On June 22, 2018, the Ontario Court of Appeal issued a decision in Amberber v IBM Canada Ltd (“Amberber”), a case involving a dispute regarding the enforceability of a termination clause in an employment contract. In Amberber, the Court of Appeal overturned the lower court’s decision that the termination clause in question was ambiguous and should therefore be construed against the employer.
The Court of Appeal reviewed the following principles that apply with respect to interpreting employment agreements:
- Where there is a genuine ambiguity, the contract is interpreted in favour of the employee.
- While the intention to exclude damages at common law must be clear, no particular wording is required to achieve that result.
- A contract must be interpreted as a whole and not on a piecemeal basis.
The Court of Appeal held that the motion judge had erred because, among other things, she did not interpret the termination clause as a whole.
The Court of Appeal also considered a “failsafe” provision in the termination clause, which stated that the employer would provide the employee with his entitlements under employment standards legislation if such entitlements were superior to those granted under the contract. The Court of Appeal found that the failsafe provision operated to ensure that, if any portion of the termination clause fell short of complying with Employment Standards Act (“ESA”) minimums, the termination clause would be “read up” to comply with the ESA.
Based on the foregoing, the Court of Appeal allowed the appeal and concluded that the employee’s entitlements were limited to those set out in the termination clause.
Jan 8, 2018:
In Nemeth v Hatch Ltd, the Ontario Court of Appeal holds that no specific phrase or particular wording is required to rebut the common law presumption of “reasonable notice”.
Amberber joins a considerable body of caselaw addressing the enforceability of termination clauses in employment contracts.
Whether the language of a termination clause is sufficient to rebut the common law presumption of “reasonable notice” is a frequently litigated issue. The profusion of Ontario Court decisions addressing this subject has resulted in uncertainty regarding the proper construction of an enforceable termination clause. Nevertheless, the following general recommendations emerge from the Court of Appeal’s decision in Amberber and other relevant cases:
- Simplicity is a virtue. The language of a termination clause should be clear and easy to understand when read as a whole.
- Language that expressly or impliedly excludes ESA obligations should be removed or revised.
- It is generally advantageous to include a “failsafe” provision to ensure compliance with the ESA.
For advice specific to your situation, consider contacting your regular lawyer at Rae Christen Jeffries LLP.