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In Brink v Xos Services (Canada), Inc., 2025 BCSC 658 (CanLII) Justice Hughes had a situation where the parties agreed on the settlement number

(  $441,667.00 USD ) but the defence offer was based on ” less statutory deductions” and the plaintiff accepted the offer on the condition that it be on the basis that it be treated as non employment income.

In Canadian terms this would be asking that the settlement funds be treated as ” general damages” which apparently attracts no taxation.

This is why the Judge ruled that there no settlement :

“However, the tax treatment of the settlement payment was a condition of fundamental importance to both parties. As an employee, the plaintiff was typically taxed at a rate of around 32% which, if applicable to the settlement funds, would result in a tax deduction of up to $143,300. The plaintiff sought the full settlement amount with no source deductions. The defendants offered to pay the settlement amount less applicable deductions, to avoid any negative tax implications for them. This is a significant gap that cannot be overlooked or resolved by resorting to common sense or common practice, as was discussed in Fieguth.”

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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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In Miller v. Alaya Care Inc., 2025 ONSC 1028 (CanLII) Justice Carroccia had a situation of a 62 year old VP making over $250K with only 7 months service who was terminated without cause. Having set aside an illegal termination clause, the Judge focussed on the issue of whether the Plaintiff had been induced to leave her previous job of 12 years and if so, what effect that would have on the notice period.

First the Judge listed these factors to consider :

1. the reasonable expectations of both parties;

2. whether the employee sought out work with the prospective employer;

3. whether there were assurances of long-term employment;

4. whether the employee did due diligence before accepting the position by conducting their own inquiry into the company;

5. whether the discussions between the employer and prospective employee amounted to more than the persuasion or the normal “courtship” that occurs between an employer and a prospective employee;

6. the length of time the employee remained in the new position, the element of inducement tending to lessen with the longevity of the employment; and

7. the age of the employee at termination and the length of employment with the previous employer.

Applying these factors to this case, the Judge said as follows:

[88]        In my view, these discussions initiated by the defendant go beyond the normal “courtship” between an employer and prospective employee and amount to an inducement. The following circumstances support this finding:

1.     The defendant reached out to the plaintiff first.

2.     There were representations made by AlayaCare that the plaintiff’s experience would assist in “growing” the company.

3.     Inquiries were made by AlayaCare as to the extent of the plaintiff’s renumeration with WellSky ( her previous employer of 12 years, editors note) , including bonuses and RSUs so that they could “lure” her.

4.     AlayaCare had hired a number of people in 2021 as part of an “aggressive growth strategy”.

5.     The defendant was prepared to go as far as indemnifying the plaintiff in the event that her previous employer commenced litigation against her for leaving them to join AlayaCare.

[89]        As a result, I find that there were inducements offered to the plaintiff to lure her to leave her employment with WellSky to become an employee of AlayaCare. This factor favours a longer period of notice.

My comments :

Inducement is often pleaded but it rarely works. This case sets out the type of evidence that is needed to prove inducement .

Under most circumstances a 13 year Senior Executive who was 62 years of age would receive a notice period greater than 14 months. On the other hand, without inducement, a 7 month employee would never get 14 months notice.

Inducement seems to give you a notice period greater than your actual employment with the defendant but less than the combined service of the two employers. This recognizes that the Plaintiff is always taking a risk with a new employer but that no reasonable person would leave a secure job of long service without the expectation that the new job would last some significant period of time.

I do not usually list who the winning lawyer is, but in this case I make an exception because Plaintiff’s counsel was none other than this years winner of the Ontario Bar Association Randall Echlin Award for Excellence in Labour and Employment Law, Stephen Moreau of Cavalluzzo LLP.

Bragging Note : I was the recipient of this award last year.

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

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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)

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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

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In Timmins v. Artisan Cells ( 2024 ONSC 7123 Justice Callaghan had a situation where the employment contract called for a payment of 3 months pay upon a without cause dismissal. The contract did not require the employee to sign a release.

The employer refused to pay that amount unless the Plaintiff signed a release, which he refused to do. The employer then only paid one week of termination pay, even though the ESA minimum entitlement was 3 weeks.

The Court found that the employer had repudiated the contract and therefore could not rely on the termination clause. The Plaintiff was therefore entitled to common law reasonable notice.

The Court then awarded 9 months notice to the 44 year old Vice President who had 3. 5 years service.

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

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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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