Employment Insurance and Without Cause Termination

by Stacey R. Ball| August 11, 2021August 10, 2023 | Employment Contracts| | General

If you have been terminated without cause, you will be eligible to collect Employment Insurance (“EI”). If you were terminated for cause, you will not be eligible for EI. Without cause termination occurs where your employer terminates you without you having done anything seriously wrong to warrant the termination. The very purpose of EI is to provide temporary income support to unemployed workers who are searching for new employment. EI was created essentially for the purpose of assisting workers terminated without cause.

There are numerous reasons why an employer might dismiss you without cause. There might have been a shortage of work. The employer might have thought you weren’t a good fit. The employer might have decided to close shop. You might have done something wrong. It is important to know that simply doing something wrong will usually not amount to just cause for termination. Usually, you would have to do something serious to be terminated for cause, or otherwise do something less serious frequently enough that, cumulatively, or taken together, just cause for termination is established. Just cause is a difficult standard to meet and it is more likely for terminations to be without cause than with cause.

Eligibility Requirements

In order to be eligible for EI, you must fulfil each of the following requirements:

a) You were previously employed in insurable employment;
b) You were terminated without cause (through no fault of your own);
c) You have not worked or been paid for at least 7 consecutive days in the last 52 weeks;
d) You have worked the required amount of insurable employment hours in the previous 52 weeks or since the start of your EI claim, whichever is shorter;
e) You are ready, willing and able to work each day; and
f) You are actively looking for new employment.

After your termination, your employer should submit to Service Canada your “Record of Employment”, which will tell Service Canada about your entitlement to EI.

Are you Eligible for EI if you quit Your Job?

An employee who quits their job must have done so with just cause in order to retain their entitlement to EI. This requires more than simply having a “good reason” to quit. Rather, you should be able to show that you were constructively dismissed, that you experienced harassment or discrimination, or that the work environment was unsafe. If you quit under these circumstances, you may nevertheless be entitled to EI. Otherwise, you will lose your entitlement to EI.

How Much Can You Receive? How Long Can You Receive?

The rate for calculating EI benefits for most people is 55% of their average insurable weekly earnings. In 2021, the maximum yearly insurable earnings amount is $56,300. Taken together, this means that you can receive a maximum amount of $595 each week.

The amount of time during which you can continue to receive EI will depend partly on the unemployment rate of your region as well as the amount of insurable hours you have accumulated in the last year or since your last claim, whichever is shorter. You should be able to receive EI from between 14 weeks up to a maximum of 45 weeks. Note, however, that you may be entitled to an additional 5 weeks (thus a maximum of 50 weeks) if you are a seasonal worker.

Are Work Hours Regulated in Ontario?

by Stacey R. Ball| August 10, 2021August 10, 2023 | Employee or Dependent Contractor

How many hours per week can your employer expect or require you to work? How many hours per day? These are questions anyone who works long hours will inevitably ask themselves. Fortunately, work hours are indeed regulated in Ontario and there are maximum amounts of hours per week and per day that an employee can be required to work. These are set out by the Ontario Employment Standards Act (“ESA”).

Maximum Daily and Weekly Limits

a) Daily

By default, the maximum amount of hours an employee can be required to work in a single day is 8 hours. Alternatively, the employer can require their employees to work longer than 8 hours if the employer has an “established regular workday” exceeding 8 hours. The established regular workday, however, cannot exceed 13 hours. Therefore, the maximum amount of hours an employee can be required to work in a day is between 8 and 13 hours.

b) Weekly

Generally, the maximum amount of hours an employer can require their employees to work in a single week is 48 hours. This can be exceeded by agreement between the employer and employee; however, this employment contract does not relieve the employer of their obligation to provide overtime pay.

Hours Free From Work

The ESA not only sets out how long an employer can require their employee to work, but also how long an employee is entitled to be away from work. Employees are entitled to 11 consecutive hours away from work each day. This rule cannot be altered by agreement. However, it does not apply to employees who are “on call”.

