Difference between revisions of "Employment Law Issues (9:V)"

Termination Clause Does Not Meet ESA Minimums =

A contractual termination clause is not enforceable if, at any time, the clause would provide the employee with less than his entitlement under the ESA.  See ''Shore v Ladner Downs'', [1998] 160 DLR (4th) 76.

However, this principle may have been qualified with respect to severance clauses and fixed term contracts (see ''Miller v Convergys CMG Canada Limited Partnership'', 2013 BCSC 1589 (upheld on appeal); ''Rogers v Tourism British Columbia'', 2010 BCSC 1562).

In ''Waksdale v. Swegon North America Inc.'', 2020 ONCA 391, the ONCA ruled that if a section of a termination provision violated the ESA (even if distinct and separate from other sections) the entire termination provision will be void.  The court refused to apply the general severability clause on the basis that once the clause is void, there is nothing to sever.  The Court identified policy reasons for this decision, highlighting that even if an employer does not rely on an illegal termination provision, it may still gain the benefit of that illegal clause, as employees “may incorrectly believe they must behave in accordance with these unenforceable provisions.”

In ''Holm v AGAT Laboratories Ltd'', 2018 ABCA 23, the Alberta Court of Appeal looked at whether a termination clause was sufficient to limit a constructively dismissed employee’s entitlement to severance.  The termination clause provided for dismissal in accordance with the Alberta Employment Standards Code, but did not clearly state that this entitlement was a ceiling.  As a result, the clause was ambiguous, and did not act to limit the employee’s severance entitlement.   

In ''Movati Athletic ( Group) Inc v Bergeron'' ( 2018 ONSC 7258), the Ontario Divisional Court also found a termination clause that allowed the employer to terminate employment without cause at any time upon providing notice or pay in lieu of notice  pursuant to Ontario Employment Standards was also not sufficient to limit the employee’s severance, as it did not clearly state that the minimum statutory severance was a cap.  

==== General Contract Construction Rules Apply ====

Other general rules regarding contracts may also invalidate the contract, such as duress, undue influence, and unconscionability, but these occur less frequently.  

For example, unfair agreements may be set aside if they resulted from an inequality of bargaining power, on the basis of unconscionability.  The purpose is to protect those (i.e. employees) who are vulnerable in the contracting process. ''Uber Technologies Inc. v. Heller'', 2020 SCC 16, a recent SCC case, may be useful in arguing unconscionability in employment contracts, as it somewhat lowered the bar for a finding of unconscionability.   The SCC found that “although one party knowingly taking advantage of another’s vulnerability may provide strong evidence of inequality of bargaining power, it is not essential for a finding of unconscionability. Unconscionability does not require that the transaction was grossly unfair, that the imbalance of bargaining power was overwhelming, or that the stronger party intended to take advantage of a vulnerable party.”

Under certain circumstances, employers and employees cannot use the above rules to invalidate a contract for their own benefit.  If a new contract is imposed in which all the benefit is to the employee, the employee cannot have the contract invalidated for lack of fresh consideration to the employer in order to avoid a severance provision or other provision of the contract.  Additionally, the employer cannot back out of a contract that only gave benefits to the employee, due to lack of fresh consideration to the employer.