Case In Point
Another Reminder to Employers: Draft Termination Notice Provisions with Care
Date: August 12, 2014
The Ontario Superior Court has reaffirmed that if a termination provision in an employment contract does not strictly comply with the requirements of the Employment Standards Act, 2000 (“ESA”), it will be considered null and void.
In Miller v. A.B.M. Canada Inc., the plaintiff, Mr. Miller, was a management accountant. He was hired into the position of Director, Finance and Business Process Improvement at $135,000 per year, which the Court found to be a middle management position. He was employed for 17 months in total before his employment was terminated.
The termination provision in his employment contract stated ““regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or being paid salary in lieu of such notice or as may otherwise be required by legislation.” (emphasis added).” The Court held that neither the plaintiff’s car allowance nor his 6% pension contribution were included as amounts to be paid during the notice period, contrary to the ESA. As the provision was null and void, a period of reasonable notice was calculated.
Notably, in calculating an appropriate notice period the Court held that the plaintiff had some responsibility for the fact the contract was not compliant with the ESA. It took into consideration the plaintiff’s prior experience in the human resources field and the fact that his position with the defendant required him to monitor relevant legislation, including employment standards legislation. The Court found that the plaintiff could have “voiced objection to whatever provisions he found unsatisfactory” in the employment contract, but did not. It stated:
By signing the contract, Mr. Miller signified to the employer that he had read, and understood, and accepted the terms of the contract. Had he in fact read what he acknowledged having read, the parties could have either negotiated their differences, or parted ways and avoided a period of employment that has been unhappy and no doubt costly for both. In the circumstances of this case, the employee cannot escape bearing some responsibility for the fact that both parties entered into a contract which fell below ESA standards. [para 51]
In the final analysis the Court awarded three months’ notice and it is unclear whether, or by how much, the reasonable notice period was reduced due to the plaintiff’s role in entering into an unenforceable contract. However, a three month notice period is on the low end for a short service middle management employee.
This case is yet another reminder to employers that termination provisions in employment contracts must be carefully drafted to ensure strict compliance with the ESA. Otherwise, an employer may unexpectedly find itself paying out a term of reasonable notice instead of the minimum standards notice it thought was agreed upon in the employment contract. What will remain to be seen is whether other courts in similar cases will hold employees responsible in some small way for agreeing to an unenforceable contract term.