Between shifts, employees are entitled to at least 8 hours off work. In order to be eligible, the two separate shifts must combine for a duration exceeding 13 hours. For example, if the employee worked only 3 hours the first shift, they are not entitled to 8 hours off before their next shift if the next shift is only 8 hours (11 hours total).

Each week, an employee is entitled to either 24 consecutive hours off work or, alternatively, 48 consecutive hours off work in every period of 2 consecutive work weeks.

Importantly, the above rules do not apply in certain exceptional circumstances. These include emergencies, unforeseen interruptions to the delivery of essential public services, and unforeseen interruptions to seasonal operations, among others.

Eating Periods

Employees are entitled by law to a 30-minute eating period each day. An employee cannot work more than 5 hours without having an eating period. Notably, eating periods are not considered hours of work and do not count towards overtime pay. Employers are not required to provide their employees with “coffee breaks” beyond this 30-minute eating period.

Minimum Hours

The ESA does not provide for minimum hours of work. Theoretically, an employer could require their employee to work 5 minutes each day and not be violating the ESA. However, if an employee regularly works more than 3 hours each day and is subsequently required to come to work for a period of less than 3 hours, the employer is then obligated to pay the employee as though they had worked 3 hours. This is the “three hour rule”.

ESA is Not Always Applicable

Although the above rules apply to the vast majority of employees, there are certain exemptions. Some industries and jobs are not covered by the ESA, and therefore do not have the benefit of the above rules. Among these exemptions are: police officers, co-op students, banks, politicians, judges, and employees governed by federal law (i.e., Canada Labour Code), among others.

Layoffs During The Covid-19 Period Can Be A Constructive Dismissal At Common Law

by Stacey R. Ball| June 10, 2021August 10, 2023 | General

In a recent decision of Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, the Ontario Superior Court ruled that the Infectious Disease Emergency Leave Regulation (“IDEL Regulation”) made under the Employment Standards Act, 2000 (“ESA”) does not preclude an employee from claiming constructive dismissal at common law.

Facts

The Plaintiff Jessica Coutinho (“Ms. Coutinho”) worked at the Defendant’s (“Ocular”) eye clinic in Cambridge as an office manager. The principals of Ocular got into disputes with ophthalmologists at the Cambridge clinic over corporate and business issues. The disputes culminated in an incident where one of the Ocular principals changed the locks to the premise on April 30, 2020.

On May 1, 2020, Ms. Coutinho was denied entry when she attended for work. She was told to return to her home and that she would continue to get paid. On May 29, 2020, Ocular wrote to Ms. Coutinho, advising her that the Cambridge clinic would be closed and she was being placed on a temporary layoff. On June 1, 2020, Ms. Coutinho brought action against Ocular seeking damages for constructive dismissal.

Analysis

Ocular pleaded that pursuant to the section 7 of the IDEL regulation under the ESA, Ms. Coutinho was not constructively dismissed because the temporary elimination of her employment duties and work hours was due to the Covid-19 health crisis. However, Ms. Coutinho takes the position that the IDEL Regulation does not affect her common law right to pursue a civil claim against Ocular for constructive dismissal.

The Court sided with Ms. Coutinho. In the analysis, the Court noted that the scope of s.7 of the IDEL regulation is constrained by s. 8(1) of the ESA, which reads “no civil remedy of an employee against his or her employer is affected by this Act”. The Court also considered the online publication of the Ontario Ministry of Labour, Training and Skills Development, which stated that the rules under the IDEL regulation affect only what constitutes a constructive dismissal under the ESA, not at common law.

Decision

Therefore, the Court ruled that the written notice by Ocular to Ms. Coutinho on May 29, 2020 that she was being placed on a temporary layoff constituted a constructive dismissal and Ms. Coutinho was not barred by the IDEL Regulation from bringing a constructive dismissal action at common law. As Ms. Coutinho fully mitigated her common law damages by commencing employment with another eye clinic on July 22, 2020, the Court awarded her statutory termination entitlements under the ESA.

