It is well known that employment contracts of an indefinite period (i.e., not fixed term contracts) give rise to a duty wherein employers must give reasonable notice, or pay in lieu of such notice, to employees whose employment is being terminated without cause. The Employment Standards Act, 2000 provides the absolute minimum period of notice required by such a duty. Reasonable notice under common law, however, can and typically does greatly exceed the statutory minimum requirements, such that a person who may only be entitled to 4 weeks’ notice under the ESA may find themselves entitled to 4 months’ notice at common law.

Obviously, employers will want to avoid having to pay common law reasonable notice if they can. Luckily for them, as the following case demonstrates, all that is required is some carefully crafted contractual language.

Vienneau v. Joy Global (Canada) Ltd.: The Employment Contract

This case concerned the without cause termination of Mr. Vienneau, a 50-year-old employee who had been working with the defendant for over five years. When he was terminated, he was paid only four weeks’ salary in lieu of notice. This, he believed, was too little, and so he commenced an action against his former employer seeking damages as payment in lieu of reasonable notice.

Mr. Vienneau, unfortunately, encountered one major obstacle: his employment contract. Although the contract’s termination clause must be read and understood in its entirety, the following sentence is of particular note:

“… Specifically, you understand and agree that your acceptance of this Employment Agreement limits your ability to claim any further damages for termination pay, termination notice, severance pay, payment in lieu of reasonable notice, or any other damages, other than as provided for in this Employment Agreement and that you are giving up any right to claim reasonable notice under common law. …” (emphasis added).

Does the above clause therefore displace the common law presumption of reasonable notice or pay in lieu thereof? Is. Mr. Vienneau consequently limited to his statutory entitlements under the ESA?

Displacing Common Law Reasonable Notice

In Machtinger v. HOJ Industries Ltd., the Supreme Court of Canada acknowledged that:

“ … Absent considerations of unconscionability, an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the Act or otherwise take into account later changes to the Act or to the employees’ notice entitlement under the Act.  Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice. …” (emphasis added).

It is clear that an employment contract can specify terms that displace common law reasonable notice, provided that the employment contract is otherwise legally enforceable.

In Mr. Vienneau’s case, the trial judge felt it would be “nonsensical” for Mr. Vienneau to believe he was entitled to common law reasonable notice given that the termination clause clearly states he would be giving up “any right to claim reasonable notice under common law.”

As a result, it was the trial judge’s view that the termination clause converted the “floor” of the ESA‘s minimum notice period into a “ceiling”, such that nothing could be awarded in addition to the statutory minimum notice. This case can serve as a lesson to employers about how they can protect themselves through their contracts in the event they must terminate an employee without cause. It can also serve as a warning to employees to read their employment contracts carefully, and to have a lawyer review the contract to ensure they are best protected in the event they lose their job.