In Wood v Fred Deeley Imports Ltd ( 2017 ONCA 158, Justice Laskin dealt with the important issue of whether an ESA only contract was valid.
The termination clause read as follows:
[The Company] is entitled to terminate your employment at any time without cause by providing you with 2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph, except for any amounts which may be due and remaining unpaid at the time of termination of your employment. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000. [Emphasis added.]
Laskin J.A. first summarized the jurisprudence on interpreting employment agreements and referred to the following 8 principles.
1. In general, courts interpret employment agreements differently from other commercial agreements. They do so mainly because of the importance of employment in a person’s life. As Dickson C.J.C. said in an oft-quoted passage from his judgment in Reference re Public Service Employee Relations Act (Alberta), [1987] 1 S.C.R. 313, at p. 368:
” Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.”
2 . As important as employment itself is the way a person’s employment is terminated, it is on termination of employment that a person is most vulnerable and thus is most in need of protection: see Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701.
3. When employment agreements are made, usually employees have less bargaining power than employers. Employees rarely have enough information or leverage to bargain with employers on an equal footing: Machtinger, p. 1003
4. Many employees are likely unfamiliar with the employment standards in the ESA and the obligations the statute imposes on employers. These employees may not seek to challenge unlawful termination clauses: Machtinger, p. 1003
5. The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so: Machtinger, p. 1003.
6.. Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship: Machtinger, p. 1004.
7. A termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment: Machtinger, p. 998.
8. Faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee: Ceccol v. Ontario Gymnastics Federation (2001), 149 O.A.C. 315, Family Counselling Centre of Sault Ste. Marie and District (2001), 151 O.A.C. 35.
Laskin thereafter dealt with the various attacks on the validity of the ESA clause under these headings :
- Failure to provide for benefits during the ESA 8 week notice period.
The failure of the termination clause to actually refer to benefits was fatal. The term ” pay ” in the clause does not clearly include benefits. As this term is at best ambiguous, the interpretation that is to be favoured is the one favouring the employee.
The fact that the Company did in fact continue the Plaintiff’s benefits after termination is irrelevant as it was an error of law to consider the post termination actions of the employer in interpreting the clause. One can only look at the wording and if it is illegal then the contract is null and void and cannot be used as a way of trying to determine what was the true intentions of the parties.
Moreover in Roden v Toronto Humane Society the ONCA upheld a clause which did not mention benefits. However in that case the termination clause did not have an ” all inclusive ” clause like the one in this case that stated that :
If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph, except for any amounts which may be due and remaining unpaid at the time of termination of your employment. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000. [Emphasis added.]
Laskin J. found that this contract language difference was sufficient to distinguish the two cases.
2. Failure to refer to severance pay:
Simply put you cannot require an employee to work out his or her severance pay period by way of working notice. It must be paid as a lump sum within 7 days of the end of the last day of employment. The clause as drafted would have permitted the employer to require the Plaintiff to work out her entire 16 weeks of notice and severance, as she was employed for 8 years.
As this would have been contrary to the ESA, it is illegal .
Laskin J. upheld the trial judges assessment of 9 months reasonable notice. The Plaintiff was 48 years old, worked for 8 years as a Sales & Event planner making $100,000 per year.
This case is refreshingly easy to read and comprehend. It is almost as if Justice Laskin wants the average employer and employee to be able to read and understand it. Remarkable.
His clear listing of the 8 General Principles of Interpretation of Employment Contracts and his application of those principles to the facts provide us with a roadmap of how to approach similar cases in the future.
I wish Mr Justice Laskin had been on the panel in Oudin v Le Centre Francophone de Toronto, Inc. ( 2016 ONCA 514 ). If so, I doubt that it would have been decided in the way that it was.
Both Justices Feldman and Hourigan concurred with Justice Laskin’s reasons.
In previous blogs I commented that I wished that the Supreme Court of Canada would examine this issue of ESA contracts.
In light of this case, I think that is no longer necessary, at least for Ontario cases.