Author: barryfisher

In Dufault v. Ignace (Township), 2024 ONCA 915 [25] the Court of Appeal dismissed the appeal by the Town of Ignace in seeking to overturn the trial decision which held that the termination clause was illegal and thus unenforceable .

The Court upheld the trial judges decision that the clause was illegal because of the reasoning of the Court of Appeal in Waksdale v. Swegon North America Inc., 2020 ONCA 391.

Of more importance is what they did not do :

“Given our conclusion that the “for cause” termination clause of the employment contract is unenforceable as contrary to the ESA and that, pursuant to Waksdale, this renders all of the termination provisions unenforceable, it is not necessary to consider the appellant’s arguments that the motion judge erred in finding the “without cause” termination clause also unenforceable as contrary to the ESA, and we expressly do not rule on that submission. The appellant argued that the motion judge’s findings in relation to the “without cause” termination clause may affect other employment contracts. In our view, resolution of the issues the appellant raises regarding the “without cause” termination clause should be left to an appeal where it would directly affect the outcome. “

My Comment:

In my opinion the Court did what they should have done, which is not to comment on issues that would not have changed the outcome. From a practical point of view this means that the “sole discretion ” and the ” at any time ” arguments will continue to be raised in future cases.

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In  Maximenko v. Zim, 2024 ONSC 5540 Justice Brownstone awarded 24 months notice to an almost 59 year old General Manager with almost 21 years service who was making approximately $160,000 / year .

In determining the appropriate bonus calculation for the notice period, the three year average was $27,725. However in the calendar year in which the Plaintiff was terminated ( March 2023) no one received a bonus.

This case was heard in September of 2024 and therefore the Judge had to deal with a year in which no bonus was paid and another year in which the bonuses had not yet been determined .

This how the Judge dealt with that issue :

[42] There is no evidence regarding 2024 annual bonuses. Zim’s suggestion of a 47 percent reduction presumes no annual bonuses will be payable for 2024. I do not accept that assumption. 2023 is the only year since annual bonuses were instituted that they have not been paid. I find it more likely than not that the annual bonuses will be payable for 2024. If this were not going to be the case, Zim is the only party that could have adduced that evidence. It did not do so. I therefore reduce the average bonus amount by 23.5 percent to reflect the lack of annual bonus in 2023.

My comments :

I would have thought that the better way to determine the bonus over the notice period would be for the remainder of 2023 ( 9 months ) she would receive no bonus, because nobody else did.

Then for the balance of the notice period ( 15 months ) apply either the pre 2023 three year average ($27, 725) or the three year average of 2023, 2022 and 2021 which is $22,663 .

This would have produced a bonus over the notice period of

$22,663 /12 X 15 = $28,328 as opposed to the $42,420 awarded by the Judge

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

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Barry B. Fisher LL.B.

In Wilds v. 1959612 Ontario Inc., 2024 ONSC 3452 (CanLII) Justice Vermette found multiple ESA violations in the employment contract.

In determining whether the savings clause was sufficient to offset these illegal provisions, this is what the judge said :

[64]        The last paragraph of section 15.1 of the Employment Agreement is a “saving provision”. For convenience, I reproduce this paragraph again:

It is intended that this termination provision includes any entitlements you have pursuant to the Act. In the event that your entitlements pursuant to the Actexceed these contractual provisions, those statutory provisions shall replace these contractual provisions and no further payments are required. You agree that the provision of notice, pay in lieu, or a combination of both as set out above will fully satisfy all obligations of the Organization to you, whether arising pursuant to statute, common law or otherwise, and that you will have no further entitlement to notice, pay in lieu, or severance arising out of your employment or the termination thereof. To be clear, these provisions replace any common law entitlement that you would otherwise have.

[65]        Gibson’s attempts to contract out of the ESA in the termination provisions cannot be saved by this paragraph: see Perretta at para. 58. This paragraph cannot reconcile the parts of the termination provisions that are and have been in direct conflict with the ESA from the outset. See Rossman at paras. 35, 40-41. The statement at the beginning of the paragraph that the intention of the termination provisions is to include any entitlement that the employee has pursuant to the ESA is contradicted by clear violations of the ESA in the termination provisions. Such language creates ambiguity and confusion for an employee and does not constitute clear wording that allows an employee to know at the beginning of their employment what their entitlement will be at the end of their employment. In my view, the termination provisions in the Employment Agreement were not drafted with strict compliance with the ESA as their main objective. See Waksdale at para. 7.

