Many employers prepare written employment agreements that limit employee entitlements on termination of employment. In the absence of an enforceable termination provision, employees are entitled to notice of termination at common law, or pay in lieu thereof.
The case law in Ontario has changed considerably in the past few years regarding what constitutes a valid termination provision. One decision at the forefront of these developments is Stevens v Sifton Properties Ltd. In this case, the plaintiff argued that the termination provisions in their employment contract violated the Ontario Employment Standards Act, 2000 (“ESA”).
The employment contract provided that the employee would receive notice of termination or pay in lieu of notice and/or severance pay in accordance with the ESA. It also provided this would be in satisfaction of all claims and demands against the employer.
The employee argued that because the contract did not provide for benefits continuation during the notice period, it violated the ESA and rendered the termination provision unenforceable.
The court agreed. The contract limited the employee’s entitlements to notice of termination and severance. It provided that the employee would not receive any further entitlements arising out of statute or common law. Even though the employer had indeed provided the employee with benefits during the ESA period, the court held the contract was void. As such, the language in the agreement at issue is distinguishable from contracts which provide only that ESA minimums will apply but don’t have a catch-all limiting provision.
What is next?
This decision has prompted many employers to revisit the language in their employment contract termination provisions. Since the Sifton Properties case, employment contracts that limit employee entitlements to notice of termination and severance pay, without taking into account other ESA entitlements may be deemed void by a court.
- The ground-rules for drafting non-competition and non-solicitation agreements
- How to craft enforceable agreements, and
- Practical strategies for implementing agreements upon termination of employment (for employees who don’t have agreements yet).
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