Takeaways

The Court ruled in this case that employees are entitled to treat employers’ unilateral imposition of the layoff as bring the contract of employment to an end at common law and thus have the right to sue for constructive dismissal. It is advisable for employers to seek legal opinions before putting their employees on a temporary layoff or reduce their working hours and/or pay. It also applies to employees, who should consult an employment lawyer about their legal rights once they are laid off

If you are experiencing any employment law issues in regard to your layoff, Top Toronto employment lawyer, Stacey Ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Saving Provisions In Termination Clauses Do Not Always Save The Day

by Stacey R. Ball| June 9, 2021August 10, 2023 | General

Employers include termination clauses in the employment contracts to limit employees’ termination entitlements once they are dismissed from work. However, if a termination clause provides for less than statutory minimum under the Employment Standards Act (“ESA”), it is unenforceable. Employees are thus entitled to reasonable notice or pay in lieu of notice at common law, which is typically greater. As a result, employers often incorporate saving provisions in termination clauses to shield them from unenforceability. However, these saving provisions do not always save the day.

In the decision of Rossman v. Canadian Solar Inc., 2019 ONCA 992, the Ontario Court of Appeal (“ONCA”) ruled that if the employer has attempted to contract out of the minimum standards in the ESA through the inclusion of a termination clause, a saving provision cannot cure an otherwise unenforceable termination clause and make it enforceable.

Facts

Noah Rossman (“Mr. Rossman”) commenced his employment with Canadian Solar Inc. (“Canadian Solar”) in 2010. He first started as a regional sales manager and signed his first employment contract. In 2012, Mr. Rossman got promoted to a project management role and signed a new employment contract.

Each employment contract included the same termination clause with a saving provision, which reads, “In the event the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement, such statutory requirements will replace the notice or payments in lieu of notice contemplated under the agreement”. However, the termination clause also stipulated that Mr. Rossman’s “benefits shall cease 4 weeks from the written notice”. Mr. Rossman was terminated without cause on February 12, 2014 and commenced an action against Canadian Solar seeking for damages for wrongful dismissal.

Analysis

The motion judge ruled that the termination clause was void and unenforceable because it was either ambiguous or an attempt to contract of the minimum standards under the ESA by limiting benefits to four weeks regardless of the term of employment. The motion judge determined that Mr. Rossman was entitled to five months’ reasonable notice. Canadian Solar appealed the decision of the motion judge to the ONCA.

The ONCA agreed with the motion judge and ruled that the termination clause was either void at the outset or contained genuine ambiguity that made it void and unenforceable. The Court found that the termination clause was void at the outset, because the four-week benefits clause contravened the notice provisions of the ESA. The employment contract was for an indefinite period, and therefore the benefit period needed to run for a minimum of eight weeks to comply with the minimum statutory notice period: s. 57(h). In addition, the Court ruled that the termination clause is ambiguous and the ambiguity is not erased by the saving provision, since the four-week benefit clause is not future facing, nor does it express an intention to conform to the ESA. Therefore, the ONCA dismissed the appeal of Canadian Solar.

Takeaways

In this case, the ONCA noted that saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards.

For employers, it highlights the importance of having well-drafted termination clauses in their employees’ employment contracts. Employers should make sure that the termination clauses do not contract out of the ESA minimum standards. Therefore, it is advisable for employers to seek legal opinions when it comes to drafting employment contracts.

It is also strongly recommended that employees should consult an employment lawyer after termination so that they can know whether the termination clause in their employment contracts is enforceable and has limited their termination entitlements to statutory minimum under the ESA.