[53]           A severability clause in an employment agreement does not have any effect on clauses of the agreement that have been made void by statute, and cannot be used to rewrite, read down or interpret the terms of the agreement so as to provide for the minimum standard imposed by the ESA.  See Waksdale at para. 14 and North v. Metaswitch Networks Corporation, 2017 ONCA 790 at para. 44. 

[54]        Further, “saving provisions” in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards, and cannot reconcile a provision that is in direct conflict with the ESA from the outset. Holding otherwise creates the risk that employers will slip sentences into employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA – to protect employees and to ensure that employers treat them fairly upon termination. Employers cannot be permitted to draft provisions that capitalize on the fact that many employees are unaware of their legal rights and will often refrain from challenging notice provisions in court. Attempting to reconcile the provisions of a termination clause with the benefit of hindsight runs counter to the remedial purpose of the ESA. See Rossman at paras. 35, 40-41.

My Comments :

This case definitively determines that neither savings clauses or severability clauses can fix an otherwise illegal termination provision.

Therefore a termination clause will only be enforceable if on its face, there is no violation of the ESA.

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a)            Celgar recruited Mr. Ferweda. Mr. Ferweda was not actively looking for a different job, nor did he respond to a newspaper advertisement. Rather, he responded to an email sent directly to him by a recruiter retained by the employer;

b)            Celgar attempted to make the job attractive to Mr. Ferweda during the visit to the Celgar Mill, which was paid for by the Celgar;

c)            During the Celgar Mill visit, Mr. Percy, who had previously worked for Catalyst, made statements which pointed out the aspects of employment with Celgar that were superior to Catalyst, including paid overtime, better benefits and a stable fibre supply;

d)            Mr. Percy expressly told Mr. Ferweda that Celgar hired for the “long term”;

e)            Mr. Belland specifically asked Mr. Ferweda how long he was prepared to commit to Celgar for, implying that the position was meant to be comparatively long-term; and

f)            Mr. Ferweda did not accept the first offer, but only took the job after Celgar offered an increased salary.

 

In Marshall v. Mercantile Exchange Corporation (2024 CanLII 71128 (ON SC)

https://canlii.ca/t/k62r7, Justice  Koehnen has a situation where the Plaintiff was claiming 26 months notice but plead that they were unable to look for another job because of their medical condition.

The Defendant moved under 105 (2) of the Courts of Justice Act provides:

“Where the physical or mental condition of a party to a proceeding is in question, the court, on motion, may order the party to undergo a physical or mental examination by one or more health practitioners.”

In allowing the motion the Judge said :

11]        The mental condition of the plaintiff has been put into question in this proceeding by the plaintiff’s own choice. The degree to which is mental condition has been put into question goes well beyond the usual adjustment period that courts afford plaintiffs to overcome the shock of dismissal before being obliged to mitigate their damages. At the moment, the plaintiff takes the position that he has had no obligation to mitigate for 9 months and that his inability to mitigate will continue into the indefinite future including up to the full 26 months notice he claims. This position arises in the context of relatively high employment and in the context of an income level which is not particularly high, and for which one might expect a significant number of jobs to exist.

[15]        It strikes me that in the circumstances of this case, if the plaintiff takes the position that he is unable to mitigate after 12 months have passed, he should be required to submit to an independent medical examination. That strikes me as a fair balance between giving an employer the right to test allegations of inability to mitigate without allowing employers to abuse independent medical examinations as a tactic to dissuade plaintiffs from legitimately relying on medical issues that prevent them from mitigating damages.

[16]        None of that is to say that the plaintiff is not suffering from a condition that prevents him from mitigating. It is merely to say that if someone takes a position as unusual as the plaintiff is taking, they should be prepared to subject themselves to an independent medical examination in order to test the assertions they are making.

