Recent case law has overwhelmingly rejected termination clauses that purport to limit an employee’s entitlements upon termination to the minimum notice required by applicable employment standards legislation. In Ontario, provisions that have failed to reference severance pay and/or benefit continuation have been found to be invalid, resulting in common law notice that far exceeds the intended contractual entitlement. The 2015 Ontario Superior Court of Justice decision in Oudin v. Le Centre Francophone de Toronto, 2015 ONSC 6494, diverged from that case law and, this summer, was upheld by the Ontario Court of Appeal, 2016 ONCA 514.
The employer, a nonprofit organization that published a directory of cultural, educational, professional, and business resources for the francophone community in Toronto, hired the employee as project manager for the publication.
After almost 13 years of service, the employee’s employment was terminated on a without-cause basis when the publication was discontinued. The employee’s employment agreement, written in French, included a termination provision that purported to displace the employee’s entitlement to common law reasonable notice.
Pursuant to the employment agreement, the employee was provided with termination and severance pay in accordance with the Ontario Employment Standards Act (ESA), and his benefits were maintained beyond the statutory notice period.
While the employer offered additional sums above and beyond the employee’s contractual or statutory entitlements in exchange for a release, the employee refused to sign the release. Instead, he initiated a wrongful dismissal action.
On a motion for summary judgment, the employee argued that the termination clause was void because it violated the ESA.
The judge translated the termination clause from French to English and found that the employee’s entitlement in the event of a without-cause termination was the greater of 15 days’ notice or “the minimum” prescribed by the ESA.
The employee contended that the reference to the 15 days’ notice – a shorter period than he was entitled to at law by the date on which he signed the employment agreement – was at least ambiguous if not a disguised and invalid attempt to contract out of the ESA. This rendered the termination clause void and entitled him to common law reasonable notice, the employee argued.
The judge was not persuaded. He found that the parties intended that the greater period of time would apply, in which case the employee would receive no less than the minimum entitlements prescribed by the ESA. In any event, the judge noted that the employment agreement included a clause that provided that the termination provision would be modified if any part of it was found to be invalid.
Accordingly, the judge found that the employee was not entitled to reasonable notice at common law, the parties having agreed to only the notice prescribed by the ESA.
On appeal, the employee argued that the judge had incorrectly translated the termination clause when it was translated to “the minimum” required by the statute rather than the correct translation to “the minimum notice” required.
The employer and the Court of Appeal did not disagree.
However, the Court of Appeal found that irrespective of the translation error, the judge understood that the termination clause referred to notice only, rather than all of the requirements of the ESA, such as severance pay and benefit continuation.
Ultimately, the Court of Appeal deferred to the motion judge’s interpretation that there was no intent to contract out of the ESA. The Court of Appeal found no error in his conclusion that the termination clause was enforceable despite the fact that it did not reference severance pay or benefit continuation.
Certainly, this case stands apart from the majority of the case law on the subject. Most cases find that failing to provide for severance pay and continuation of benefits in the termination provision renders the entire termination clause void. While perhaps the judge was persuaded that there was no intention to contract out of the ESA since the employer in Oudin did, in fact, comply with the ESA by paying notice, severance, and continuing the employee’s benefits, prior cases have nevertheless found that this conduct does not cure an unenforceable termination clause.
The other possibility, of course, is that this decision represents a significant change in the legal landscape with respect to the enforceability of ESA–only termination provisions.
We will continue to monitor developments in, and arising out of, this case, including whether leave to appeal this decision to the Supreme Court of Canada is sought and/or granted.