12 May 2021
by Filion Wakely Thorup Angeletti LLP
Filion Wakely Thorup Angeletti LLP
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Bottom Line
The Ontario Superior Court of Justice held that anemployer's failure to abide by the very termination provisionit drafted amounted to a repudiation of the employment contract.Furthermore, following the reasoning set out in the Ontario Courtof Appeal's recent decision in Waksdale v Swegon NorthAmerica, 2020 ONCA 391 ("Waksdale"), theCourt determined that the termination provision was void fornon-compliance with the Employment Standards Act, 2000("ESA") in any event. As a result, the employerwas unable to rely on the termination provision to limit itsliability, and was ordered to pay common law reasonable noticedamages.
Background
The Plaintiff's employment with the Defendant employer wassubject to a written employment contract. The contract providedthat, in the event that Plaintiff was terminated from heremployment without just cause, the Employer would provide thePlaintiff with her minimum statutory entitlements under theESA plus an additional two weeks of notice, or pay in lieuthereof.
The Plaintiff was terminated from her employment without cause.The Employer provided the Plaintiff her minimum statutoryentitlements under the ESA, but refused to provide her theadditional two weeks of pay unless the Plaintiff agreed to executea full and final release and indemnity.
Although the Employer later apologized to the Plaintiff and paidher the additional two weeks of pay, the Plaintiff argued that theDefendant's initial refusal to pay such amount constituted arepudiation of the contract, and the Defendant therefore could notrely on the contract to limit the Plaintiff's entitlements tocommon law reasonable notice of termination.
The Plaintiff also relied on the Ontario Court of Appeal'sdecision in Waksdale to argue that the termination forcause provision was unenforceable and, as such, the without causeprovision was also unenforceable.
The Termination Provisions
The Termination provision in the Plaintiff's contractstated:
Termination Without Cause - we may terminateyour employment in our sole discretion, without cause, by providingyou with two weeks of notice or pay in lieu of notice (or somecombination thereof), plus the minimum notice or [ay in lieu ofnotice (or some combination thereof) and severance pay (if any)then required by the ESA. Rand will also continue yourBenefits to the extent and for the minimum period required by theESA.
Termination With Cause - We may terminate youremployment for just cause at any time without notice, pay in lieuof notice, severance pay, or other liability, subject to theESA. For the purposes of this Agreement, "justcause" means just cause as that term is understood under thecommon law and includes, but is not limited to: [list of elevencategories of just cause].
Three of the eleven categories of just cause listed in thecontract included:
- a material breach of the agreement, or the Employer'semployment policies;
- unacceptable performance standards; and
- repeated unwarranted lateness, absenteeism or failure to reportto work.The Defendant's Conduct Constituted Repudiation of theEmployment Contract
The Court noted that repudiation of an employment contractoccurs when the words or conduct of one party, in this case theemployer, demonstrate an intention to no longer be bound by theterms of a contract.
The Court specifically highlighted that the employer'srequest that the Plaintiff sign a release in exchange for receivingtwo weeks of wages was not a casual request, nor an accidentalslip. The termination letter referenced a requirement that thePlaintiff sign the release as a condition to payment four separatetimes. The release itself was also expansive. The release not onlyprecluded the Plaintiff from making further claim against theDefendant, but also included various other substantive termsincluding an indemnity provision, a consent to injunctive relief inthe event of a breach, a non-disparagement provision, and aconfidentiality clause. The Court found that it would have takenthe Defendant time and purpose to prepare both the terminationletter and the release.
Further, after the Plaintiff initially challenged theemployer's requirement that she sign the release, the employerreiterated its position. Taken together, the Court held that areasonable person assessing the Employer's conduct wouldconclude that the employer no longer intended to be bound by theemployment contract, and found the Defendant's conduct amountedto repudiation.
It is also important to note that the Court found the contracthad been repudiated even in light of the employer's subsequentconduct and its attempt to remedy the breach. The Defendant'sapology to the Plaintiff and rescission of the requirement to signthe release did not cure its repudiation of the contract.
The Termination Provision Was Unenforceable
Even if the employer had not repudiated the employment contract,the Plaintiff likely would have been entitled to common lawreasonable notice damages. Following the Ontario Court ofAppeal's recent decision in Waksdale, the Court foundthat the Termination With Cause provision was unenforceable, as itattempted to contract out of the Plaintiff's ESAentitlements. This had the effect of rendering the TerminationWithout Cause provision unenforceable as well.
