Call us for a FREE 30 minute phone consultation at 416-907-9249 or submit a callback request
It is settled law that employers must draft termination clauses that are clear and unambiguous in order to limit an employee’s entitlements upon termination to less than their common law entitlements.
In a recent case, Amberber v IBM Canada Limited, 2017 ONSC 6470 (CanLII), Justice Hebner found that the following termination clause was unenforceable since, in her view, it was vague and ambiguous:
TERMINATION OF EMPLOYMENT
If you are terminated by IBM other than for cause, IBM will provide you with notice or a separation payment in lieu of notice of termination equal to the greater of (a) one (1) month of your current annual base salary or (b) one week of your current annual base salary, for each completed six months worked from your IBM service reference date to a maximum of twelve (12) months of your annual base salary. This payment includes any and all termination notice pay, and severance payments you may be entitled to under provincial employment standards legislation and Common Law. Any separation payment will be subject to applicable statutory deductions. In addition, you will be entitled to benefit continuation for the minimum notice period under applicable provincial employment standard legislation. In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment.
The above termination clause can be divided into two sections. The first section provides a formula for the employee’s entitlements on termination – the greater of either a) one month of annual base salary or b) one week of annual base salary for each completed six months of service. For ease of reference, I will refer to the first part of the termination clause as the “first section”. The “second section” of the termination clause provides that in the event the employee’s entitlements under the applicable employment standards legislation are greater than those afforded to him or her under the “first section”, that the employee shall receive their statutory entitlements.
In her decision, Justice Hebner found that the termination clause did not rebut the presumption that employees are entitled to reasonable common law notice. In particular, Justice Hebner reasoned as follows:
1)The first section of the termination clause is modified by the following language: “this payment includes any and all termination notice pay, and severance payments you may be entitled to under provincial employment standards legislation and Common Law”. Accordingly, if the first section governs the employee’s entitlements on termination, the employee is only entitled to the amounts provided for in the clause and nothing more.
2)It is not clear, however, that the “second section” is also modified by the language used to modify the first section, and accordingly, it is ambiguous whether an employee whose entitlements on termination would be determined in accordance with the second section, would be limited to only their statutory entitlements.
3)As a result of the ambiguity, the termination clause is unenforceable and the employee is entitled to reasonable common law notice.
The decision in Amberber stands a stark reminder that employers must be very careful when drafting termination clauses. Any ambiguity in a termination clause will be resolved in the employee’s favour.
Moreover, the decision in Amberber is also in accordance with recent decisions out of the Ontario courts confirming that to the extent a termination clause allows for any potential violations of Employment Standards legislation or are vague and ambiguous, the clause will be struck and the employee will be entitled to reasonable common law notice (See for example Wood v Fred Deeley Importd Ltd, 2017 ONCA 158, North v Metaswitch Networks Corporation, 2017 ONCA 790 and Noguiera v Second Cup, 2017 ONSC 6315). Although North v. Metawswitch would even indicate the Court should have not found that the ‘saving provision’ was valid.
If you have been terminated and your employer is relying on a contract which governs your severance entitlements, you should speak with a lawyer. Call Monkhouse Law today for a free 30 minute phone consultation!
To arrange your free confidential 30 minute phone consultation make sure to contact us today.