Case In Point
Court Finds ESA-Only Termination Clause Unenforceable Due To Wording of Conflict of Interest and Confidential Information Clauses
Date: August 24, 2022
In Henderson v. Slavkin et al., the Ontario Superior Court of Justice found that a termination clause in an employment contract which limited entitlements upon termination to only the minimums required by the Employment Standards Act, 2000 (ESA) was unenforceable due to the wording of the provisions related to “confidential information” and “conflict of interest.”
In 2015, the plaintiff, a receptionist in a dental office, was asked by her employers (dental surgeons) to sign a new employment contract as they were contemplating retirement. Fresh consideration for the contract was provided. The contract contained a provision limiting entitlements upon termination only to those provided under the ESA. After 30 years of service, the plaintiff’s employment was terminated in April 2020. The plaintiff challenged the enforceability of the ESA-only termination clause and the parties agreed that if the Court found the clause to be unenforceable, 18 months’ notice would be owing.
Entitlements Upon Termination
The Court found that the provisions in the contract which related to confidential information and conflict of interest violated the ESA. Each provision contained a clause which provided that a failure to comply with the clause would constitute cause for termination without notice or compensation in lieu of notice. The Court stated:
[38] It is the position of the plaintiff that conduct that falls short of wilful misconduct cannot constitute dismissal for cause. The standard for just cause termination under the ESA entitles even those terminated with cause to minimal entitlements unless the employer can establish, pursuant to s. 2(1)(3) of Termination and Severance of Employment, O. Reg. 288/01, that the employee is guilty of wilful misconduct or wilful neglect of duty. While the defendants argue that the provisions enumerated above all bespeak wilful misconduct or wilful neglect of duty, I am unable to conclude that that is indeed the case, based on the wording thereof. I am, however, of the view that the provisions are overly broad and ambiguous. […]
[42] … Again, an employee is entitled to know at the beginning of an employment relationship what the employment will be at the end of their employment and how and when it may be terminated without cause. In this case, it is not clear in what circumstances the disclosure of confidential information may occur without immediate termination for cause without notice. One can conceive of a situation where confidential information may have been inadvertently disclosed in a situation where it is not wilful and/or where it is a trivial breach. This clause does not respect the ESA provisions in this regard.
The Court concluded that these clauses “were not in compliance with the ESA, and therefore invalidated the employment contract.” As a result, 18 months’ reasonable notice was owing.
Mitigation of Damages
On the issue of mitigation, the defendants argued that the plaintiff did not take reasonable steps to mitigate her damages. The plaintiff argued her employment was terminated at the height of the pandemic, which impacted her ability to find alternative employment. The Court took this factor into account in slightly reducing the reasonable notice, stating:
[54] After moving to Glencoe, [the plaintiff] began to look for work. She applied to numerous positions, including medical offices, and finally secured employment as a frontline worker in a long-term care home.
[55] This took 18 months from her notice of termination, 12 months from her last day of work. In normal circumstances, this would not meet the test for mitigation. However, given the pandemic, the long economic recovery, the difficulty in finding work as businesses slowly began to open, as well as the plaintiff’s age and her move to a smaller centre where rent was cheaper, I am of the view that there should be only a small deduction for the length of time it took her to mitigate in the circumstances. The plaintiff acted reasonably and did her best to find work once she moved from Toronto to Glencoe. I am of the view that the notice period should be reduced by 3 months in the circumstances.
Canadian Emergency Response Benefit (CERB)
The Court also considered the conflicting case law on whether CERB should be deducted from the wrongful dismissal damages awarded. It found that the CERB benefits did not amount to a collateral benefit and should not be deducted from the award.
Takeaway
The Court’s decision underscores that all provisions in an employment agreement will be read together in assessing an employee’s entitlements upon termination, and reaffirms the importance of ensuring that all provisions are in compliance with the ESA to minimize the risk of them being found unenforceable.
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