My Commentary:

This use of the IME by Defendants is routine in personal injury cases but is rarely used in employment cases. I have also seen this procedure used where the plaintiff has claimed damages for mental distress.

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

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In 415909 Canada Inc c.o.b. PARS 2000 v. Moghadam, 2024 ONSC 3886 (CanLII), Justice Kaufman faced a common situation where a dismissed employee who had the benefit of using a company car for their personal use refused to return the car to their former employer after being wrongfully dismissed.

In this case the former employer brought a lawsuit to order the return of the company car.

This what the judge said:

[14]        The defendant ( former employee) further asserts that his employment was wrongfully terminated and that he would be entitled to the benefit of these cars, which were benefits of his employment, during the period of reasonable notice. The defendant intends to commence an action for wrongful dismissal.

[15]        If the defendant is successful in his wrongful dismissal action, he may be compensated for the value of any employment benefits he would have enjoyed during the reasonable notice period, but he is not entitled to use the vehicles before proving his case for wrongful dismissal, let alone before commencing such an action.

The judge ordered the car to be immediately returned and whacked the terminated employee with a $10,000 cost award.

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

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In Wilds v. 1959612 Ontario Inc., 2024 ONSC 3452 , Justice Vermette dealt with the following termination clause :

Although it is difficult to contemplate ending our relationship when it is just beginning, it is mutually beneficial to determine our respective obligations ahead of time.  This Agreement can be terminated prior to the expiration of the term set out above in any of the following circumstances:

[…]

(c) Termination Without Cause: We may terminate your employment at any time and in our sole discretion by providing you with written notice and/or pay in lieu of notice.  The notice / pay in lieu to be provided will be two (2) weeks plus any applicable notice and severance requirements in accordance with the Employment Standards Act, 2000 (the “Severance Period”).

If pay in lieu of notice is provided, you will receive only your base salary and employment-related health and dental benefits for the applicable period, save and except for short-term disability, long-term disability, and which will not continue beyond the statutory notice period or as required by applicable employment standards legislation.

You have an obligation to take all reasonable steps to mitigate the loss of your employment.  Your obligation includes an obligation to accept reasonable alternate work offered to you if your position with the Organization ends.

If you obtain alternative employment (or otherwise commence earning income in lieu of working for the Organization) before the expiry of the Severance Period, the payments will end immediately and the Organization will pay you the equivalent of 50% of the amount owed from the date you commence alternative employment (or otherwise commence earning income in lieu of working for the Organization) and the expiry of the Severance Period, provided that you will never receive less pay in lieu of notice (and severance pay, as applicable) than you are entitled to under the employment standards legislation applicable to your employment.

You agree to immediately advise the Organization when you receive an offer of employment, commence alternative employment (or otherwise commence earning income in lieu of working for the Organization).

You agree that in exchange for the notice and/or pay set out herein, you will execute a Full and Final Release, in a form acceptable to the Organization, pursuant to which you will agree to waive any and all claims relating to your employment with the Organization or the termination thereof.

[…]

(e) Termination With Cause: We may terminate your employment for just cause at any time without notice, pay in lieu of notice, severance pay, or other liability, other than any notice, pay in lieu of notice or severance required pursuant to the applicable employment standards legislation.  For the purposes of this Agreement, just cause includes, but is not limited to:

(i)         a material breach of this Agreement or our employment policies;

(ii)       unacceptable performance standards;

(iii)      theft, dishonesty or falsifying records, including providing false information as part of your application for employment;

(iv)      intentional destruction, improper use or abuse of Organization property;

(v)        violence in the workplace;

(vi)      obscene conduct at our premises, property or during Organization-related functions at other locations;

(vii)      harassment of your co-workers, supervisors, managers, customers, suppliers or other individuals associated with the Organization;

(viii)     insubordination or willful refusal to take directions;

(ix)      intoxication or impairment in the workplace;

(x)        repeated, unwarranted lateness, absenteeism or failure to report for work;

(xi)      personal or off-duty conduct (including online conduct) that prejudices the Organization’s reputation, services or morale; or

(xii)      any conduct that would constitute just cause pursuant to common law.