If you are experiencing any issues in regard to your employment contract, Top Toronto employment lawyer, Stacey Ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Severability Clause Cannot Save An Invalid Termination Provision

by Stacey R. Ball| June 8, 2021August 10, 2023 | General

In the decision of North v. Metaswitch Networks Corporation, 2017 ONCA 790, the Ontario Court of Appeal (“ONCA”) reaffirmed the previous court decision that a termination clause is void if it attempts to contract out of any provisions of the Employment Standards Act (“ESA”). It also ruled that a severability clause cannot save an otherwise invalid termination clause in an employment contract.

Facts

Doug North’s (“North”) employment with Metaswitch Neworks Corporation (“Metaswitch”) was governed by an employment contract. A termination clause in the contract stipulated that Metaswitch could terminate North without cause upon providing him with notice in accordance with the provisions of the ESA. However, it also provided that any payments owing to North “shall be based on Base Salary, as defined in the Agreement”. North’s compensation consisted of base salary and commissions.

Analysis

The Appellant North took the position that the termination provision was void, because the part of the provision that provides payment to be based on base salary contravened the ESA by excluding his commissions. On the other hand, the Respondent argued that the severability clause in the employment agreement could save the balance of the termination provision and leave it in force. The Application judge sided with the Respondent and ruled that the severability clause of the employment contract could save the termination clause that contravened the ESA.

On appeal, the ONCA ruled that the application judge erred in her approach to the interpretation and application of the severability clause. The Court ruled that “where a termination clause contracts out of one employment standard, the Court is to find the entire termination clause to be void, in accordance with s.5(1) of the ESA. It is an error in law to merely void the offending portion and leave the rest of the termination clause to be enforced” (para.24). As a result, the application judge erred in law by severing only the offending portion that referred to using the base salary only as calculation of pay in lieu and leave the reminder of the termination clause in force. The Court noted that the correct approach is “to first assess the termination clause to see whether there is any contracting out of an employment standard. If there is, then the termination clause is void, and there is nothing to which the severability clause can be applied” (para. 41).

Takeaways

In this case, the ONCA noted that if the drafted termination clause is void because it attempts to contract out of any provision of the ESA, there is nothing on which the severability can act. The Court further noted that this conclusion does not make the severability clause void. It continues to have application to the rest of the agreement but just not the clauses that have been made void by statute.

Can Covid-19 Pandemic Have An Impact On The Common Law Reasonable Notice Period?

by Stacey R. Ball| May 21, 2021August 10, 2023 | General

With the Covid-19 pandemic dragging on, employers have to resort to restructuring and downsizing their business operations to stay afloat in this harsh economic weather. Thus, a large number of employees are terminated and have to look for new employment. In this way, it becomes a critical issue whether the Covid-19 pandemic have an impact on the common law reasonable notice period when the terminated employees commence a proceeding against their former employers for wrongful dismissal at the court.

The recent court decision in Yee v. Hudson’s Bay Company, 2021 ONSC 387 has shed some light on this aspect. The Court ruled that if the employee’s termination occurred after the start of the Covid-19, the pandemic will serve to increase an employee’s entitlement to a longer common law notice period.

Facts

In this case, the Plaintiff Mr. Melvin Yee was terminated by his former employer Hudson’s Bay Company (HBC) on August 28, 2019. At the time of termination, Mr. Yee was 62 years of age and had a working history with HBC for over 11 years. He was employed as Director of Product Design and Development.

The Relevant Factors

Mr. Yee’s employment contract with HBC did not contain a valid and enforceable termination provision, which entitled him to the common law reasonable notice period.

The Court fully considered the four Bardal factors in assessing Mr. Yee’s common law reasonable notice period, which are

Age;
Length of service;
Character of employment;
The availability of similar employment having regard to the experience, training and qualifications of the employee.

The Court ruled that Mr. Yee’s age and character of employment “favored a longer notice period” while his length of service was “neutral to somewhat favoring a longer period”.

