In T. v. Artisan Cells, 2024 ONSC 7123, the Ontario Superior Court awarded a terminated employee nine months’ reasonable notice after finding that the employer repudiated the employment contract by withholding severance it already owed.
The employee’s contract promised three months’ notice or pay in lieu if terminated without cause. Instead, the employer paid only one week and refused to pay the balance unless the employee signed a broad full and final release. The court found that withholding severance already owed under the contract amounted to “repudiation” — a legal term meaning the employer’s conduct showed it was no longer prepared to honour the agreement.
Background
The employee worked in a senior executive role in a specialized industry for approximately 3.5 years. His compensation exceeded $450,000 annually, including salary, bonus, benefits, RRSP contributions, and other compensation.
His written employment agreement provided for three months’ notice on a without-cause termination — an amount greater than the minimum required under Ontario’s Employment Standards Act (ESA).
Upon termination, the employer:
- Paid only one week of termination pay;
- Did not provide full ESA minimum entitlements;
- Did not pay the three months required under the contract; and
- Conditioned any further payment on signing a release.
The proposed release went beyond severance and included non-disclosure, non-disparagement, and a release of “any other claims.”
Why the Court Found Repudiation
Repudiation occurs when a party’s conduct shows they no longer intend to be bound by a contract. The test is objective: would a reasonable person conclude the employer did not intend to honour the agreement?
The court found repudiation here because the employer deliberately withheld contractual severance to obtain additional protections it was not entitled to under the employment agreement. Once repudiation was established, the termination clause limiting notice to three months was no longer enforceable.
Reasonable Notice: Nine Months
The court assessed reasonable notice using established factors, including:
- The employee’s senior executive role;
- Approximately 3.5 years of service;
- Age (44 at termination);
- Limited comparable employment opportunities in a niche sector; and
- High compensation, making replacement employment more difficult to secure.
Based on these factors, the court awarded nine months’ notice.
Damages Awarded
The employee received damages reflecting what he would have earned during the nine-month notice period, including salary, bonus, benefits, and RRSP contributions.
Total damages: $456,908.82
Costs: $27,900
Plus pre-judgment and post-judgment interest.
The court also found that two related corporate entities were jointly liable under the common employer doctrine, as both exercised effective control over the employee.
Key Takeaways for Employees
- Severance already owed cannot be used as leverage. If your contract promises a specific amount on termination, your employer cannot withhold it to pressure you into signing a broad release.
- Repudiation can eliminate a notice cap. Once an employer repudiates the agreement, the contractual limit on notice may no longer apply.
- Broad releases raise red flags. Demands for non-disclosure, non-disparagement, or a release of all claims in exchange for severance already owed may be improper.
- Compensation and industry matter. Courts consider role, income level, and the availability of comparable work when determining reasonable notice.
- Multiple companies may be liable. Where related entities function as a single employer, more than one company may be responsible for damages.
This post is provided for general information only and does not constitute legal advice.
If you have been terminated and your employer is withholding severance or conditioning payment on signing a release, you may be entitled to significantly more than you were offered. Contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation to review your situation and explain your rights.