It is intended that this termination provision includes any entitlements you have pursuant to the Act.  In the event that your entitlements pursuant to the Act exceed these contractual provisions, those statutory provisions shall replace these contractual provisions and no further payments are required.  You agree that the provision of notice, pay in lieu, or a combination of both as set out above will fully satisfy all obligations of the Organization to you, whether arising pursuant to statute, common law or otherwise, and that you will have no further entitlement to notice, pay in lieu, or severance arising out of your employment or the termination thereof.  To be clear, these provisions replace any common law entitlement that you would otherwise have.

The Court found that this termination clause was invalid for a number of reasons :

[63]           There are many problems with the termination provisions.  Among others:

a.      The termination without cause provision states that if pay in lieu of notice is provided, Ms. Wilds “will receive only [her] base salary and employment-related health and dental benefits for the applicable period”.  As stated above, pursuant to section 60 of the ESA, an employer cannot reduce wages or alter any other term or condition of employment during the notice period.  Employees are entitled to their regular wages and the continuation of all employee benefits.  Pursuant to section 61, where an employee is provided with termination pay in lieu of notice, they must receive all entitlements required by section 60, which includes all wages and benefits without reduction or alteration.  See Groves v. UTS Consultants Inc., 2019 ONSC 5605 at para. 56(“Groves”).  The termination provision in this case, which only uses the “base salary” to calculate the pay in lieu of notice as well as health and dental benefits, does not include vacation pay, bonus and the other benefits that Ms. Wilds was entitled to under the Employment Contract, i.e., life insurance and accidental death and dismemberment insurance.  This constitutes a breach of sections 60 and 61 of the ESA (read in conjunction with sections 1(1) and 57).  See Groves at para. 57.

b.      The termination without cause provision requires that Ms. Wilds execute a full and final release in a form acceptable to Gibson in exchange for pay in lieu of notice.  The employer’s obligation to provide the ESA entitlements is not contingent on the execution of a release or anything else.  Making the employer’s compliance with the ESA subject to the execution of a release violates the ESA, notably section 54.

c.      The termination with cause provision contains categories of “just cause” for termination without notice that fall short of the statutory exemptions set out in the Regulation, i.e., they include instances where the employee would not necessarily have done something deliberately, knowing that they were doing something wrong.  For example: “a material breach of this Agreement or our employment policies”; “unacceptable performance standards”; “repeated, unwarranted lateness, absenteeism or failure to report for work”; “personal or off-duty conduct (including online conduct) that prejudices the Organization’s reputation, services or morale”; and “any conduct that would constitute just cause pursuant to the common law”.  See Perretta v. Rand A Technology Corporation, 2021 ONSC 2111 at paras. 44-45 (“Perretta”).

The first paragraph of the termination with cause provision contains the following words: “other than any notice, pay in lieu of notice or severance required pursuant to the applicable employment standards legislation”.  In my view, these words are insufficient to save the termination provision.  Among other things, these words are immediately followed by categories that clearly do not comply with the ESA and the requirement for deliberate conduct.  As was the case with the termination provision in Perretta, the termination provision in Ms. Wilds’ Employment Agreement states that it is subject to the ESA, but the inclusion of a number of categories of “just cause” flies in the face of the ESA.  At a minimum, this creates confusion and ambiguity.  As stated in Perretta, the test of validity of a termination provision is not to struggle to find a way that the provision can be read consistent with the ESA, however convoluted.  When the clause is ambiguous, it must be read in a manner that provides the highest benefit to the employee.  Here, the ambiguity must be resolved in favour of Ms. Wilds by finding that the termination with cause provision violates the ESA.  See Perretta at paras. 54-56.

[64]           The last paragraph of section 15.1 of the Employment Agreement is a “saving provision”.  For convenience, I reproduce this paragraph again:

It is intended that this termination provision includes any entitlements you have pursuant to the Act.  In the event that your entitlements pursuant to the Actexceed these contractual provisions, those statutory provisions shall replace these contractual provisions and no further payments are required.  You agree that the provision of notice, pay in lieu, or a combination of both as set out above will fully satisfy all obligations of the Organization to you, whether arising pursuant to statute, common law or otherwise, and that you will have no further entitlement to notice, pay in lieu, or severance arising out of your employment or the termination thereof.  To be clear, these provisions replace any common law entitlement that you would otherwise have.