With regard to the “availability of similar employment”, the Court acknowledged the decision of Paquette v. TeraGo Networks Inc., 2015 ONSC 4189 that “economic factors such as a downturn in the economy or in a particular industry or sector of the economy that indicate that an employee may have difficulty finding another position may justify a longer notice period”. However, the Court also empathized that this reasonable notice is to be “determined by the circumstances existing at the time of termination and not by the amount of time it takes the employee to find employment”.

Decision

Mr. Yee was terminated on August 28, 2019, which is approximately seven months before the pandemic began in Ontaro. Therefore, the Court ruled that the Covid-19 pandemic was not a relevant factor in this case, as Mr. Yee’s termination occurred before the onset of the pandemic.

Based on the four Bardal factors, the Court awarded 16 months’ notice to Mr. Yee.

Key Takeways For Employers And Employees

For employers, it is advisable for them to review the employment contracts with an lawyer to see if there are valid and legally enforceable termination provisions in place, which can limit their employees’ termination and severance pay to the Employment Standards Act minimums. They also need to prove that the industry has not severely affected by the Covid-19 pandemic so that it is not difficult for the terminated employees to find alternative employment.

For employees, this case serves as a reminder of the importance to consult a lawyer after getting terminated. With the help of a lawyer, they will get to know whether the termination provisions in their employment contract are valid and enforceable and whether they are entitled to a longer common law notice period due to the Covid-19 pandemic.

If you are experiencing any issues in connection to your employment during the Covid-19, Top Toronto employment lawyer, Stacey ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Isolated Incident Without Any Prior Progessive Discipline Does Not Justify Termination For Just Cause

by Stacey R. Ball| May 20, 2021August 10, 2023 | General

In the recent decision of Czerniawski v. Corma Inc., 2021 ONSC 1514, the Ontario Superior Court of Justice ruled that a long-term employee’s one-time misconduct without any prior progressive discipline did not justify dismissal without notice.

The Court reaffirmed that a contextual approach should be used to assess whether an employee’s misconduct justifies termination without notice. It noted that the principle of proportionality should be applied where an effective balance should be achieved between the severity of the employee’s misconduct and the sanction imposed. The Court ruled that with no prior disciplinary actions, the isolated incident in this case did not warrant termination for just cause and thus awarded nineteen (19) months’ reasonable notice to this employee.

Facts

Mr. Czerniawski worked as an assembler for the Defendant for nineteen (19) years without any performance issues. Mr. Czerniawski was terminated alleged for cause when he got into a verbal dispute with a co-worker over work distribution. After refusing to leave the work premises, he was escorted off work by the police. Mr. Czerniawski was then asked not to return to the workplace until further notice by the employer and the police. However, after four days of hearing nothing from the employer, Mr. Czerniawski went to the reception of the plant to deliver a letter stating his side of story.

Without interviewing Mr. Czerniawski for his version of the incident, the employer abruptly terminated him and specified two grounds for dismissal without notice, namely a) Mr. Czerniawski was acting in a threatening matter to coworkers; b) Mr. Czerniawski was subordinate by refusing to leave the workplace and then returning to deliver the letter.

Decision

In this case, the Court fully considered the all the circumstances surrounding the dismissal and concluded that the misconduct did not justify termination without notice.

The Court followed the decision of McKinley v. BC Tel, 2001 SCC 38 and noted that “an employee’s misconduct does not inherently justify dismissal without notice unless it is ‘so grievous’ that intimates the employee’s abandonment of the intention to remain part of the employment relationship” (para 21). The Court noted that careful consideration should be given to the particular facts as well as the employee’s tenure and discipline history.

The Court analyzed the evidence submitted by both parties and found that the employee was a solid and steady worker with no prior history of discipline, threats or violence. Mr. Czerniawski was not given any opportunity to state his version of the incident during the investigation conducted by the employer. The Court relied upon a number of case law and ruled that given that Mr. Czerniawski was a conscientious employee with no prior incident of violence, progressive discipline such as a disciplinary letter or suspension would be an appropriate action that could send the message that his behaviour was unacceptable and given him a warning that a continuation could result in his dismissal.