Specifically, the Court found that the Termination With Causeprovision was ambiguous. The Court suggested that the firstsentence indicated the Employer would comply with the ESA,and the Plaintiff's employment could be terminated at any timewithout notice or pay in lieu of notice or severance pay if thePlaintiff engaged in conduct that rose to the level of wilfulmisconduct, disobedience or wilful neglect of duty that was nottrivial and not condoned by the Employer. However, the inclusion ofthe second sentence, and the list of eleven categories of justcause, flew in the face of compliance with the ESA becauseseveral of those categories could not be classified as wilfulmisconduct, disobedience, or wilful neglect of duty.
In light of the ambiguity, the Court found that the TerminationWith Cause provision amounted to an unlawful attempt to contractout of the Plaintiff's minimum entitlements under theESA and, as such, was unenforceable.
Check the Box
For employers, this case highlights the importance of abiding bythe terms of their own employment agreements. Employers who fail todo so may be found liable to provide common law reasonable noticedamages, even where the termination provision would otherwise havebeen enforceable.
This case also serves as another reminder to employers that anyambiguity in their employment agreements will be read in theemployee's favour. In this case, the inclusion of an enumeratedlist of offending conduct in the termination provision, some ofwhich could not be appropriately characterized as wilfulmisconduct, disobedience or wilful neglect of duty, is whatultimately led to the clause being deemed unenforceable. Whereemployers wish to itemize what conduct will and will not betolerated in the workplace, it may be preferable to include theseexpectations in a policy document rather than an employmentagreement.
Date: March 22, 2021
Forum: Ontario Superior Court of Justice
Citation: Perretta v Rand A Technology Corporation,2021 ONSC 2111
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
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FAQs
Is termination without cause legal Canada? ›
In Ontario, an employer can fire an employee without cause at any time, through no fault of the employee. This means an employee does not have to do something wrong to be dismissed. However, employers can only terminate employees without cause by providing them advanced notice and/or severance pay.
What happens if employer breaks contract Canada? ›If an employer breaches your contract you can either waive the breach, in which case the contract will continue as normal, or you can sue for breach of contract, provided there are financial losses flowing from that breach.
Are termination clauses enforceable? ›Termination clauses in employment agreements may be unenforceable if an employee's role has expanded significantly over time. To prevent this outcome employers should ensure their agreements anticipate job changes, and they should confirm the continued application of agreements as changes occur.
What is the common law termination in Canada? ›Under this legislation, if an employee has completed three consecutive months of continuous employment, you are required to give at least two weeks' written notice of your intention to terminate them. In lieu of written notice, you must pay two weeks' wages at the regular rate to the employee.
What qualifies as wrongful termination Canada? ›Where an employee believes that there was no justification for the termination, he or she may file an unjust dismissal complaint with any Labour Program office. Then it is the employer's responsibility to demonstrate that the termination actually was for valid economic reasons.
Do you need a reason to terminate an employee Canada? ›In Canada, an employer can fire employees at any time, for any reason. The Canadian legislation defines Termination With Cause as “when an employee is dismissed for a serious reason related to the employee's conduct,” where Termination Without Cause is termination for reasons that are not related to misconduct.
Can you sue your employer in Canada? ›You can sue an employer for the following reasons:
Illegal termination. Deducting pay. Discrimination. Workplace harassment.
Equitable remedies for breach of employment contract may include contract reformation, specific performance of the terms, or rescission. Importantly, if the breach of contract claim arose from an employee's termination, a court would expect the employee to mitigate their damages by seeking other employment.
Are employment contracts legally binding in Canada? ›Are employment contracts legally binding in Canada? To be legally binding, an employment contract must be formed by offer, acceptance and consideration. To be enforceable, the contract must fulfill the essential elements of a binding contract at common law, and must not contravene any applicable legislation.
How do I terminate a contract with no termination provision? ›In summary, any party is entitled to terminate a contract, even if their contract does not have a termination clause. But reasonable notice must be given, and if there is a dispute, the reasonableness of that notice will be the subject of court review.
How can a termination clause be invalid? ›
If a court determines that another clause in the employment contract that addresses termination for non-compliance is unenforceable, it may render the entire employment contract invalid.
What is the effect of the termination provision? ›The Effect of Termination clause makes it clear that the rights and obligations of each party end immediately on termination, and details certain new obligations the parties have in wrapping-up the agreement.
