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:

  1. 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.

  1. 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.