The Court ruled that the Plaintiff’s misconduct was not so egregious to warrant a dismissal without notice. By taking into account Mr. Czerniawski’s age (54) , length of service (19 years) and technical nature of his position, the Court awarded him nineteen (19) months with benefits for this notice period.

Takeways For Employers And Employees

Employees

This case serves as a reminder to employers that you should bear in mind the principle of progressive discipline before terminating any employees for cause. You are strongly advised to consult an employment lawyer in regard to appropriate sanctions once you are aware of the employee’s misconduct.

Employers should interview the employee and ask them to provide their versions of the incident. You should interview all relevant parties and conduct a full and fair investigation. Most importantly, you should consider give the employee a disciplinary letter or suspension before terminating them. You should only consider terminating the employee for cause when you are certain that the misconduct is egregious enough to warrant a dismissal without reasonable notice.

Employees

For employees, this case also sheds light on how to act appropriately once you are terminated alleged for cause. You should ask the employer for particulars about the alleged just cause, if the termination letter does not specify the reasons. You should also bear in mind that the just cause test is stringent. It is advisable for you to consult an employment lawyer for legal options before you sign any settlement documents.

If you are experiencing any employment law issues in regard to termination, Top Toronto employment lawyer, Stacey ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Pregnancy-an Important Factor In Determining The Length Of Reasonable Notice Period

by Stacey R. Ball| May 19, 2021August 10, 2023 | General

In a recent decision of Nahum v. Honeycomb Hospitality Inc., 2021 ONSC 1455, the Ontario Superior Court ruled that pregnancy at the time of dismissal is an important factor in calculating the length of reasonable notice period and awarded five (5) months’ notice to the Plaintiff who had a short service of only four and one half (4.5) months.

Facts

Ms. Nahum was twenty-eight (28) years old and about five (5) months pregnant at the time of her termination. She had been employed as a Director of People and Culture with the Defendant for four and one half (4.5) months. Ms. Nahum made a compensation of $80,000 per annum with benefits. She was terminated without cause. Ms. Nahum mitigated her loss by actively looking for a job only two (2) months after she gave birth. She did not secure any employment at the time of the trial.

The parties agreed that there was no enforceable termination provision in Ms. Nahum’s employment contract. The Plaintiff argued that she was entitled to eight (8) months’ notice, while the Defendant argued that a two (2) month notice is generous.

Analysis

1. Bardal Factors

Employees are generally entitled to common law reasonable notice or pay in lieu when they are terminated by the employer without cause, if there is no valid or enforceable termination provisions in the employment contract that limit their entitlement to the statutory minimums.

The assessment of common law notice period is case-specific. The Court fully considered the core factors established in the case of Bardal v. Globe & Mail Ltd, 24 D.L.R. (2d) 140 (Ont. H.C.) in calculating the length of reasonable notice, namely

Character of the Employment;
Length of Service;
Age of Employee;
Availability of Similar Employment Having Regard to the Employee’s Experience, Training, and Qualifications

The Court noted that the character of Ms. Nahum’s position was that of mid-level management.

Her service with the Defendant was short. Since she was twenty-eight (28) years old at termination, it would not pose as an impediment for her to obtain similar positions. The Court also concluded that Ms. Nahum had the education and skills required for many available positions but the market was competitive.

2. Pregnancy, an Important Factor in Measuring the Reasonable Notice Period

The Court has also considered the additional factor pregnancy in determining the length of the reasonable notice period in this fact pattern.

The Court reviewed case law on this point. It noted that in Harris v. Yorkville Sound Ltd., 2005 CanLII 46394 (Ont, S.C.), the judge did not require evidence to find that pregnancy does not enhance immediate employability. It also noted that in Ivens v. Automodular Assemblies Inc., [2002] O.J. No. 3129, 162 O.A.C. 124 (Div.Ct.), the appellate court found that pregnancy complications are a “Bardal-type” factor that should be considered in determining the length of reasonable notice.

