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Posts tagged: Termination Clauses

Top 10 Employment Law Developments in 2017

By , December 4, 2017 1:43 pm

In 2017, the provincial legislature and Ontario judges continued to change Ontario’s employment laws. These changes resulted in higher payroll costs and a more regulated workplace. This blog briefly identifies 10 employment law developments from the past year.

1.Changes to the Employment Standards Act. Many changes were made to this law in November. Most of these changes take effect on January 1, 2018 which doesn’t give employers much time to change existing practices and policies. We offer a fixed fee service for employers who need help complying with these changes.

2.Ministry of Labour inspectors are visiting more Ontario workplaces. In the past, most inspections were the result of an employee complaint. Now the MOL is getting more proactive. For the last several years, the MOL has initiated strategic inspection blitzes. In 2017 the MOL announced it is hiring 175 additional ESA enforcement officers. This means your organization is much more likely to be inspected for compliance with Ontario’s employment laws including the many changes to the ESA that take effect January 1, 2018.

3. Accommodating employees with mental disabilities may be the fastest growing area of human rights law.  We recently devoted ⅓ of our employment law conference to this topic. It seems as if more and more employees are debilitated by depression and anxiety, and often an employee’s interaction with their supervisor triggers a mental disability. It is a complex area fraught with legal uncertainty. The duty to inquire about a person’s health when there are objective signs that the person may have a mental disability is one such issue.

4. Damages for employee terminations are going up. In the past, the sole issue in most wrongful dismissal cases was how much pay the employer owes the employee in lieu of the notice of termination that the employee should have received.  Now employees routinely seek several kinds of additional damages. A 2017 decision considered the termination of a 44-year-old female supervisor with 9 years’ service shortly after filing a sexual harassment complaint. The trial judge awarded her 10 months pay in lieu of reasonable notice, $ 60 000 in moral damages because of the way she was terminated, $ 25 000 for the way the employer handled her human rights complaint,  interest, and about $ 425 000 in legal fees. The Court of Appeal increased the damage award. In another case, a trial judge awarded a terminated employee, among other damages,  $ 100 000 for the intentional infliction of mental stress and the tort of harassment which I believe was recognized as a legal cause of action in the employment context for the first time.  

5. Termination clauses in employment contracts continue to be successfully attacked. We have written several blogs on this issue. Some judges are refusing to enforce termination clauses whereas others do, so there is considerable legal uncertainty in this area. I’m hoping the Supreme Court of Canada will provide some guidance in this area. In the meantime, we suggest that employment contracts be reviewed periodically – especially termination clauses.We provide this service for a fixed fee

6. Changes to AODA. The Employment Standards under the Accessibility for Ontarians with Disabilities Act came into effect for all employers in 2017. Did you know this law imposes 9 new obligations  on all employees, and 2 additional obligations on organizations with more than 50 employees? Also, did you know that organizations with more than 20 employees must file a report with the government by December 31, 2017? We offer a fixed fee service  for employers who need help complying with these obligations.

7. Sexual harassment. The Harvey Weinstein story shone a light on this issue – again. Changes to Ontario’s health and safety law in late 2016 amended the definition of “workplace harassment” to include sexual harassment. Employees now have the right to have complaints investigated by a trained person, and be told the outcome of the investigation and whether the alleged harasser was disciplined. We offer a fixed fee service for employers who have not complied with the new obligations imposed on employers including the obligation to implement a written workplace harassment investigation procedure.

8. Pregnancy and parental leave extended to 18 months. The federal government and provincial government have amended laws to make this happen. As written about in our blog, now employees can take 12 months EI benefits over an 18 month period. 

9. Drug testing. The federal government plans to regulate the sale of marijuana and it won’t be limited to people who need it for medical purposes. Recently some judges have found that drug testing is permitted in certain circumstances. I predict that more and more employers will be implementing drug and alcohol policies in 2018.

10. Employee bonuses. Is an employee entitled to the bonus they would have earned if they had received notice of termination? This often turns on how to  interpret the term “actively employed”. The Alberta Court of Appeal and Ontario Court of Appeal seem to be taking a different approach to this issue. Accordingly, it looks like the Supreme Court of Canada will have to decide this issue. In the meantime, we suggest that bonus clauses in employment contracts be updated.

