Termination provisions in employment contracts
As an employee, by law, you are entitled to reasonable notice of termination of your employment. Employers however, often attempt to limit your legal entitlements by explicitly defining your rights upon termination in the employment contract. In the recent case of Singh v Qualified Metal Fabricators Ltd. an Ontario Court adopted an employee–friendly interpretation of these termination provisions, resolving the potential ambiguities in favour of the employee. While employers are allowed to contractually limit employees’ common–law reasonable notice requirements, they are required to do so with complete precision.
In this case, an employee was terminated after 4 years of employment without cause. The employee received 4 weeks’ pay in lieu of notice in accordance with his employment agreement, and subsequently brought a wrongful dismissal action claiming that he was entitled to reasonable notice under the common law, and not merely additional pay as stipulated in the employment agreement.
The Ontario Court ruled in the employee’s favour and awarded additional common law entitlements. The Court ruled that the termination clause in the employee’s agreement was ambiguous in regards to whether it limited the employee’s common law rights, as the clause did not explicitly rule out common law notice. In doing so, the Court in essence found that the ambiguity in the contract should be construed against the employer in order to protect employee rights. The Court also construed the contract against the employer on the issue of whether the contract complied with the minimum notice requirements set out by the Employment Standards Act.
The decision, while fairly technical, is important from the standpoint of protecting employee rights, as the Court continued to impose a high standard on employers seeking to limit an employee’s common law entitlements. In order to do so, employers are required to be precise and unambiguous, and the Courts will continue to interpret such provisions favourably towards the employees if the employer has failed to do so.
 2016 CarswellOnt 8795, 267 ACWS (3d) 867
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