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Ontario Court of Appeal suggest deference to trial judge in interpretation of termination clause

TerminationThe Ontario Court of Appeal weighed in, to some extent, on the hot issue of enforceability of termination clauses in the recent decision of Oudin v. Centre Fancophone de Toronto, 2016 ONCA 514. This was an appeal of a motion for summary judgement.

As you know, there are a lot of cases which have held the failure to reference severance pay or benefits or other entitlements prescribed by the Employment Standards Act (“ESA”) render a termination clause void.

In this case, the clause at issue was written in French. The Applicant argued that the Motion Judge’s interpretation of the clause only referred to “notice” and not “severance” and therefore the termination clause was an unlawful attempt to contract out of the ESA because it did not expressly provide for the payment of severance and there are a number of cases suggesting such clauses are void. The Respondent argued that the error of the judge had no significance because the intent of the parties was to be bound by the minimums prescribed by the ESA, irrespective of whether or not they were expressly referenced.

The Court of Appeal took an extremely “deferential” approach to the Motion Judge’s reasoning and agreed with the Respondent and held:

The motion judge’s decision was based on his interpretation of a contract. He considered the circumstances of parties, the words of the agreement as a whole and the legal obligations between the parties. He concluded at paragraph 54:

Contracts are to be interpreted in their context and I can find no basis to interpret this employment agreement in a way that neither party reasonably expected it would be interpreted when they entered into it. There was no intent to contract out of the ESA in fact; to the contrary, the intent to apply the ESA is manifest.

I’m not sure the Court of Appeal arrived at the correct decision. The Court of Appeal chose to follow the principle of deference to the lower court rather than truly examine the enforceability of the clause based on a whole hose of other decisions. There are still a number of decision that have held a failure to reference statutory severance pay renders a termination clause void and these decisions should continue to have precedential value.

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Simon Heath, BA, MIR, LLB, Heath Law

Employment Lawyer and principal at Heath Law, Employment Lawyers
Simon Heath, BA, MIR, LLB, is the Principal of Heath Law, Employment Lawyers in Mississauga, Ontario. Simon represents both public and private-sector employers and employees (unionized and non-unionized) at all stages of the employment relationship with a focus in the areas of employment law, labour law and human rights law; these representations are made at all levels of courts and all administrative tribunals. Read more
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