For 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm. 

Court of Appeal Gives Clarity to Termination Clauses

By , March 3, 2017 9:43 am

As we have written in the past, the enforceability of termination clauses is a hotly contested area of employment law. Employers who draft proper termination clauses in employment contracts can significantly limit their liability when terminating employees.

A termination clause that is poorly written will not be enforced by a court. If the clause is not enforceable, then the employee is usually entitled to a longer notice period (or more termination pay). This is why employee counsel often attack the enforceability of a termination clause.

A recent decision by the Ontario Court of Appeal (“OCA”) has found that a termination clause was not enforceable and as a result, the employer was ordered to pay the terminated employee almost double the termination pay she would have received under the termination clause.

Minimum Standards for Notice of Termination, Benefit Continuation & Severance Pay

Under Ontario’s Employment Standards Act, 2000 any employee with 3 months’ service is entitled to up to 8 weeks’ notice of termination and the employer is required to continue employee benefits during this notice period. In addition, if the employee has been employed for 5 years and the employer’s payroll is over $ 2.5M, then the employee is also entitled to one week severance pay for each year of service up to 26 weeks.

Wood v Fred Deeley Imports Ltd.

In this case, the Employer terminated an 8-year Employee after it sold its assets to Harley-Davidson. The Employer provided the Employee 13 weeks’ working notice, where it paid her salary and benefits. After the working notice, the Employer provided the Employee with  8 weeks’ termination pay. The Employer took the position that the 13 weeks’ notice and 8 weeks’ termination pay was what it owed the Employee pursuant to her termination clause.

Termination Clause

In this case the termination clause stated: “[The Company] is entitled to terminate your employment at any time without cause by providing you with 2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph…. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000.”

Initial Decision     

The judge found that this termination clause was enforceable. Despite not expressly mentioning that the Employer would continue contributing to the Employee’s benefit plans, the judge found that it was enforceable as it provided more than the minimum payment under the ESA. The judge also noted that the Employer continued its benefit contributions throughout the notice period. The Employee appealed this finding to the OCA.

OCA Decision

The OCA overturned the motion judge, finding that the termination clause was unenforceable because it did not provide for benefit plan continuation.

The termination clause said nothing about benefit contributions, and the following language specifically excluded benefit contributions: “the Company shall not be obliged to make any payments to you other than those provided for in this paragraph”, and “the payments and notice provided for in this paragraph are inclusive of your entitlement to notice, pay in lieu of notice and severance pay pursuant to the [ESA].”

The Employer argued that even though benefit continuation was not stated in the termination clause, the word “pay” included both salary and benefits. The OCA disagreed and found that the word “pay” was ambiguous, as it clearly does not include both salary and benefits. Where the language is unclear, courts will interpret it in favour of the employee.

Although the above finding was enough to find the termination clause unenforceable, the OCA went one step further by finding that the failure to comply with the severance pay obligation under the ESA also rendered it unenforceable.

The termination clause was worded in such a way that the Employer could deprive her of severance pay. By stating that she would receive two weeks notice of termination per year of service, it was not clear whether the notice was for termination or severance pay, which are two separate obligations. Because the termination clause did not clearly satisfy the Employer’s obligation to pay the Employee her statutory severance pay, the clause was found unenforceable.

Because the termination clause was unenforceable, the Employer was ordered to pay the Employee 9 months’ in lieu of reasonable notice, instead of the 21 weeks (~5 months) the Employer originally provided to the Employee. Because the termination clause was not enforceable, the Employer had to pay the Employee almost twice the amount owed under the termination clause, plus legal costs. This is the cost of a legally unenforceable termination clause.

Lesson To Be Learned

Employers can drastically limit their termination pay obligations to employees by including a legally enforceable termination clause in an employment contract. Although the case law is still unsettled, this recent decision by Ontario’s highest court should put employers on notice that termination clauses must, at a minimum, comply with all ESA obligations. Employers should consult an employment lawyer to determine whether their termination clause is enforceable.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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