The Court did not agree with the Defendant’s submission that it is problematic to find that pregnant people are less likely to find employment. The Court noted that an employer may have an immediate need for someone in the role, thus making it unappealing if a new employee will shortly require a lengthy leave and may not meet bona fide needs of the organization (para. 43). The Court stated that a person’s pregnancy is likely to increase the amount of time for them to find new employment and it does not need evidence to reach such conclusion. The Court emphasized that it is open to it to take judicial notice that pregnant people face additional challenges when looking for work (para 46).

However, the Court also emphasized that pregnancy does not always impede a job search. It should be assessed on a case-to-case basis. If a person’s pregnancy at the time of dismissal is reasonably likely to negatively impact their ability to find alternative employment, this should factor into the determination of the reasonable notice period.

Decision

In this fact pattern, the Court ruled that pregnancy should factor into the calculation of Ms. Nahum’s reasonable notice period. Given that Ms. Nahum was terminated when she was five (5) months pregnant, it would be impossible for her to find alternative employment in the two (2) month period proposed by the Defendant. The Court awarded a five months’ notice.

If you are experiencing any issues in connection to your employment due to pregnancy, Top Toronto employment lawyer, Stacey ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

The Obligation To Notify: Enforcebility Of Harsh And Oppressive Terms In The Employment Contract

by Stacey R. Ball| May 18, 2021August 10, 2023 | General

In the decision of Battiston v. Microsoft Canada Inc., 2020 ONSC 4286, the Ontario Superior Court of Justice ruled that the termination provisions in the Stock Award Agreement were unenforceable because the employer failed to draw these provisions to the employee’s attention. Consequently, the Court awarded the employee damages in lieu of stock awards that would vest during the reasonable notice period.

Facts

Mr. Battiston worked with the Defendant for nearly twenty-three (23) years before he was terminated without cause. Mr. Battiston Apart from his base salary, Mr. Battistion received cash bonus and stock awards that collectively accounted for approximately thirty (30) percent of his compensation.

For the stock awards, Mr. Battiston received an email link that directed him to a website to complete an online acceptance process. Mr. Battiston was required to click acceptance of the stock plan, which indicates that he had read, understood and accepted the Stock Award Agreement and the accompanying documents. Mr. Battistion confirmed that he received such emails each year. He simply clicked acceptance without reading the Agreement given the length of it.

The employer took a position that the termination provisions in the Stock Awards agreement were enforceable, and thus he was not entitled to the awarded but unvested stock awards upon his termination. In response, Mr. Battiston sued his employer for wrongful dismissal and claimed that he was entitled to the damages arising from the failure to vest shares over the reasonable notice period.

Decision

The Court noted that there is no dispute that the stock awards were an integral part of Mr. Battiston’s compensation package, thus triggering a common law entitlement to damages in lieu of stock awards.

The Court determined that Stock Award Agreement unambiguously displaces Mr. Battiston’s right to unvested stock awards upon termination without cause. However, the termination provisions were unenforceable as they were not drawn to Mr. Battiston’s attention by his employer. Relying upon the contract law principle and a number of case law, the Court noted that “reasonable measures must be taken to draw harsh and oppressive terms to the attention of the other party” (para. 36). The termination provisions in the Agreement were harsh and oppressive. The email communication that accompanied the notice of the stock award did not amount to reasonable measures to draw the termination provisions to Mr. Battiston’s attention. Therefore, the termination provisions of the Stock Award Agreement were unenforceable. Mr. Battiston was entitled to the damages in lieu of stock awards that would vest over the reasonable notice period.

Takeaway

This case serves as a reminder that employers should adopt reasonable measures to highlight harsh and oppressive terms in the employment contract and bring them to the employees’ attention. It appears that by sending employees an email notification where a click of acceptance is required, employers are doing far from enough. Employers could summarize those terms in a memorandum or in an email that attaches the agreement and require employees to sign an acknowledgment letter in which the employee acknowledges having received and read the terms in the agreement. It is advisable for employers to consult a lawyer when drafting termination provisions in the employment contract.

