Canadian Lawyer

April 2021

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Page 42 of 51 41 over the legality of termination clauses that purport to set out payments on termination of employment, and Waksdale is the latest illus- tration of courts interpreting those clauses in a way that favours the employee "in the sense that if any part of the clause is unlawful, that clause will be struck down and the employer won't be able to rely on it," Barrett says. Underpinning that is the courts' recognition of the power imbalance between employers and employees in workplaces, he adds. In Waksdale, the Court of Appeal for Ontario found that where "an employer does not rely on an illegal termination clause, it may nonetheless gain the benefit of the illegal clause." For instance, when an employee who is not familiar with their rights signs a contract that includes unen- forceable termination for cause provisions, they may incorrectly believe that they must behave in accordance with these unenforce- able provisions in order to avoid termination for cause. If the employee strives to comply with these overreaching provisions, then their employer might benefit from them "even if the employee is eventually termi- nated without cause on terms otherwise compliant with the ESA." The main issue in Matthews v. Ocean Nutrition was whether damages for failure to provide reasonable notice included an incen- tive bonus to which the former employee would have been entitled had they been given proper notice; the Supreme Court decided that it did. The court also said that, in order to take away a right from an employee, the wording of the employment contract must "unambiguously limit or remove the employ- ee's common law rights" or rights to a benefit, Barrett says. As in Waksdale, for a court to override employees' rights, "you need to have clear and unambiguous language in order to take away those protections"; absent that, courts will adopt an interpretation that protects employees' interests, he adds. Ideally, Waksdale will result in employees KEY FINDINGS FROM OCEAN NUTRITION an employment contract must expressly, clearly and unambiguously remove an employee's common law right to a bonus or other incentive payment during any common law reasonable notice period bonuses or long-term incentive plan payouts are otherwise owed to employees who are constructively dismissed or terminated without cause from their employment and employers settling rather than litigating, "but it's conceivable that if employers try to impose even more onerous clauses that we may see more litigation." Although Ocean Nutrition gives guid- ance as to when entitlement to benefits might occur after employment is termi- nated, "unfortunately, it creates some uncer- tainty for us as well," says Caroline Spindler, a partner in Mathews Dinsdale and Clark LLP's Halifax office. This is because, although the Ontario appellate court gave guidance as to what language might not be significant to limit or prevent a payout to an employee on termina- tion, "it doesn't tell us what language would be sufficient," she says. Spindler has not yet seen a case that has been decided based on Ocean Nutrition, but she predicts "the real test" will come when Ocean Nutrition is adjudicated. "It's coming down the pike." She advises employers to "take a hard look at the language" in their employee incentive plans now and make changes as needed. Many employers may have thought that Matthews was ineligible for the payout he received as they would not have consid- ered him to be an active employee at the time he would have been eligible to receive his benefit under the company's long-term incentive plan. Employers should have their contracts regularly reviewed to ensure they are up to date, Attwell says. "Clauses that may have been enforceable a few years ago won't be now, so this recent decision [in Waksdale] means review your contracts and make it a point to do so on a regular basis." Overall, says Spindler, the Ocean Nutrition decision "highlighted the integral part of employment in one's life — and, in my view, that's [something] we're seeing courts recog- nize more and more." Courts are placing a greater onus on employers to ensure that employment terminations or limiting employee rights are "on point," she says.

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