Earlier this year, the Ontario Court of Appeal (“OCA”) in Waksdale v Swegon North America Inc. struck down a termination clause. This was not groundbreaking as this court has struck down a number of termination clauses in recent years.
In the Waksdale case, the employer conceded that the “with cause” termination provision was not enforceable, and the OCA concluded that because this provision was not enforceable, then the entire termination clause was unenforceable.
Many employment lawyers have argued Waksdale is distinguishable from their cases because the lawyer does not agree that the “with cause” termination provision is not enforceable.
Now comes the Sewell v Provincial Fruit Co. Limited, 2020 ONSC 4406 decision, which is a trial decision.
One of the provisions of the termination clause under review read as follows:
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.
With respect to this provision, the judge wrote:
… I find that the “Termination for Just Cause” provision of the contract was illegal insofar as it contracted around the ESA requirement to provide notice except in cases where an employee engaged in “willful misconduct.” Based on the Court of Appeal’s reasoning, I must read the contract as a whole and set it aside if one or more of the terms are illegal, even if the offending term is not at issue in the instant case.
If Sewell is good law, then my guess is that many (if not most) of the termination clauses in Ontario are no longer legally enforceable.
The employer in Waksdale has sought leave to appeal to the Supreme Court of Canada (“SCC”).
I do not know whether the Sewell decision has been appealed. If so and the OCA upholds this decision and the SCC denies leave in the Wakesdale case, then employee side lawyers in Ontario will no doubt ask for more termination pay because of the increased litigation risk that a termination clause will be struck down by an Ontario court.
If there was ever a time for the SCC to clarify the law of the enforceability of ESA termination clauses, now is that time.
Doug MacLeod, MacLeod Law Firm
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I have always wondered if there is an issue with the “no further obligations” or “no further action” part of these clauses. Does this not imply that the dismissed employee is being asked to waive their right to legal action if they believe themselves to have been wrongly dismissed? Did the judge in this decision give us any clue as to what element of the clause he considered to be not legal? I’m wondering if we are focusing on the “with cause” element when the issue could be elsewhere.