In my last blog post, I discussed a case where an employee was awarded punitive damages because her employer engaged in malicious conduct during her termination. In this week’s blog post, I’ll delve into how much the employee was awarded for reasonable notice, despite the fact that she signed an employment contract with a termination clause.
As we have written countless times before, termination clauses can have a significant effect on how much you receive in terms of pay-in-lieu-of-notice if you are terminated. Many termination clauses aim to limit the termination and severance pay an employee will receive. Therefore, termination clauses are often litigated, and the last couple of years have been no exception.
In Hampton Securities Limited v Dean, Ms. Dean resigned after a dispute arose as to how much responsibility Ms. Dean had to bear for losses resulting from her trades (for more details on the facts leading up to Ms. Dean’s resignation, see my blog from last week). Hampton Securities sued Ms. Dean for the losses, while Ms. Dean countersued for constructive dismissal.
The termination clause in her contract stipulated: “In the event Hampton wishes to terminate your employment without cause they may do so by paying you the minimum amounts required pursuant to the Employment Standards Act of Ontario in force at the time of termination; no further compensation shall or will be provided. You agree by signing this agreement that such amounts are the total compensation you will receive if terminated without cause.”
Pursuant to the Employment Standards Act, an employee is entitled to notice of termination or pay in lieu of notice, the length of which depends on their period of employment. During the minimum notice period, an employer must continue to make whatever contributions would be required to maintain the employee’s benefits plans. Despite the clause’s assurance that the employer would pay Ms. Dean hr minimum entitlements under the Employment Standards Act, the trial judge held that the clause above was not enforceable because it excluded benefit continuation for the statutory notice period. The Ontario Court of Appeal agreed.
The trial judge then awarded Ms. Dean six months’ notice, despite the fact she had only employed Hampton Securities for 13 months. The trial judge noted that the ordinary notice period for someone in Ms. Dean’s position was three to four months. However, the trial judge extended the notice period by a further two months to compensate her for the additional time it took Ms. Dean to find employment due to Hampton Securities’ actions after her termination (read my last week’s blog for more details on Hampton Securities’ actions).
Lessons to be Learned
Given the ever-evolving nature of litigation about termination clauses, it is difficult to predict whether the courts will find an employer is entitled to rely on a termination clause to minimise its damages. If you have recently been terminated, you should speak to an employment lawyer regardless of whether there is a termination clause in your employment contract. If you would like to speak to a lawyer at MacLeod Law Firm, you can reach us at [email protected] 647-204-8107.
The Employment Standards Act the (“ESA”) contains a provision which allows for temporary lay-off. Pre Covid-19, the ESA told employers that they could lay off an employee for 13 out of 20 weeks, or 35 out of 52 weeks if the employer continues the employee’s benefits, for example.
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