Ontario Superior Court applies Waksdale Decision to Invalidate Termination Provision
In Sewell v. Provincial Fruit Co. Limited, 2020 ONSC 4406, the plaintiff brought a motion for summary judgment to determine the notice payable because of his termination.
The plaintiff had signed an employment contract which included the following termination clause:
- 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.
- 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");
The motions judge found that the employment contract violated the minimum standards set out in the Employment Standards Act, 2000 (the “ESA”) and was therefore unenforceable. In doing so, Justice Mandhane applied the Court of Appeal’s decision in Waksdale v. Swegon North America Inc. The Court found that the “for cause” termination provision violated the ESA by contracting out of the requirement to provide notice except in cases where the employee engaged in willful misconduct.
This is a relevant decision given that in Waksdale, counsel had conceded that the “for cause” termination provision violated the ESA.
The Court also found that the termination clause combined notice and severance pay entitlements in violation of the ESA, noting that the clause in question was “substantially similar” to the one found unenforceable by the Ontario Court of Appeal in Wood v. Fred Deeley Imports Ltd.
For my part, I find the Court’s findings with respect to the combination of notice and severance pay entitlements confusing. In Wood, the clause read:
[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.
On its face, the clause in Wood expressly combined notice and severance pay within the two 2 weeks’ notice. The clause in Sewelll appears to separate reasonable notice (or pay in lieu therefore) from severance pay, which is only payable “if applicable” and “as may be required under the ESA” (i.e. in a lump sum).
One thing is certain: Confusion continues to abound when it comes to the enforceability of termination provisions. Unfortunately, this uncertainty creates challenges for both employers and employees.
Frequently Asked Questions
I was injured in a car accident while driving to drop off a package for my employer—I almost never drive as part of my job. I work in an office as a clerk. The other driver was charged. Now I am off work and need physiotherapy. My doctor says I may have a permanent injury to my back. I have received a Notice from the Workplace Safety Insurance Board (WSIB) requesting that I elect whether or not I want to receive benefits.
Can I sue the other driver and receive benefits?
No. In Ontario injured workers who receive WSIB benefits forego their right to sue on their own behalf. You may choose to elect not to receive benefits and preserve your right to sue a third party in some limited circumstances. In Ontario, employees who are insured under the Workplace Safety Insurance Act scheme are not permitted to sue their own employer for injuries sustained while working. Depending on the nature of your job, you may not be able to sue another worker or employer either.
However, if you are injured in a vehicle collision and the responsible driver is not a worker as defined in the Act then you may elect whether or not you wish to receive WSIB benefits or pursue the at fault driver. That is a complicated decision.
Generally speaking, the more serious the injuries you have sustained the more likely you will be better off foregoing WSIB benefits and pursuing the at fault driver. However, if there are questions about liability (if you are wholly or partially at fault), or if there is a question about your ability to successfully recover damages in a tort action the WSIB scheme may be the best option for you.
Deciding whether or not to elect to receive WSIB benefits is complicated, and best made with the assistance of a Lawyer with experience in such matters. Experienced Lawyers are available to consult with you, often without obligation to you.
Work at my business has slowed down quite a bit this year. I currently have 11 employees but there is not enough work to go around. I should be getting a set of new contracts that will keep everyone busy this spring, but I’d like to make some temporary layoffs in the meantime to avoid having to let anyone go for good. I’ve discussed this with business colleagues who told me that temporary layoffs are not permitted for non-unionized employees. What are my options?
The law applicable to temporary layoffs in Ontario can be confusing. The Employment Standards Act does allow temporary layoffs of up to 13 weeks in a 20 week period. In certain seasonal industries, such as construction, temporary layoffs over the winter months are fairly common. However, in other workplaces courts in Ontario have treated temporary layoffs as constructive dismissals and have ordered employers to provide termination and severance pay.
In recent years, some Ontario court decisions have allowed temporary layoffs provided employers comply with both the Employment Standards Act and the terms of the employee’s contract. Depending on the nature of the work, such layoffs may even be permitted when an employee is working with an unwritten contract. A temporary layoff is also more likely to be permitted if an employee remains entitled to benefits and can access Employment Insurance during their time off. During any such layoff it is important to inform the employee that the layoff is temporary and to provide them with a return to work date. Finally, a temporary layoff should not be used as a form of discipline to punish an employee for misconduct – that will most certainly result in a claim for constructive dismissal.
Last month local newspapers reported the case of a McDonald’s employee in Kanata who was dismissed after receiving poor performance reviews. The employee received more than $100,000.00 in court. Why?
The short answer is that the judge in this case found that although the employee’s performance was not perfect the employer did not have “just cause” to terminate her employment contract. If a business chooses to dismiss an employee the employer has to first decide if they have just cause to end the contract or not. Just cause exists when an employee has committed a serious breach of contract such as theft or continually missing work without reason. If the employer does not have just cause then in most cases they have to provide compensation which can equal up to a month of salary for every year of the employee’s service.
Many employers have staff who they believe are poor performers. Performance reviews are often done to encourage better performance but may also be an attempt to build a case for a just cause dismissal. After several poor performance reviews an employer may choose to dismiss an employee for just cause. However, a decision to terminate an employee for just cause can be challenged in court where employers often find it difficult to prove that the alleged breach of contract was serious enough to warrant a just cause dismissal. Poor performance reviews may show that an employee was less than perfect but this alone is usually not enough to disentitle them to some compensation when they are dismissed. Because compensation is typically based on the number of years the employee has worked, the amount owing to dismissed employee can be significant which is what occurred in the case of the former McDonald’s employee.