3 Year Fixed Term Employment Agreement Not Affected by Early Termination Clause .
In Bouchard v Facility Condition Assessment Portfolio Experts Ontario Ltd., 2024 BCSC 1870, Justice Walken was faced with a situation where the Plaintiff had sold his company to the Defendant by way of two agreements :
1) Share Purchase Agreement :
12. CONSULTING AGREEMENT The principal of the Vendor, [Mr. Bouchard] agrees to enter into an employment contract which shall be for no less than 3 years on terms agreeable to both the parties based on the existing employment of [Mr. Bouchard] by the Vendor. Any probationary periods for [Mr. Bouchard] shall be waived.
2) Employment Agreement :
FCAPX may terminate your employment at any time for cause. FCAPX may terminate your employment without cause at any time by providing you with notice, or pay in lieu of such notice, and any severance pay required by the Employment Standards Act. In the event a temporary layoff is ever required, it may be implemented in accordance with the requirements of the Employment Standards Act.
The Judge first determined that on its face this was a 3 year fixed term agreement. However the law allows the parties to provide for an early termination provision, which it did.
However the Employment Agreement also contained this unusual clause :
“Any conditions included in the Share Purchase Agreement between Ally Engineering and FCAPX will supersede any related/relevant clause within this agreement.”
The Judge then simply said ” [58] I find that in the present case, the contract between the parties did not provide for without cause early termination of the three-year fixed-term.
My Comments :
It is unfortunate that the Judge did not articulate how that conclusion was reached. I assume that the the rationale was that because there was a clear contradiction between a 3 year fixed term contract vs an early termination clause, the superseding clause applied and the early termination clause was ignored.
If there was no superseding clause, would the result have been different?
Another way to invalidate this early termination clause was that it offended the Waksdale case, insofar as the agreement referred to just cause which is not the standard in the Ontario ESA. Furthermore the clause did not provide for the continuation of benefits during the statutory notice period and that too is fatal in Ontario. Although this was a BC case, the parties agreed that Ontario law applied.
1) Share Purchase Agreement :
12. CONSULTING AGREEMENT
The principal of the Vendor, [Mr. Bouchard] agrees to enter into an employment contract which shall be for no less than 3 years on terms agreeable to both the parties based on the existing employment of [Mr. Bouchard] by the Vendor. Any probationary periods for [Mr. Bouchard] shall be waived.
2) Employment Agreement :
FCAPX may terminate your employment at any time for cause.
FCAPX may terminate your employment without cause at any time by providing you with notice, or pay in lieu of such notice, and any severance pay required by the Employment Standards Act.
In the event a temporary layoff is ever required, it may be implemented in accordance with the requirements of the Employment Standards Act.
The Judge first determined that on its face this was a 3 year fixed term agreement. However the law allows the parties to provide for an early termination provision, which it did.
However the Employment Agreement also contained this unusual clause :
“Any conditions included in the Share Purchase Agreement between Ally Engineering and FCAPX will supersede any related/relevant clause within this agreement.”
The Judge then simply said ” [58] I find that in the present case, the contract between the parties did not provide for without cause early termination of the three-year fixed-term.
My Comments :
It is unfortunate that the Judge did not articulate how that conclusion was reached. I assume that the the rationale was that because there was a clear contradiction between a 3 year fixed term contract vs an early termination clause, the superseding clause applied and the early termination clause was ignored.
If there was no superseding clause, would the result have been different?
Another way to invalidate this early termination clause was that it offended the Waksdale case, insofar as the agreement referred to just cause which is not the standard in the Ontario ESA. Furthermore the clause did not provide for the continuation of benefits during the statutory notice period and that too is fatal in Ontario. Although this was a BC case, the parties agreed that Ontario law applied.
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