Does common law apply in Canada? ›Sponsoring your spouse or common-law partner who lives with you in Canada. You can apply under the Spouse or Common-Law Partner in Canada class if your spouse or common-law partner cohabits (lives) with you in Canada.
What do you say when terminating an employee in Canada? ›Explain the reason for the termination
Explain that you're terminating their position and discuss the reasons. Give as many details as you can by mentioning specific reasons, and also try to keep your explanation concise to give the employee a chance to talk.
“just cause” – termination without notice or pay in lieu of notice; the onus of proof is on the employer to show on a balance of probabilities that an employee breached an employment contract in a fundamental way or has committed misconduct that has irreparably damaged the employment relationship.
What is the statute of limitations for wrongful termination in Canada? ›In Ontario, there is a general two year limitation period that applies for most civil claims that could result in a Court action. Exceptions abound (such as those pursuant to the Libel and Slander Act) but the general two year period is the most common limitation period.
What is an example of wrongful dismissal in Canada? ›A wrongful dismissal occurs when an employer either: (i) terminates an employee without cause but fails to provide the employee with sufficient notice of dismissal; or (ii) terminates an employee for cause without providing any notice of dismissal in circumstances when the employer did not have just cause to dismiss ...
How do I file a complaint against an employer in Canada? ›Labour Standards
For information regarding employment standards and/or for assistance in filing a complaint please call 1-800-641-4049 or email NA-ERO-GD@labour-travail.gc.ca. For information on filing a complaint, consult the Filing a complaint web page.
Yes. Because California is an “at-will” employment state, your employer can fire you at any time, for any reason, without warning. Likewise, you can quit your job at any time you wish. Even with “at-will” employment laws, your employer cannot fire you for a discriminatory reason.
Does termination affect future employment in Canada? ›Potential Damage to Reputation: Being terminated with cause can impact an individual's professional reputation. Employers may disclose the reasons for termination when providing employment references, which can affect future career prospects.
Can an employer force you to quit in Canada? ›
Pressured to quit by an employer: Resigning from a position has to be a voluntary act and the employee has to come to the decision on their own. Forced firing or 'quiet firing' is illegal and is considered to be a termination.
What is the average payout for wrongful termination in Canada? ›What is the average settlement for a wrongful termination claim? Every case is unique. Generally, however, workers who succeed in a wrongful termination case tend to receive an amount of compensation between $5,000 and $100,000. There are numerous factors that can impact the amount of damages suffered by the worker.
Can I sue my employer for negligence in Canada? ›In general, the more severe the injury, the more likely the employee will be able to bring a successful claim against the employer. However, even if an employee has suffered a minor injury, they may still be able to sue the employer if the employer's negligence or misconduct caused the injury.
How much does it cost to sue a company in Canada? ›According to recent surveys of Canadian lawyers, it can cost upwards of $10,000—$25,000 to take a lawsuit through the traditional litigation process and a trial. Small claims actions cost considerably less and often involve little more than a small filing fee and another fee to serve documents on the opposing side.
What invalidates an employment contract? ›Illegal Terms
Any illegal term in an employment contract is automatically void. For example, in California, non-compete clauses are void on their face because the state has made them illegal by statute. Any other clause that asks an employee to agree to something made illegal by state or federal law is also void.
Within contract law, promissory estoppel refers to the doctrine that a party may recover on the basis of a promise made when the party's reliance on that promise was reasonable, and the party attempting to recover detrimentally relied on the promise.
What is breach of contract for termination? ›A breach of contract exists when one or both parties do not fulfill the obligations of the contract. Termination for cause clauses can be highly specific or vague depending on the industry, ordinary course of performance, and nature of the contract.
What is required for breach of contract in Canada? ›- the existence of a valid contract;
- a breach of that contract; and.
- damages flowing as a consequence of that breach.
Generally, a contract is binding when the following is true: the parties intend to make a contract. there is an offer and an acceptance. the parties receive something in return for their promises.
How enforceable are employment contracts? ›Yes, employment contracts are legally binding.
An employment contract can also include clauses such as non-disclosure and non-compete agreements, trade secret provisions, and details about termination. As a legally binding document, a party who breaches the agreement may face consequences.
What is an example of termination provision? ›
Examples of a termination clause
Either party will have the right to terminate the contract by giving written notice to the other party at least 3 months before the end of the initial period of the contract or at least 30 days at any point after the end of the initial period.
- Termination of contract for breach.
- Termination of contract by performance.
- Termination of contract by agreement.
- Termination of contract by frustration or force majeure.
