Alberta Court Upholds 4 Week Termination Clause

Alberta Court

In Lawton v Syndicated Services Inc., the Alberta Provincial Court upheld a termination clause in an employment contract that limited an employee’s notice period to just four weeks.

The Facts

Mr. Lawton was a former employee of Syndicated Services Inc. He commenced employment in August of 2018 as the Chief Operating Officer making a salary of $158,000 per year. Importantly, Mr. Lawton negotiated a term into his employment contract that required four weeks’ notice in the event his employment with Syndicated was terminated.

In 2020, the business was suffering dramatically. There had been a significant drop in the industry in which they operated. The sudden impact of the COVID-19 pandemic was, as described by the trial judge, “the nail in the coffin.” The company experienced a loss of $200,000 in 2020. In response, Mr. Lawton was terminated at the end of April 2020 having only worked with the company for approximately twenty months.

In the proceeding before the court, Mr. Lawton was claiming against his former employer $64,583.84 in severance pay (being approximately 21 weeks’ notice – far more than the 4 weeks agreed to under the contract), $15,000 in benefits, and $10,000 in enhanced damages.

Was Mr. Lawton Entitled to More Notice?

In determining how much notice Mr. Lawton was entitled to, the trial judge noted that after only 20 months’ service, he would be entitled to only one week of notice under the Alberta Employment Standards Code. Nevertheless, the parties agreed to a term permitting four weeks’ notice under the employment contract. The contract, in Mr. Lawton’s particular circumstances, consequently provided for a benefit that was greater than the minimum entitlements of the Employment Standards Code. In commenting on that term, the trial judge stated:

“The employment contract had the term “Termination of this contract requires 4 weeks notice”.  This term is clear and unambiguous.  Parties are entitled to negotiate terms of employment contracts and where the terms do not interfere with statutory requirements they ought to be enforced.”

As a result, Mr. Lawton’s claim for increased severance pay was dismissed as he was paid exactly what he was entitled to under his contract.

The Takeaway: Distinctions in Alberta vs Ontario Law

This case is interesting in that the result departs from what might be expected under Ontario law. The four week termination provision was not contrary to law here because it provided a benefit greater than the statutory minimum. However, this was only the case because Mr. Lawton’s tenure with the company was so short. Had he been working there longer, Mr. Lawton may have been entitled to more according to the statutory minimum than he was contractually entitled to receive under the employment contract. In a hypothetical context where Mr. Lawton may be entitled to, for example, six weeks’ notice under statute, it would be impossible for the contractual term of only four weeks’ notice to be enforceable.

What this suggests is that in Alberta, courts are willing to interpret employment contracts and their unique termination provisions based on the particular circumstances of the case and not on whether the impugned termination clause might violate minimum employment standards in a different context. This is very different from employment law in Ontario, where the fact that a contract could violate the Employment Standards Act may be enough to invalidate the contract’s terms, whether or not it results in any actual violation of the Employment Standards Act.

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