OCA Finally Nixes ESA Savings Clauses:

In Rossman v Canadian Solar Solutions ( 2019 ONCA 992 ) the Ontario Court of Appeal had a situation where the ESA termination had an illegal clause ( “Benefits shall cease 4 weeks from the written notice”) which the Defendant argued was remedied by a clause that said  as follows:
” In the event that the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement such statutory requirements will replace the notice or payments in lieu of notice contemplated under this agreement”.
The Court held that:
a) the language was ambiguous because the Plaintiff could not know if, after 4 years of service, he would get his ESA benefits ( max 8 weeks ) or the 4 weeks under the contract.
b) from a policy point, savings clause cannot help employers who attempt to contract out of the ESA.
This is what the Court said :

[39]      I make a final observation. Employees need to know the conditions, including entitlements, of their employment with certainty. This is especially so with respect to an employee’s termination – a fragile moment of stress and uncertainty.

[40]      In this context, saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards. Holding otherwise creates the risk employers will slip sentences, like the four-week benefits clause, 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: Machtinger, at pp. 1002-3.

[41]      While employers are entitled to contractually amend the ESA’s notice requirements, as long as they respect the minimum standards, they are not entitled to offend them. Employers must have an incentive to comply with the ESA’s minimum notice requirements. They cannot be permitted to draft provisions that capitalize on the fact many employees are unaware of their legal rights and will often refrain from challenging notice provisions in court: Machtinger, at p. 1004. Attempting to reconcile the provisions of the Termination Clause with the benefit of hindsight runs counter to the remedial purpose of the ESA.

My Comments:

It is refreshing to see that the Court is finally putting  policy considerations front and centre in these cases involving the enforceability of ESA clauses. The Court also quotes extensively from Wood v Fred Deeley, another leading case on how to interpret ESA termination clauses.

Too often the Courts have treated these cases as one off contract interpretation cases as if they were normal commercial contracts between parties of equal bargaining power. This has led to a series of often contradictory court decisions. Hopefully this method of legal analysis will be adopted by all courts so that some well deserved certainty will finally come to this issue of interpreting termination clauses.

There is no reason in the world that employers cannot draft  fair and enforceable termination provisions that can be easily understood by the average employee, without having to have to refer to a statute  as complicated as  the Employment Standards  Act, 2000 which has 142 sections and 14 Regulations.