Canadian Lawyer InHouse

13 CANAdIANLAwyERMAG.COM/INhOUSE october 2014 Hendrik Nieuwland and todd Weisberg Workplace Solutions A question of benefits courts continue to take narrow approach on enforceability of standard termination clauses. I n the August 2013 edition of this magazine, we wrote about the decision in Stevens v. Sif- ton Property Ltd., where the court concluded the termination clause in question provided the plaintiff with less than her minimum em- ployment standards entitlements because the clause did not expressly state that benefits would be pro- vided over the notice period. Our view was that Ste- vens took an overly narrow and impractical view of standard form termination clauses, which typically only provides "notice or payment in lieu of notice." Specifically, we noted that the term "notice" meant "working notice," therefore the phrase "payment in lieu of notice" implicitly included a promise to provide benefits. However, in the two years since the Stevens decision, courts have either not had this argument brought to their attention, or have disre- garded it by accepting the Stevens approach. A review of the two most recent decisions, Paquette v. Quadraspec Inc., and Miller v. A.B.M. Canada Inc., suggests that a termination clause that does not spe- cifically reference benefits will not be enforceable regardless of any qualifying language. The termination clause in Quadraspec, drafted in French, loosely translates as follows: The employer may terminate the employee's employ- ment for any reason upon written notice of two weeks per completed year of service, up to a maximum of six months. The termination clause in Miller states: Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be re- quired by applicable legislation. (emphasis added) Citing Stevens, the court found in both cases that the termination clause was unenforceable as a result of the failure to mention benefits. Neither decision dealt with whether using the term "notice" implic- itly included the provision of benefits, as described above. Accordingly, this valid argument remains to be made in a future case. However, the way the courts have embraced the Stevens decision thus far suggests such an argument is unlikely to succeed without an appeal to the Ontario Court of Appeal. Out of the two decisions, Miller is particularly in- teresting for two reasons. First, in Miller the court focused on the meaning of "salary" found in the ter- mination clause. The court determined the defini- tion of salary in that particular contract did not in- clude benefits and failed to comply with minimum employment standards. So, like Stevens, the court in Miller appeared to require a termination clause to ex- plicitly mention benefits in order to be enforceable. The Miller decision is also interesting as it failed to deal with the "saving" language found at the end of the termination clause, which stated that a ter- minated employee would receive such entitlements "as may otherwise be required by applicable legis- lation." In our view, such language is broad enough to encompass the payment of benefits in addition to salary. However, the court in Miller ignored this lan- guage entirely in finding the termination clause was unenforceable. The failure to address this "saving" language shows the court's readiness to strike down termination clauses that try to limit terminated em- ployees' entitlements to the statutory minimums. Following the decisions in Miller and Quadraspec, it more prudent than ever for in-house counsel to re- examine the language found in termination clauses to ensure explicit reference to benefits is made, re- gardless of any additional "saving" language that could be said to encompass the payment of benefits. In addition to the issue of termination clauses, the Quadraspec decision is important due to its analysis regarding entitlement to severance pay. Historically, the $2.5-million payroll threshold to severance en- titlement was based on a company's payroll within Ontario. The court in Quadraspec disregarded this approach and looked to the defendant's Canada-wide payroll to find the plaintiff was entitled to severance pay. In our view, this analysis is wrong as it amounts to the application of legislation outside Ontario's ju- risdiction. However, absent an appeal or subsequent decisions by the Ministry of Labour, Quadraspec has created uncertainty for certain employers. Until this matter has been revisited, in-house counsel at compa- nies with payrolls of less than $2.5 million in Ontario but more than $2.5 million across Canada will have tough decisions to make whether or not they provide severance pay to departing employees. IH Hendrik Nieuwland and Todd Weisberg practise employment law with the firm Shields O'Donnell MacKillop LLP of Toronto.

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