Court Finds Savings Clause Cannot Save Invalid Provisions

In a recent decision of the Ontario Superior Court, Tan v. Storstac Inc., Justice Dineen awarded seven months of reasonable notice to an employee with five years of tenure. The plaintiff began working for the defendant in June 2015 as a container controller. He was soon promoted to depot manager. At the time of termination, the plaintiff earned $67,500 per year and was enrolled in the company’s benefits plan.

The Termination Clause Cannot be Saved by a Savings Clause

The plaintiff’s termination clause stated the following:

The Employer may end the employment relationship at any time without advanced notice and without pay in lieu of such notice for any just cause recognized at law.

Subsequent to the probationary period, the Employee understands and agrees that employment may be terminated at any time by the Employer providing the Employee with two (2) weeks of notice, pay in lieu of notice or a combination of both, at the Employer’s option, plus one additional week of notice (or pay in lieu) for each year of completed service to a maximum of eight (8) weeks. In addition, after completing five (5) years of continuous employment, severance pay pursuant to the Ontario Employment Standards Act, 2000 may be payable upon termination of employment in accordance with the terms of the Ontario Employment Standards Act, 2000. Upon receipt of the above notice (and severance pay if applicable) the Employee agrees that no further amounts shall be owing to him/her on account of the termination of the Employee’s employment under statute or at common law. The provisions of the Ontario Employment Standards Act, 2000, as they may from time to time be amended, are deemed to be incorporated herein and shall prevail if greater.

According to the plaintiff’s termination clause, the employer could terminate the employee without notice or pay for “any just cause”. This language allows the defendant to terminate employment without notice or payment for conduct that does not amount to non-trivial willful misconduct.

In the final sentence of the termination provision, the defendant incorporates a savings clause. Although the defendant has attempted to incorporate the Employment Standards Act, 2000 (“ESA”), this does not change the fact that the language clearly allows the employer to
terminate the plaintiff without notice for any just cause. A savings clause cannot be thrown into a termination provision to justify an illegal provision.

Due to the power imbalance between employers and employees, terminated employees are unlikely to be familiar with their statutory rights. Thus, Justice Dineen noted that courts must interpret employment agreements in a manner that ensures employers draft employment
agreements that are compliant with applicable statutes.

Reasonable Notice Period

Justice Dineen considered the plaintiff’s Bardal factors, including his age at 40 years old, the managerial nature of his position, his tenure, and the lack of comparable positions due to economic conditions.

In consideration of all these factors, Justice Dineen awarded the plaintiff seven months of base salary and benefits.

CERB Does Not Count Towards Mitigation

The duty to mitigate refers to an employee’s obligation to look for comparable positions upon termination if they are pursuing a wrongful dismissal action. The employee is attempting to mitigate their damages. If an employee finds a new position, this may limit their reasonable notice period.

However, if the employee’s new position pays less than what they made at their previous employment, the employee may still be entitled to the difference of their incomes for the reasonable notice period.

Following the plaintiff’s termination, the plaintiff searched for comparable positions and applied to over 80 jobs. He also received Canada Emergency Response Benefits (“CERB”). It was the defendant’s position that the plaintiff’s income from CERB should be considered in
mitigation calculations.

Although the plaintiff received CERB payments, Justice Dineen determined that the payments should not be deducted from any amounts awarded, affirming the decision in Gracias v. Dr. David Walt Dentistry. According to the court, CERB is not a mitigation credit.

Important Takeaway for Employees

Justice Dineen has affirmed that courts are to interpret employment agreements in a manner that considers the substantial power imbalance between employers and employees. Employees cannot be expected to be familiar with statutory rights and know how to enforce them.

Additionally, it is evident that the courts will not consider CERB in mitigation calculations. This is particularly crucial for employees who have been wrongfully dismissed and had little to no financial support during the COVID-19 pandemic.

Speak to an Employment Lawyer

If you believe you have been wrongfully terminated by your employer, you may be entitled to wrongful dismissal damages. You should consider speaking with an employment lawyer. The lawyers at Monkhouse Law have experience pursuing wrongful dismissal actions and can help
ensure you do not miss out on any of your legal entitlements.

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