Feb 24

EMPLOYMENT CONTRACTS-Limitation Clauses

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As an employment law firm, we get many clients whom have signed employment contracts which have affected what they are entitled to upon a without-cause termination.

Perhaps one of the most common aspects of those contracts is something referred to as a “limitation clause” which reduces the amount of notice an employee is entitled to upon dismissal. The clause typically goes like this:

“ABC Company may terminate your employment by providing you with only the notice of termination and severance pay that is required by the Employment Standards Act, 2000.”

Often when an employee is signing their contract, they don’t pay attention to such aspects, being untrained in the legal field. Or, they read such a clause and view it as a good thing, thinking “Great, I am getting what I’m legally entitled to.”

The Law

While someone not well-versed in law or Employment Law in particular may not be familiar with the guidelines surrounding such clauses, the ‘minimum standards’ set by the Employment Standards Act, 2000 (“ESA”) are just that- the minimum. The ESA sets out the minimums in order to ensure that employees are not taken advantage of.

Unless they contractually agree to these minimums the actual notice an employee is entitled to is the common law where a judge asks how long it would reasonably take for someone to find a new job. While the minimum standard is a week for every year of service as a maximum, most employees receive at least 3-4 weeks if their matter goes to court and get reasonable notice

A clause which limits your notice period to the minimum notice which is statutorily required is actually an attempt to contract out of the ESA, as it limits benefits below that which are required by the ESA. In the case of Stevens v. Sifton Properties Ltd., 2012 ONSC 5508, Deborah Stevens, an Associate Golf Professional entered into an employment contract with Sifton Properties Limited. The employment contract stated the following could happen in the event that Deborah was terminated without cause: “The Corporation may terminate your employment without cause at any time by providing you with notice or payment in lieu of notice, and/or severance pay, in accordance with the Employment Standards Act of Ontario.”

The court found the clause to be invalid, stating at Paragraph 64 that: “The failing of the particular termination provisions in the case before me is that they attempt to “draw the circle” of employee rights and entitlements on termination with an all-encompassing specificity that results in the effective and impermissible exclusion and denial of the benefit continuation rights mandated by the legislation. That is what puts paragraph 13 offside, and requires the “termination provision package” of paragraph 13 to be regarded as null and void.”

The same principle was relied upon by the court in the previous decisions of MacDonald v. ADGA Systems International Ltd., [1999] O.J. No. 146 (C.A.), and Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986

A particularly important quote from Machtinger is “The minimum notice periods set out in such legislation therefore do not by themselves operate to displace the presumption at common law of reasonable notice.” (para. 25)

Ongoing Advice

If you are negotiating an employment contract, have signed an employment contract with a similar clause, or have been dismissed without cause, you should contact an Employment Lawyer right away.

An Employment Lawyer will be able to examine your contract and determine whether such a clause is enforceable.

Contact Monkhouse Law today for a consultation.