Employment contracts are complicated documents. They need to be just right. Any mistake, however small, could potentially be catastrophic. Entering the wrong words, even so much as two, can have serious consequences. In Lamontagne v. J.L. Richards Associates Ltd., 2021 ONSC 2133, a recent Ontario decision, this is exactly what happened. At issue in this case was the enforceability of a termination provision.
Ms. Lamontagne was the employee in this case. She was a 36 year old, bilingual, well-educated chartered accountant who worked for J.L. Richards Associates for just over six years. Ms. Lamontagne oversaw a staff of eight, was responsible for the employer’s accounting and reported directly to a vice-president. Clearly, her position was a rather important one. That did not prevent her employer from terminating her, admittedly without cause. The employer relied on the termination clause provided in her employment contract to justify paying her only the bare minimum statutory requirement under the Employment Standards Act as compensation. But, was this termination clause enforceable? If not, Ms. Lamontagne would be entitled to common law notice, an amount potentially much higher than that provided by the Employment Standards Act.
The Termination Provision – Interpreting Employment Contracts
The termination provision included the following: “Employment may be terminated for cause at any time, without notice.” The enforceability of this clause depends in part on its wording. This is what makes the language in employment contracts so vital.
Employment contracts are interpreted differently than commercial contracts due to the importance work has in a person’s life. The Supreme Court of Canada has noted in the past that work is fundamental to a person’s life, essential to their self-worth and identity. It is worthy of vigorous protection. There is no time an employee is in greater need of protection than at the time of termination. This is why the Employment Standards Act establishes minimum protections. Employment contracts cannot provide less than those minimum protections. Employment contracts may only provide greater benefits than those provided in the Employment Standards Act. If just one part of a termination clause is contrary to the Employment Standards Act, the entire termination clause is unenforceable. Again, the importance of language is plain to see.
The question that must be asked is this: Does the termination clause found in Ms. Lamontagne’s contract comply with the Employment Standards Act?
“For Cause” – Contrary to the Employment Standards Act
Ultimately, the termination clause was found invalid as being contrary to the Employment Standards Act, and therefore unenforceable. The reason for this is simple. Employers cannot contract out of their obligations under the Employment Standards Act.
The Employment Standards Act provides employees who have been continuously employed for three or more months with entitlement to either written notice of termination or compensation equal to the amount they would have received during the notice period. However, employees who are guilty of willful misconduct, disobedience or willful neglect of duty are not entitled to either notice of termination or termination pay.
The termination clause in Ms. Lamontagne’s employment contract failed to comply with the Employment Standards Act because it required only “cause” to terminate her without notice or compensation. “Cause” is a common law standard which is actually lower than the standard of “willful misconduct”; required by the Employment Standards Act. Recall that employment contracts can only provide greater benefits than those required by the Employment Standards Act – never less. By implementing this lower standard, the employer illegally contracted out of the Employment Standards Act. The entire termination clause was therefore invalid, and Ms. Lamontagne was entitled to common law reasonable notice – in this case, ten months’ pay (a far greater number than the six weeks pay required by the Employment Standards Act).
In the end, this was a costly mistake for the employer, but a good lesson for the rest of us: be very careful with the words you place in an employment contract.