Case Commentary – Is This a Valid Termination Clause?

A contract of employment should include a valid termination clause, setting out an employee’s entitlement to notice of termination. In many cases, an employer will use language that limits an employee’s entitlements to the minimum required under the Employment Standards Act, 2000 (“ESA”). However, if the agreement does not explicitly set out these entitlements, the provision can be unenforceable on the grounds that it is an attempt to “contract out” of the ESA and the employer may be liable to pay out more than the ESA minimum entitlements.

Oudin v. Centre Francophone de Toronto

In 2016, the Ontario Court of Appeal upheld the lower court’s decision in Oudin v. Centre Francophone de Toronto (“Oudin”). This case arose after the plaintiff challenged the termination provisions of his employment agreement. The Superior Court determined that the employment agreement’s provision with respect to termination and notice was valid. In his reasons, Justice Dunphy interpreted the agreement as a whole and relied significantly upon the presence of a curative clause later in the agreement. This clause was interpreted in such a way as to modify any invalid provisions to align with the ESA requirements.

This decision represents something of a departure from prior decisions on similar issues. It may be a signal that the courts are moving towards a less technical interpretation of employment contracts, and rather focusing on the intention of the parties when the contract was signed. If no intention to “contract out” of the ESA can be imputed to the parties, then it may be that a court will not find relevant provisions invalid on otherwise technical grounds.

On February 2, 2017, the Supreme Court of Canada upheld both lower courts’ decisions and dismissed, with costs, an application for leave to appeal these decisions to Canada’s highest court.

Is this termination clause valid?

Since the initial decision was released, our Employment Law team has been receiving a lot of questions about whether a given termination clause is valid. Unfortunately, Oudin does not provide much clarity. Subsequent decisions, including the recent findings in Wood v. Fred Deeley Imports Ltd., indicate that the specific language used in a termination clause is central to an analysis of its validity.

Kitchener Waterloo employment lawyers advising on termination clauses

Regardless of whether Oudin is a sign of changes to come, the fact remains that termination clauses are subject to a highly nuanced interpretation when they are challenged. An employer that seeks to limit entitlements to ESA minimums should consult with a knowledgeable employment lawyer.

If you have questions about your employment agreement, your termination clause or your rights under the ESA, our experienced employment lawyers can provide straightforward advice.

Duncan Linton’s Employment Law Team regularly advises on contract drafting, interpretation, and termination disputes. Contact us online, or call 519-886-3340 to make an appointment.