Given the significant percentage of
void termination clauses, employers are advised to have their termination clauses reviewed by an experienced employment lawyer.
The number of employers who provide their employees with employment contracts containing
void termination clauses is amazing.
In this instance, an important question is whether the unilateral change by the employer to the employment contract
voids the termination clause.
Not exact matches
In particular, the wording describing the employee's entitlements upon
termination must not allow for alternate interpretations since such ambiguities will likely be resolved in the employee's favour or render the
clause void.
Nemeth argued that the motion judge had erred in finding that the contract excluded the right to claim common law reasonable notice, and that the
termination clause was
void, as it purported to contract out of the minimum statutory entitlement to severance pay.
It is an error in law to merely
void the offending portion and leave the rest of the
termination clause to be enforced.»
The court rejected this argument, stating that «where a
termination clause contracts out of one employment standard, the court is to find the entire
termination clause to be
void, in accordance with s. 5 (1) of the ESA.
Accordingly, the
termination clause was
void and unenforceable.
Where a
termination clause calls for pay in lieu of notice, but does not provide for the payment of benefits during the notice period, the entire
clause is
void as contrary to the Employment Standards Act, 2000.
If a
termination clause contracts out of an employment standard, the entire
termination clause must be found
void, resulting in reasonable notice.
As a result of section 5 (1), ESA, the Court of Appeal stated that where the
termination clause contains «even one» violation of the ESA, the entire
termination clause would be considered
void and thus, unenforceable.
I would estimate in Ontario that 30 % of the
termination clauses in employment contracts are
void.
The Court rejected this argument indicating that it is an error in law to merely
void the offending portion and leave the rest of the
termination clause to be enforced.
This effectively rendered both the Agreement's
termination and severability
clause null and
void and ultimately, entitled the employee to a much more weighty notice period payment.
The Court held that the
termination clause did not provide less than the minimum entitlement under the ESA on the basis that it did not expressly exclude the ESA entitlement to severance pay, and that it therefore was not
void because of the failure to expressly address severance pay.
If a
termination clause could breach the Employment Standards Act, 2000 (the «ESA») at some point in the future, the
clause is
void and unenforceable even if the dismissed employee receives all necessary entitlements under the ESA at the time of
termination.
The employee argued that, if the
termination clause was not
void, he was entitled to 19 weeks» notice.
Is the
termination clause void because it contracts out of the ESA by not mentioning severance pay?
However, the Court of Appeal disagreed, on the basis that if a
termination clause could breach the ESA at some point in the employment relationship, the
clause is
void and unenforceable even if the employee has in fact received all of her entitlements given when
termination of her employment happened.
If the
termination clause is
void the dismissed employee will be entitled to reasonable notice of dismissal.
Justice Glithero found that the
termination clause breached the ESA writing «[b] oth Machtinger at para. 26 and s. 5 (1) of the ESA make any provisions that attempt to contract out of minimum employment standards, by providing for lesser benefits than those legislated as minimums, «null and
void»».
A
Termination Clause that Provides a Notice Period that is Less than the Minimum Provided By the Employment Standards Act is
Void
The
termination clause was found to be unlawful and therefore
void because the words «any amounts paid» could be read as failing to provide for the continuation of the plaintiff's benefits during the plaintiff's statutory (ESA) notice period.
The British Columbia Court of Appeal held in Shore v Ladner Downs15 that a
termination clause in an employment contract that potentially violated the statutory requirement in the future is «
void from the beginning».
In the 2016 decision Garreton v Complete Innovations Inc. 18 Pattillo J. stated that he disagreed with Price J.'s decision in Keegan and held that a
termination clause that potentially violates the ESA in the future is
void.
In Bellini v. Ausenco Engineering Alberta Inc. 4 the court found the following
termination clause, although not
void, did not rebut the presumption of reasonable notice of dismissal:
One of the latest decisions to find that a
termination clause is
void is Miller v. A.B.M. Canada Inc., 2014 ONSC 4062.
As a result, the
termination clause was
void and unenforceable.
In Stevens v. Sifton Properties Ltd. 10 the Court found that a
termination clause that does not provided for a continuation of an employee's benefits as required by the ESA was
void even though the
termination clause complied with the statutory minimums regarding payment of wages.
Accordingly, the court found that the
termination clause in Miller's employment contract failed to comply with the Employment Standards Act, 2000 and was, therefore, null and
void for all purposes.
In addition, employers who have avoided putting PILON
clauses in their contracts so that they have the flexibility of making tax free
termination payments should be warned that there is now no tax advantage to not having a
clause, and in fact, by making a payment in lieu of notice where there is no entitlement in the contract has the effect of rendering any restrictive covenants
void.
Musoni should have claimed the contract and
termination clause was
void because it was contrary to the Employment Standards Act.
Doorey, who calls the case «a head - scratcher,» points out that in Wright v. Young & Rubicam the court ruled a notice of
termination clause in an employment contract that could conceivably leave an employee with less notice than the ESA requires at some point in the future is
void and the longer period of reasonable notice is then required.