able to Rely on a Valid Without Just Cause Termination Clause Even if They Allege Just Cause and Fail.

In Singh v Clark Builders, 2025 ABKB 3 Justice Becker Brooks had a situation where the employer alleged just cause and therefore did not pay the 90 day contractual severance clause in the contract.

The Judge found that there was no just cause.

Could the employer still rely on the 90 day clause or did they repudiate the contract and thus have to pay common law notice, which in this case was held to be 12 months ?

First the Judge accepted these 4 principles :

  1. Where an employer alleges cause and fails, or withdraws its cause allegation, or repudiates an employment agreement through acts which constitute constructive dismissal, the employer is not precluded from subsequently invoking a without cause termination provision for the purpose of calculating the employee’s damages: Roden, Moore, Simpson.
  2. However, in all cases, it is a question of construction of the without cause termination provision before the Court as to whether, properly construed, the without cause termination provision applies. Such clauses are subject to strict construction: Ebert, Matthews.
  3. Even if the contract, properly construed, permits an employer to terminate without cause after a failed for cause termination, there are some breaches or acts of repudiation which are so significant, or of such an order of magnitude, that they render a without cause termination provision unenforceable: Dixon. Although Dixon has not specifically been considered and accepted by appellate courts, I find the reasoning compelling. All employment agreements are negotiated and agreed to on the basis of certain implied minimum expectations as to how the employer will conduct itself, the duty of good faith being one. An employee’s agreement to accept terms which significantly impact on the employee’s common law rights must be taken to be made in the expectation that the employer will comply with these minimum implied expectations. Where the employer significantly departs from such expectations, in my view, the employee should not be held to extremely disadvantageous provisions which he, she or they agreed to. This is not rewriting the contract but giving effect to what the parties must reasonably have intended.
  4. However, minor or technical mistakes made in good faith by the employer will not constitute a repudiation sufficient to prevent the employer from relying upon the without cause termination provision: Amberer, Oudin.

The Judge then ruled as follows:

[92] An employer’s failure to establish just cause will not disentitle the employer from enforcing an otherwise valid without cause termination provision provided the allegations of just cause are made in good faith: Simpson v Global Warranty, 2014 ONSC 6916 at para 8.

[93] In my reading of the authorities surveyed in Humphrey, provided there is a good faith basis for the employer to allege just cause, both at termination and during litigation, an employer who subsequently decides not to pursue just cause or is unable to prove just cause, is notprecluded from relying on a without cause termination provision.n

[94] The good faith requirement means the allegation of just cause cannot be brought dishonestly or for an improper, dishonest, or fraudulent purpose.

My Comments :

The process would seem to unfold as follows:

  1. If just cause is alleged initially but dropped before trial and the defendant subsequently pays the contractual severance, the issue would be whether the initial allegation of just cause was made in good faith.
  2. If just cause is alleged and not dropped and then the Court finds that there was no just cause, the issue would be whether the allegation, although not proven, was made in good faith.
  3. Remember this is only relevant where the without cause termination clause is valid.
  4. It appears that this may be the same analysis in a constructive dismissal case. Therefore even if the plaintiff wins the constructive dismissal argument, unless they can show that the employer acted in bad faith, they will be limited to their contractual severance, not common law notice.

If you like a copy of this case, email me at barry@barryfisher.ca

To book a mediation go to www.barryfisher.ca

To access the Wrongful Dismissal Database, go to www.wddonline.ca