In Jones v. Strides Toronto, 2025 ONSC 2482, Justice Moore was faced with this termination clause :
Termination of Employment:
The Organization may terminate your employment without cause at any time upon providing you with the following:
• Advance notice, or payment in lieu, in accordance with the Employment Standards Act, 2000 (“ESA”) and any other payments required by such legislation including severance pay, and as well as continuing to provide benefits (which includes participation in the group RRSP) during the applicable statutory notice period; plus
• An additional 1-week advance notice of termination or pay in lieu thereof for each completed year of each completed month of employment with the Organization in an incomplete year.
Notwithstanding the above, the Organization may terminate your employment at any time, without notice or pay in lieu thereof or severance pay, for willful misconduct, disobedience or willful neglect of duty that is not trivial and has not be condoned by the Organization. If your employment is terminated for conduct that amounts to just cause at common law but not willful misconduct, disobedience or willful neglect of duty that is not trivial and has not been condoned by the Organization, you will receive those amounts set out in (a) above but you will not receive the amounts in (b) above. (emphasis added)
There were two attacks on this clause:
At Any Time
In the case of Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029(“Dufault”). the relevant clause had two components; ” at any time ” and “in the employer’s sole discretion” . The Court found as follows;
I find that the Dufault decision does not stand for the proposition that the words “at any time” divorced from “sole discretion” are improper in an employment contract. I do not find that these words in the termination clause in this case bring it into conflict with the ESA and make it unenforceable.
My Comment:
Nowhere in the decision does the Court reference the recent case of Justice Sproat in Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 in which it was held that the use of the phrase ” at any time ” alone is fatal to the enforceability of the termination provision.
Failure to Repeat the Provision of Benefits :
This three tier clause seems to have become popular in which the termination clause provides for three distinct outcomes :
- If there is wilful misconduct you get nothing .
- If there is not wilful misconduct but there is just cause you only get the ESA minimums
- If there is neither ( without cause ) then you get ESA plus something extra.
The attack on the clause in this case was quite ingenious. The clause provided that in a just cause but not wilful misconduct situation ( #2) that you would receive the ” amounts ” set out in the first clause but not the secound clause with the extra payment.
The Judge noted that the contract only referred to receiving ” amounts ” and did not refer to the other obligation to ” continuing to provide benefits” . There was a further clause which stated:
“By signing below, you agree that the forgoing is your full entitlement upon termination of employment pursuant to the common law and employment standards legislation, and that there is no further amount or obligation owing upon termination,”
The Judge therefore found there was a potential violation of section 60(1)(a) of the ESA which prohibits reducing or altering any term of employment during the statutory notice period.
The Court therefore found that the termination clause was illegal and awarded common law notice of four months.
My Comment:
The ESA does not require the employer to actually provide the benefits during the statutory notice period, it only requires that they pay the insurance premiums to the insurance company to provide those benefits:
Paragraph 60.(1)( c) of the ESA:
60 (1) During a notice period 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. 2000, c. 41, s. 60 (1).
And see also :
61 (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,
(b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive. 2000, c. 41, s. 61 (1); 2001, c. 9, Sched. I, s. 1 (14).
So one could argue that since the only obligation of the employer under the ESA is to pay the insurance premiums or contribution ( which of course is actual money) that it would be covered by the term in the termination clause that requires the employer to pay the ” amounts” .
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Under the Unanimous Shareholder Agreement, he was required to sell his shares to the Company immediately upon his termination based on the value that day. This was done and upheld under an arbitration award.
All the shareholders were also employees. The parties had set up a system whereby the shareholder/employees were paid both by salary and dividends .
The issue was whether the Plaintifff was entitled to the dividends he would have received had he been employed over the 26 month notice period.
In Ontario, the case of Mikelsteins v Morrison Herschfield Limited, 2021 ONCA 1555 stands for the proposition that when dealing with the issue of interpreting corporate documents you do not apply the principles of employment contract interpretation. Therefore where the shareholders agreement says that your rights end upon the termination of employment , that means the day you receive notice of termination. However applying a employment law analysis this same language would be read as if is said upon the date of the lawful termination of employment, which is at the end of the notice period.
The Alberta Court clearly rejected this interpretation:
[71] In my respectful view, this is not consistent with either the law in Alberta or the Supreme Court’s direction in Matthews as to the legal characterization of when employment terminates and the appropriate analysis to consider an employee shareholder’s claims. I disagree that an individual shareholder, whose ability to hold shares is tied to their employment in any fashion, can be dealt with simply as a corporate law matter. This places the interests of the corporate employer above those of the employee, which is not consistent with the balance between employees and employers established over decades of employment law, a balance that is maintained by the required analysis set out in Matthews. Therefore, I decline to follow the Ontario line of cases.
As a result the Plaintiff received $948,000 for this issue alone.
If you like a copy of this case email me at barry@barryfisher.ca
To book a mediation go to my online calendar at www.barryfisher.ca
To access the Wrongful Dismissal Database go to www.wddonline.ca