As we have written before, termination clauses may have a significant effect on how much money you receive if you are terminated. If you are fired because of a business decision and not misconduct, it is the without cause termination clause that determines how much additional compensation you will receive.
Many termination clauses attempt to limit the termination and severance pay an employee will receive. Throughout the past few years, we have seen several decisions from Ontario judges decide that termination clauses are not enforceable. The courts often order the employer to pay more to the employee because the termination clause was poorly drafted.
This trend continues.
Earlier this year, the Ontario Court of Appeal (“OCA”) in Waksdale v Swegon North America Inc. struck down another termination clause. This case was unique, however. The employer conceded that the “with cause” termination provision was not enforceable and the Court of Appeal concluded that because this provision was not enforceable then the entire termination clause was unenforceable. This included the section about without terminations. The Waksdale decision now allows many more employees to bring claims that their employment contracts are not enforceable and that they are owed more pay after being fired.
Some lawyers have tried to argue that Waksdale does not apply to their case because they do not admit that the with cause termination clause is unenforceable.
The Ontario courts have made that argument much more difficult with a new decision following Waksdale.
In Sewell v. Provincial Fruit Co. Limited, the with cause termination clause was similar to what many employees have in their current contracts:
b) Termination by the Company for Just Cause
The Company is entitled to terminate your employment at any time and without any notice or any further compensation for just cause and the Company will not have any further obligations to you whether at contract, under statute, at common law or otherwise.
The court held that this with cause termination clause violated the Employment Standards Act, and concluded that based on the Waksdale decision, the court must set aside the entire contract including the without cause termination clause. The employee then received $30,000 more than the minimum termination and severance pay that he otherwise would have under his employment contract.
Lessons for Employees
The case highlights how important it is for employees to get legal advice after a termination. The arguments are becoming very technical and expertise is required. The difference between the minimum termination and severance pay under the ESA and what an employee might receive at common law could be significant.
If you have been terminated and your employer is relying on your employment contract to limit how much they pay you, you should consult a lawyer. You can contact Barrie and Toronto Employment Lawyer Nicole Simes at MacLeod Law Firm via [email protected] or 647-204-8107.
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