I previously reported on a case called De Castro v. Arista Homes Limited
in which the trial Judge found that the following clause breached the ESA ands therefore unenforceable:
“If you are terminated for Cause or you have been guilty of wilful misconduct, disobedience, breach of Employment Agreement or wilful neglect of duty that is not trivial and has not been condoned by ARISTA, then ARISTA will be under no further obligation to provide you with pay in lieu of reasonable notice or severance pay whether under statute or common law.
For the purposes of this Agreement “Cause” shall include your involvement in any act or omission which would in law permit ARISTA to, without notice or payment in lieu of notice, terminate your employment.”
The Employer had a somewhat convoluted interpretation of how this clause could be read to be consistant with the ESA.
The Court of Appeal said that the judge’s interpretation was correct.
What is interesting is what they said about the methodology of how Courts are to approach these cases.
[14] Finally, the motion judge’s approach reflects a careful application of established principles governing the interpretation of employment contracts. Courts have recognized that such contracts are generally interpreted differently than other commercial agreements to protect the interests of employees: see Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 412 D.L.R. (4th) 261, at paras. 26-28. Employees have less bargaining power than employers. Furthermore, employees are far less likely than employers to be familiar with the standards dictated by the ESA.
[15] Because the ESA is “remedial legislation, intended to protect the interests of employees”, courts are to adopt an interpretation that best achieves this objective: Wood, at para. 28. That means an interpretation that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”: Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 1003. The contract is to be read as a whole, with any ambiguity construed in favour of the employee.
The Court of Appeal decision can be found at l(2025 ONCA 260).
In other words, if there are two possible ( presumably reasonable ) interpretations of a termination clause, we are to always favour the one that favours the employee.
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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.