{"id":18871,"date":"2020-07-03T10:00:42","date_gmt":"2020-07-03T14:00:42","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/ontario-appeal-court-ruling-marks-substantial-shift-in-enforcement-of-termination-clauses-147726"},"modified":"2020-07-03T10:00:42","modified_gmt":"2020-07-03T14:00:42","slug":"ontario-appeal-court-ruling-marks-substantial-shift-in-enforcement-of-termination-clauses","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2020\/07\/03\/ontario-appeal-court-ruling-marks-substantial-shift-in-enforcement-of-termination-clauses\/","title":{"rendered":"Ontario appeal court ruling marks substantial shift in enforcement of termination clauses"},"content":{"rendered":"
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Kelsey Rolfe<\/span> | July 3, 2020 <\/p>\n

The Ontario Court of Appeal has ruled that where one provision of a termination clause doesn\u2019t meet minimum statutory requirements, it renders the entire clause unenforceable.<\/p>\n

In Waksdale v. Segon North America Inc.,<\/em> the court reversed a Superior Court of Justice ruling in favour of plaintiff Benjamin Waksdale\u2019s former employer Segon. Superior Court Justice Edward Morgan found that while the company\u2019s termination of Waksdale with cause provision violated the Ontario Employment Standards Act, he was terminated under the without-cause provision, which was compliant with the law, and those two provisions should be considered separately.<\/p>\n

In their decision, Court of Appeal Justices Sarah Pepall, C. William Hourigan, and Lois Roberts ruled the termination provisions must be read together.<\/p>\n

Read: Court decision in IBM case clarifies enforcement of termination clauses<\/a><\/strong><\/p>\n

\u201cRecognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee\u2019s common-law rights on termination, violated the employee\u2019s ESA rights,\u201d wrote the justices. \u201cWhile courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal.\u201d<\/p>\n

While Segon asserted that its severability clause should apply to the with-cause provision of the contract \u2014 which would keep the rest of the contract in effect if one portion were found to be \u201cinvalid, illegal or incapable of being enforced by a rule of law or public policy\u201d \u2014 the justices disagreed.<\/p>\n

\u201cA severability clause cannot have any effect on clauses of a contract that have been made void by statute,\u201d they wrote. \u201cHaving concluded that the termination for cause provision and the termination of employment with notice provision are to be understood together, the severability clause cannot apply to sever the offending portion of the termination provisions.\u201d<\/p>\n

Read: Ontario Court of Appeal ruling highlights interpretation of termination clauses<\/a><\/strong><\/p>\n

The mid-June ruling is a substantial shift in how termination clauses have been enforced, but follows a trend of recent court of appeal rulings on these clauses, says Daniel Attwell, a partner at Matthews, Dinsdale & Clark LLP.<\/p>\n

\u201cWhy the court of appeal considered this case differently than other cases in the past, I think, is more just indicative of the overall trend of the court of appeal to be more and more willing to strike down these clauses where they think there are potentially some deficiencies. It\u2019s not new, this idea of wanting to ensure that employees are sufficiently protected and that poor-intentioned employers can\u2019t take advantage of potentially offside termination clauses.\u201d<\/p>\n

Attwell says he\u2019s concerned with the court\u2019s choice to effectively ignore Segon\u2019s severability clause. \u201cI think, in certain circumstances, the severability language probably is not going to serve the employer\u2019s interests, if you have one clause that has several parts to it but it\u2019s all encompassed together. But I think where the contract is crafted \u2014 and deliberately so \u2014 with very separate and distinct provisions, . . . severability language should serve a useful purpose, otherwise you\u2019re ignoring language that the parties have specifically contracted for.\u201d<\/p>\n

Read: Court decision warns employers about financial liability in mass terminations<\/a><\/strong><\/p>\n

The ruling could have a potential impact in other provinces and may eventually have to be reviewed by the Supreme Court of Canada, he noted. \u201cI think the generality of the issues in play here will certainly be considered . . . and, therefore, potentially have [an] impact in other provinces. And that\u2019s where I see the Supreme Court potentially having an interest in this case and even going beyond employment law [to] . . . how severability clauses are treated going forward. I certainly see that as having broader implications.\u201d<\/p>\n

Going forward, employers should look at their employment contracts carefully and keep the language simple, adds Attwell. \u201cWhat we\u2019ve seen in the past is . . . well-intentioned employers can run afoul of what the court of appeal is saying about these things. If you try to be too specific or too detailed in what it is you\u2019re providing for, . . . the more likely it is you run into issues.\u201d<\/p>\n

Read: Employers given mixed messages on termination clauses in employment contracts<\/a><\/strong><\/p>\n

He also suggested that employers be mindful of how much further the court\u2019s line of analysis could go. \u201cIf the court\u2019s prepared to look at [these two termination provisions] all together \u2014 notwithstanding any clear language in the contract \u2014 . . . I don\u2019t think it would be outside the realm of possibilities for challenges to be made [that], if any aspect of the contract is in violation of the Employment Standards Act, to strike the entire thing. <\/p>\n

\u201cI don\u2019t think the law is there \u2014 certainly this case doesn\u2019t say that. But I think it\u2019s reason for employers to be concerned. They should be looking at their contracts as a whole, including its constituent parts to make sure that everything is on side.\u201d<\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Kelsey Rolfe | July 3, 2020 The Ontario Court of Appeal has ruled that where one provision of a termination clause doesn\u2019t meet minimum statutory requirements, it renders the entire clause unenforceable. In Waksdale v. Segon North America...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18871"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=18871"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18871\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=18871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=18871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=18871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}