By George Waggott, founder, George Waggott Law
Numerous recent Ontario cases have found increasingly novel ways to strike down termination provisions in employment contracts. For a variety of reasons, these decisions have refused to enforce contract wording which sought to limit employee claims upon termination to amounts owing under employment standards legislation.
A recent decision has breathed new life into the termination provisions in employment contracts. In Bertsch v. Datastealth Inc., 2024 ONSC 5593, the Ontario Superior Court of Justice provided valuable support for the enforcement of clear, well-drafted employment contracts, particularly when it comes to termination clauses and severance entitlements. Employers are urged to take this decision into account and review their own employment contracts to mitigate risks associated with wrongful dismissal claims and to ensure compliance with legal standards. The case emphasizes that an employment contract is more than just a formality—it's a key document that can influence the outcome of a legal dispute.
In the Bertsch case, the employment agreement stated that the employee’s entitlements upon termination would be limited to the minimum amounts provided for in the Ontario Employment Standards Act, 2000 (ESA), with no further entitlement under applicable common law. The employee, who had been employed for just under nine months, was paid four weeks pay in lieu of notice, which exceed his ESA entitlements. He proceeded to file a claim which sought 12 months pay in lieu of notice, based on the argument that the termination provision was unenforceable.
The termination provision in the Datastealth contract said that the employee “will be provided with only the minimum payments and entitlements, if any, owed to you” pursuant to the ESA. There was also express wording which said that complying with the ESA “satisfies any common law or contractual entitlement”.
The employee unsuccessfully argued that the contract wording was unenforceable because it did not refer to the potential obligations under the ESA which might arise in a termination for cause. This argument was based on the results in a number of recent decisions which have adopted the reasoning from the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391.
The Court’s decision in Bertsch was to dismiss the employee’s claim, based on a finding that the employment agreement termination provisions were enforceable. The Court said that for the termination provision in an employment to be valid, it must satisfy the following two conditions: (1) it must not contravene the ESA; and (2) there needs to be clear wording which excludes common law notice. The decision focused on the absence of ambiguous wording in the termination provision, which supported enforceability.
The Bertsch. decision serves as an important reminder of the crucial role that well-crafted employment contracts play in managing legal risks associated with employee terminations. By taking the time to review and update their employment contracts, employers can better safeguard themselves against wrongful dismissal claims and disputes over severance and other entitlements. A clear, comprehensive employment contract is an invaluable tool in mitigating potential legal liabilities.
For more information about George Waggott Law, please see: www.georgewaggott.com, or contact: george@georgewaggott.com
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