Either party may terminate this Agreement if a party materially breaches its obligations under this Agreement, and such breach is not cured within thirty (30) days after delivery of the non-breaching party's notice or such longer time as the non-breaching party may specify in the notice.
What are two circumstances under which a contract might be rendered invalid? ›One of the parties to which the agreement relates doesn't have legal capacity (is mentally incapable of entering into a legally binding agreement). One of the parties was coerced (undue influence) or manipulated (misrepresentation) into signing the contract.
How might exclusion clauses be found to be unenforceable? ›Exclusion clauses will not be enforceable if they are unfair. Additionally, penalties may apply if unfair contract terms are included in an agreement.
What are the two main types of termination clauses? ›There are two basic types of termination: 1) termination for cause, otherwise known as termination for default; and 2) termination for convenience. A party's right to terminate its contract may originate from the general principles of contract law or it may arise out of the terms of the contract itself.
What was the main reason that the termination policy failed? ›One reason that termination failed was that the Menominee no longer received federal funds to finance basic services. Money the government gave to Indian tribes was not a form of welfare.
What is the effect if a provision of a contract is illegal? ›The illegality itself must relate to the contract, whether it be what is included in the contract or how the contract was entered into. If a court determines that the contract is illegal, it will no longer exist. Thus, it becomes void or unenforceable.
What provisions usually survive termination? ›Clauses that survive termination include obligations around breach of contract disputes, substantive procedures, or secondary obligations. Other rights may survive termination as well, including a right to damages and contract performance.
Does US recognize Canadian common-law? ›U.S. visa law does not recognize common-law relationships; therefore a partner or fiancée is not eligible to apply for derivative visa status.
What is an example of common-law in Canada? ›
As defined in Ontario's Family Law Act, a couple is considered to be in a common law relationship in Ontario after living together for at least three continuous years. If they have a child together by birth or adoption, they only need to have been living together for one year.
Is common-law the same as case law in Canada? ›Case law comes from all levels of courts in Canada. In the common law in Canada, judges must follow the principle of stare decisis, which requires that judges follow the previous rulings (i.e. precedents) of other judges in higher courts in their province or territory and the Supreme Court of Canada on the same issue.
What are the grounds for termination in Canada? ›In Canada, an employer can fire employees at any time, for any reason. The Canadian legislation defines Termination With Cause as “when an employee is dismissed for a serious reason related to the employee's conduct,” where Termination Without Cause is termination for reasons that are not related to misconduct.
What are the 7 steps that concerns HR in terminating employees? ›- Documenting Termination Processes. ...
- Recording Incidents. ...
- Attempting to Reconcile After Suspension or Termination. ...
- Analyzing Relevant State Laws. ...
- Avoiding Discrimination/Wrongful Termination. ...
- Officially Terminating Employment.
Ask your employer why you've been fired
Legally speaking, your employer doesn't need to give you a reason for firing you — unless you're fired for just cause.
- sexual or other harassment.
- needing to move with a spouse or dependent child to another place of residence.
- discrimination.
- working conditions that endanger your health or safety.
- having to provide care for a child or another member of your immediate family.
This will surprise many, but in Canada, most employees can be dismissed at any time, for almost any reason. However, unless there is just cause for dismissal, notice or pay in lieu is required.
Are no cause termination clauses legal? ›If the employer wants to be able to end and employee's time with their company without cause, the employee will need to agree to that. With a no-fault termination clause, the employer is usually only required to give the employee a set number of dates notice of their termination and a written notice of the action.
What is Canadian termination for cause? ›An employer that fires an employee for just cause must be able to show that the employee's conduct was of such a degree that it was no longer compatible with ongoing employment. The key is that the sanction imposed (termination) must be proportional to the misconduct in question.
What is an example of termination without cause in Ontario? ›Often, the employee has not done anything wrong. Examples of termination without cause include being terminated for poor work performance, because of the employer's finances, or because of a lack of “fit” with the workplace community.
What happens if there is no termination clause? ›
When there is no termination clause in an employee contract, it means an indefinite contract of employment is in place, but a termination is still an option with reasonable notice given.
What is the difference between termination with cause and without cause? ›Being fired without cause means an employee is being let go, but not because of any serious workplace misconduct. Conversely, being fired with cause means the employee committed a serious breach of conduct in their workplace, which led to their termination.
What are the types of dismissal in Canada? ›- Termination of employment.
- Notice of termination.
- Temporary layoff.
- Group termination.
- Severance pay.
- Unjust dismissal.