Recently, the Supreme Court of Canada denied leave to appeal in Waksdale v Swegon North America Inc (Waksdale), which means that the Ontario Court of Appeal’s decision remains the law in Ontario. This decision is critical because it renders the majority of termination clauses in employment contracts unenforceable, leaving employers exposed to significant liability under the common law.
The Ontario Court of Appeal held that a termination clause must be looked at in its entirety, and thus, despite the fact that the termination was without cause and the without cause provision standing alone was fine, the “for cause” provision invalidated the entire termination clause as it breached the Employment Standards Act, 2000 (ESA). As a result, the employee was entitled to common law reasonable notice, and significantly more compensation. We wrote about this decision here, here and here.
So what does this mean for you?
If you are an employer and you have not had your employment contracts checked recently, you should get them reviewed by an Employment Lawyer. The termination clauses in your existing contracts may not be binding, which can expose you to significant liability under the common law (for example, you might think your obligation is to pay 8 weeks of pay only to realize it is 24 months of pay instead). If you are an employee and your employer provides you with a new agreement or a termination letter, you should seek legal advice before accepting anything, as it can substantially impact your entitlements.
