First, the good news: This article is not about Ontario’s Bill 148 or
Now, the bad news: This is the fourth article I have written for this
publication within the last year and a half about the uncertainty and lack of
predictability in drafting and interpreting termination without cause
provisions in employment contracts. This is due to seemingly conflicting (or
hard-to-decipher) decisions from the Court of Appeal for Ontario over that time.
My view then was that, while there was still uncertainty, the courts
were now squarely on the employee’s side (and employers at least knew where
they stood). I believed then, in those halcyon days of last autumn, that we
actually (or at least temporarily) knew the following “rules”:
Courts will heavily scrutinize
termination clauses in a manner that favours employees.
If a termination clause has the
potential to violate Ontario’s Employment Standards Act, 2000, then it is
If any part of a termination clause
violates the ESA, the entire clause is illegal and a severability provision
will not save it.
So far, this is pretty powerful stuff, simple and predictable at the
I then added two caveats:
A pristinely worded termination clause
may be worthless in the end through an employer’s own actions and omissions due
to a failure of consideration (and, I will add here: typos, missing pages,
improperly signed documents and those for which no legal advice was sought or
it may be safer for employers to use
fewer words than less and avoid all-inclusive language (like that found in Wood and North) due to Roden, a 2005 Court of Appeal decision.
Despite rule number 5 above, I always considered the Roden decision to be something of an
outlier that would simply fade away over time.
I was naïve.
In January, the Court of Appeal released its decision in Nemeth v. Hatch Ltd. Applying Roden, the following
sparsely worded termination clause was deemed not to offend the ESA but at the
same time displaced the common law:
“The Company’s policy with
respect to termination is that employment may be terminated by either party
with notice in writing. The notice period shall amount to one week per year of
service with a minimum of four weeks or the notice required by the applicable
Respectfully, in my view, the above clause violates rule numbers 1, 2
and 3 above. Clearly, rule number 5 (the “less is more” approach) was given
paramountcy since there is no “all-inclusive” provision.
However, applying Wood (and
rule number 1), the court (with two panel members who heard the North appeal) at least awarded the
employee his 19 weeks of notice (one year for every year worked) instead of the
lower ESA minimums.
Yet, the employee did not receive his potentially higher common law
Now, I am not simply pro-employee or pro-employer. I am a lawyer for
both sides. I am a mediator and I am an employer. I am also pro-predictability
(despite the fact I know it is difficult to attain), which is why I am having
trouble accepting the reasoning in Nemeth.
It does not make sense to me how an employee can be expected to have contracted
out of their inherent common law rights (and perhaps even agreed to something
far less) without language that somehow suggests that is precisely what is
Also, if “less is more” in this case, then another panel of the court
may reach the opposite conclusion in another case. Accordingly, it may be time
for the Supreme Court of Canada to weigh in on this matter of national
importance (since each province has its own version of Ontario’s ESA).
Don’t get me wrong. I like to write articles (and draft, argue and
mediate disputes over contractual provisions), but I am concerned about the
effects of the constantly shifting winds on employers, employees and counsel. No
one knows where they stand. There comes a point when the benefit of a legal
tool like a contract is far exceeded by the cost to society at large.
I am suggesting that we may have reached that point unless our nation’s
highest court can provide clear guidelines. It should not, and need not, be
difficult to draft a termination provision that pre-determines what an employee
receives by way of notice and severance, but it is still legally compliant (and
fair to employees who may have unequal bargaining power)and is based on clear rules
to be followed by all.
When you add rule number 4 above (the potential for
employer mistakes) into the mix, I have come to the conclusion that, without
clear, consistent rules, employment contract termination clauses may just be
offering parties a false sense of security and a potential increase in
litigation with its inherent risk, time, cost and lack of privacy and finality.
Mitchell Rose is a lawyer,
mediator and settlement counsel with Stancer Gossin Rose LLP in Toronto.