It is also strongly recommended for employees to consult an employment lawyer before signing any settlement documents when they are terminated. If you are experiencing any employment law issues in regard to your termination, Top Toronto employment lawyer, Stacey ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Unenforcable Termination For Cause Provision Can Render Entire Termination Provision Invalid

by Stacey R. Ball| May 17, 2021August 10, 2023 | General

In 2020, the Ontario Court of Appeal held in Waksdale v Swegon North America Inc., 2020 ONCA 391 that if anywhere in the termination provision of an employment contract fails to abide by the minimum standards set out the Employment Standards Act, 2000 (ESA), the entire termination provision will be invalid. In January 2021, the Supreme Court denied leave to appeal this decision.

Facts

The plaintiff employee, Mr. Waksdale, sued his former employer Swegon North America Inc., for wrongful dismissal. After working at the defendant corporation for eight months, Mr. Waksdale was terminated without cause. He sued for six-months pay in lieu of reasonable notice. The Ontario Superior Court of Justice dismissed the plaintiff’s action, which was subsequently overruled by the Court of Appeal.

Mr. Waksdale’s employment contract had a “Termination Without Cause” provision and a “Termination for Cause” provision respectively. The “Termination Without Cause” provided that if the employee’s employment is terminated without cause, he shall receive one week notice or pay in lieu of such notice in addition to the minimum notice or pay in lieu of such notice and statutory severance pay as may be required under the ESA. However, the employer conceded that the “Termination for Cause” provision violated ESA, but the exact language of this clause was cited by neither the Court of Appeal nor the Superior Court.

Both parties were in consensus that the “Termination Without Cause” provision was compliant with the ESA while the “Termination for Cause” provision was not and thus unenforceable. Mr. Waksdale took the position that the entire termination clause in his employment contract was void because it was an attempt to contract out of the minimum standards of the ESA.

Decision

The issue to be examined is whether the illegality of the “Termination for Cause” provision rendered the “Termination Without Cause” provision unenforceable. The Court of Appeal started with the principles on interpretation of termination clauses set out in Wood v Fred Deeley Imports Ltd., 2017 ONCA 158, that 1) as the ESA’s legislative intention is to protect employee interest, courts shall interpret it in a manner that encourages employers to comply with its minimum requirements, and 2) termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA.

In light of these principles, the Court held that “[a]n employment agreement must be interpreted as a whole and not on a piecemeal basis”. The termination provisions shall be read as a whole, and if any part violates the ESA, they all become invalid. The Court further elaborated that “it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked”.

Furthermore, the employer attempted to invoke a severability clause in the employment contract which stated that if any part of the contract is found to be invalid, illegal or enforceable, all remaining covenants, terms, conditions and provisions shall be considered severable and shall remain in full force and effect. The Court found this clause inapplicable in the case in question, pointing out that a severability clause cannot have any effect on clauses of a contract that have been made void by statute.

Key Takeways For Employers And Employees

For employers, the impact of this decision is significant. If the termination provisions in the employment contract fail to comply with ESA standards at any point, it may render the entire termination provisions unenforceable, and it cannot be saved by a severability clause. Therefore, it is advisable to review the employment contracts with a lawyer to see if there are valid and legally enforceable termination provisions in place, which can limit their employees’ termination and severance pay to the Employment Standards Act minimums.

For employees, this case provides more clarity in terms of ascertaining their rights upon wrongful termination and challenging termination provisions in employment contracts. It will be helpful for an employee to consult a lawyer to examine whether the employment contract is valid and enforceable and discover what their lawful entitlements will be upon termination.

If you are experiencing any issues in connection to the termination provisions in your employment contract, Top Toronto employment lawyer, Stacey ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.