Background
In a recent decision, Bertsch v. Datastealth Inc., the Ontario Court of Appeal upheld the dismissal of a wrongful dismissal claim brought by a former executive, confirming that a termination clause limiting entitlements to the minimum standards under the Employment Standards Act, 2000 (ESA) was enforceable.
The appellant, a former vice-president earning $300,000 annually, was terminated without cause after 8.5 months and provided four weeks’ pay in lieu of notice, three weeks more than the ESA minimum. He challenged the validity of the termination clause in his contract, arguing that it violated the ESA and was therefore void, entitling him to common law notice.
For more background details and commentary regarding the original decision, please see our earlier reporting here.
The Termination Clause
The termination clause explicitly stated that the employee would receive only the ESA minimum entitlements, regardless of cause, and included a “failsafe” clause ensuring compliance with the ESA.
The relevant provisions provided as follows:
5. Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the [ESA] and its Regulations… including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.
You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
…
11.(a) If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owning (sic) under the [ESA] …you shall instead receive your minimum entitlements under the [ESA]…
(h) This Agreement constitutes the complete understanding between you and the Company with respect to your employment, and no statement, representation, warranty or covenant have been made by you or the Company with respect to this Agreement except as expressly set forth herein. The parties have expressly contemplated whether there are any additional implied duties owed by the Company to you, at common law or otherwise, outside the written terms of the Agreement or under statute and confirm that there are no such obligations. This Agreement shall not be altered, modified, amended or terminated unless evidenced in writing by the Company.”
The Superior Court’s Decision
The Ontario Superior Court of Justice found in favour of the employer. The Court found that the impugned termination clause complied with the ESA and was therefore legal. The Court further found that the language in the clause was sufficiently clear and unambiguous, despite the protestations of the plaintiff to the contrary. In so finding, this decision set itself apart from many that had come before it, where an employer’s attempts to limit an employee’s entitlements upon termination had not been upheld.
The Court of Appeal’s Decision
The appellant argued that the language in the termination clause, reproduced in relevant part above, was ambiguous and could mislead an average employee into thinking they could be terminated for cause without pay for reasons falling short of “wilful misconduct,” contrary to ESA protections.
The Court rejected this argument, finding no ambiguity in the contract. It emphasized that the clause clearly provided for ESA minimums on termination “with or without cause,” and that any misinterpretation by a layperson does not render an otherwise unambiguous clause invalid. The Court confirmed that a reasonable interpretation is what governs enforceability.
The appeal was dismissed with costs of $10,000 awarded to the employer.
Conclusion
This decision demonstrates that properly drafted termination clauses, which clearly limit termination entitlements to ESA minimums and do not contravene the statute, may be upheld, even if they exclude common law notice.
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