Federal Terminated Employees Can Prove Contract is Unenforceable

by | Mar 10, 2021 | For Employees

We often write about termination clauses and the impact that they have on terminated employees. This type of clause can change the pay a terminated employee receives by thousands, sometimes hundreds of thousands, of dollars. Often though, the legal cases fighting about the validity of termination clauses are based on provincially regulated employers. Federally regulated employers include businesses like banks, telecom, or businesses in international or cross-provincial travel.  Employees who work for federally regulated employers are governed by different legislation – the Canada Labour Code (“the Code”) instead of the Employment Standards Act in Ontario. As the legislation is different, and there are fewer federally regulated employers, there are less cases about these terminated employees and their contracts and termination clauses.

One recent case, however, gives us guidance on arguments that terminated employees can make when they have worked for a federal company.

The Case

In Sager v. TFI International Inc., the VP of Sales and Customer Care was terminated without cause after working for three years.  TFI International was the parent company to Loomis Express which is involved in inter-provincial and international shipping. Sager had previously signed an employment contract with a termination clause.  That clause stated that if terminated, he would receive:

“the greater of 3 months’ base salary or 1 month base salary per year of completed service to a maximum of 12 months.” It further said that this amount was “inclusive of any and all requirements” owed to him under the Canada Labour Code.

Sager had other forms of compensation in his position as well as base salary.  These included a car allowance, group benefits, a pension plan, and bonuses.

Sager argued that his termination clause was unenforceable because it violated the Canada Labour Code. Specifically, the Code prohibits employers from altering any term or condition of employment during the statutory notice period. Federally, under the Code, the statutory notice period is two weeks.

Sager won his case.  The Court held that his termination clause was unenforceable because it did not provide for the continuation of his benefits during the notice period.

Under the Code, if the termination clause was properly drafted, Sager would have received two weeks statutory notice and six days severance.  Instead, the court ordered his employer to pay nine months’ termination pay including the value of his pension, benefits and bonus that he would have received over that nine month period.

Lessons

The Court’s decision in Sager serves as a reminder to employees at federally regulated companies or employers that you may be entitled to more pay after a termination even if you have signed a contract with a termination clause.

If you have been terminated and would like to speak with Nicole Simes or any of our Barrie and Toronto Employment Lawyers at MacLeod Law Firm you can contact us via [email protected] or 647-204-8107.

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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