[65]           Gibson’s attempts to contract out of the ESA in the termination provisions cannot be saved by this paragraph: see Perretta at para. 58.  This paragraph cannot reconcile the parts of the termination provisions that are and have been in direct conflict with the ESA from the outset.  See Rossman at paras. 35, 40-41.  The statement at the beginning of the paragraph that the intention of the termination provisions is to include any entitlement that the employee has pursuant to the ESA is contradicted by clear violations of the ESA in the termination provisions.  Such language creates ambiguity and confusion for an employee and does not constitute clear wording that allows an employee to know at the beginning of their employment what their entitlement will be at the end of their employment.  In my view, the termination provisions in the Employment Agreement were not drafted with strict compliance with the ESA as their main objective.  See Waksdale at para. 7.

[66]           In support of its position that the termination provisions in the Employment Agreement comply with the ESA, Gibson relies on Kielb v National Money Mart Company, 2015 ONSC 3790 (“Kielb SCJ”); aff’d 2017 ONCA 356 (“Kielb CA”).  In addition to having been decided before key decisions of the Court of Appeal referred to above, this case involved a termination clause that was structured differently than the one before this Court.  In Kielb SCJ, the ESA entitlements were clearly maintained in the first part of the termination clause, and the requirement for a full and final release only applied to any additional payments made by the employer.  See Kielb SCJ at paras. 9, 14, 60 and Kielb CA at para. 11.  In the present case, the termination provisions do not ensure in clear and unambiguous language that Ms. Wilds’ statutory entitlements under the ESA would be paid.  Further, the requirement for a full and final release is not limited to payments over and above Ms. Wilds’ statutory entitlements under the ESA.

[67]           Burton v. Aronovitch McCauley Rollo LLP, 2018 ONSC 3018, another case relied upon by Gibson, is also distinguishable.  Like in Kielb SCJ, the termination clause in that case maintained the ESA entitlements and did not attempt to reduce them, for instance, by limiting the pay in lieu of notice to base salary and some (but not all) benefits.

[68]           In light of the foregoing, I conclude that the termination provisions of the Employment Agreement, read as a whole, violate the ESA.  Therefore, they are unenforceable and do not rebut the presumption that Gibson cannot terminate Ms. Wilds’ employment without giving her reasonable notice under the common law: see Waksdale at para. 10 and Rossman at para. 17.

My Comments:

This case provides a useful checklist of things to look for or avoid when writing or attacking termination clauses.

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

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n Brown v. General Electric Canada et al., 2024 MBKB 95 (CanLII), Justice Bock had a situation where the Employer sold its assets to a Purchaser who at the same time offered the Plaintiff a job on the same terms and conditions as he had before .

As this was an sale of assets and not shares, the Court found that this was a dismissal by the Employer. This is what the Judge said :

[25]     I find Mr. Brown’s employment with General Electric Canada was constructively terminated when it sold GE Transportation to Wabtec. It is clear from the evidence that as a result of that sale, General Electric Canada no longer wanted or needed Mr. Brown’s services. While he was offered continued employment with Wabtec, a separate and distinct legal entity, that did not constitute an offer of continued employment by General Electric Canada. Insofar as his employment there is concerned, it ended with the sale of GE Transportation to Wabtec.

However the Judge went on to find that the Plaintiff’s rejection of the new job offer constituted a complete failure to mitigate and thus awarded no damages for wrongful dismissal.

My Comments :

In Ontario the Plaintiff would still have been entitled to both termination and severance pay because the exception only applies to ” refusing an offer of reasonable alternative employment with the employer “. See Reg 288/01 sections 2(1)5 and 9(1)4.

Note had the sale involved the sale of shares rather than assets there would not even be a termination of employment as the actual legal employer would be the same even when the actual ownership of the employer had changed hands.

Therefore in advising an employee facing a situation involving the sale of a company it is vital to understand the actual methodology of the transaction.

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