Waksdale Followed Voiding Entire Termination Clause Because of “Just Cause ” Reference:

In Sewell v Provincial Fruit ( 2020 ONSC 4406) Mandhane J. had to determine if the following clause invalidated the termination provision of an employment contract:

“b) Termination by the Company for Just Cause
The Company is entitled to terminate your employment at any time and without any notice or any further compensation for just cause and the Company will not have any further obligations to you whether at contract, under statute, at common law or otherwise.”

In setting out why this made the whole termination clause, including the not for cause provision, illegal, the Judge said :

[19] Second, applying Waksdale, I find that the “Termination for Just Cause” provision of the contract was illegal insofar as it contracted around the ESA requirement to provide notice except in cases where an employee engaged in “willful misconduct.” Based on the Court of Appeal’s reasoning, I must read the contract as a whole and set it aside if one or more of the terms are illegal, even if the offending term is not at issue in the instant case.

This case is important because in Waksdale the parties agreed that the for cause termination clause was illegal. That clause was very different from this one as it set all sorts of things as just cause, including breaching any federal or provincial law.

In this case the reference to just cause is in line with most termination clauses which simply reference ” just cause” . More importantly, in this case the Court ruled that the clause was illegal, and thus sets a clear judicial precedent.

This case had a number of other issues :

1. Even though the Plaintiff had been contacted by a head hunter the judge found that that did not constitute inducement:

“Rather, the arrangement was mutually beneficial as the plaintiff had tried to change jobs prior to accepting the defendant’s employment offer and seemed ready for a change.”

2. The not for cause provision read as follows

c) Termination by the Company without Just Cause

(A) The Company will be entitled to terminate your employment at any time without just cause by providing you with the following

(ii) a payment, or at the Company’s sole option, notice or combination of notice and pay in lieu of such notice representing termination pay and, if applicable, severance pay, as may be required under the Employment Standards Act, 2000, as amended from time to time (the “Separation Period”);

It is agreed that upon compliance with the above provisions, the Company will be release from any and all obligations to you, whether statutory, under contract, at common law or otherwise.

When I first read that clause it looked fine to me because it looked like you would get both termination pay and severance pay. The Judge saw it differently :

First, a plain reading of the contract supports the plaintiff’s argument that it combines notice and severance pay entitlements in violation of the ESA requirement to pay both notice and severance. The provision states:

The Company will be entitled to terminate your employment at any time without just cause by providing you with … a payment, or at the Company’s sole option, notice or a combination of notice and pay in lieu of such notice, representing termination pay and, if applicable, severance pay

[17]       Indeed, this provision is substantially similar to the one deemed illegal by the Court of Appeal for Ontario in Wood. The Wood termination clauses stated:

[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… The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay

[18]       The only substantial difference between the provisions is that the Wood clause specified a notice and severance period of 2 weeks per year, whereas the contract in this case left the amount of notice and severance open. This difference is not significant in terms of the Court’s reasoning in Wood and I find that the contract at issue in this case is void.

It is not entirely clear to me what it is about this clause that ” combines notice and severance pay requirement “.

It appears that the judge read the clause as saying that the employee would get either :

a) a payment of termination pay and severance pay ( this is OK)

OR

b) working notice of the amount of weeks in the termination pay and severance pay provisions ( which is illegal as you cannot be required to work out the severance pay period, rather it must be paid as a lump sum )

3. The Judge made the following comments about the signing of the agreement when the Plaintiff was hired:[

8]       I accept the plaintiff’s evidence that he signed the contract expecting that it would accurately set out the main terms of his employment as discussed with the defendant, as well as comply with employment standards legislation. I also accept that he did not understand the full implications of the “termination” clauses and that they were never explained to him.