Saving provisions are widely used in employment agreements to ensure that even if a decision-maker finds that some aspect of some clause is not enforceable due to the fact that it could possibly, maybe, one day, maybe, sorta violate the Employment Standards Act (ESA), the saving provision will communicate to that judge that this was not the employer’s intention to do so.
A saving provision did not work for the employer in the recent case of Groves v. UTS Consultants Inc., 2019 ONSC 5605. The contract, in this case, violated a few parts of the ESA and the contract’s saving provision did not do its job of saving!
ESA violations in Mr. Groves’ contract
First off, this case involved the sale of a business. The purchasing company contracted Mr. Groves, the founder and president of the selling company, to have him continue on with the purchasing company as an employee. Mr. Groves’ employment contract with the purchasing company contained a clause that attempted to waive his years of service with the selling company in the event of a termination from the purchasing company. The court ruled that this provision violated section 9(1) and 65(2) of the ESA, regarding the length of service in the event of the sale of a business and length of service for the purposes of determining entitlement to severance entitlements.
The court also found that the contract violated section 60 of the ESA because it stated that pay in lieu of notice would be calculated on “base salary only.” Section 60 of the ESA requires that the employer cannot reduce wages or alter any other term or condition during the employee’s notice period. Basing pay in lieu of notice on “base salary only” excludes variable compensation, as well as vacation pay or pension contributions.
Not saved by the saving provision
The court considered the following saving provision in Mr. Groves’ contract:
Notwithstanding the foregoing, the Company guarantees that the amounts payable upon termination, without cause, shall not be less than that required under the notice and severance provisions of the Employment Standards Act.
Previously courts have “read up” termination provisions that did not comply with the ESA where the contract also contained a saving provision that communicated the employer’s intention to comply with the ESA.
In the case of Mr. Groves’ contract, the court declined to do so, stating instead that the employer had sought to contract out of the ESA and that saving provision could not be used to “rewrite the express language in an agreement to cause it to comply.”
Mr. Groves was offered 13 weeks of notice on termination by the purchaser. The court awarded him 24 months!
This decision draws attention to the need to have extremely carefully crafted employment contracts in order to create certainty around entitlements on termination. Saving provisions will not reliably save poorly drafted provisions.
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