The New World – Employment Contracts

The workplace in Ontario is highly regulated and guided by the overarching principles of protecting and enforcing employee’s rights. There is no doubt there have been significant advancements in this regard. Employees now have rights to protected leaves of absence, restrictions on hours of work, and to be free from bullying and harassment, amongst others. Employers are statutorily obligated to investigate complaints of workplace harassment and also have a duty to accommodate employees short of undue hardship, such as for medical restrictions or childcare obligations. Yet, notwithstanding the introduction of numerous statutory protections over the years, employers have themselves taken measures to limit employee’s rights. The main way in which they have done so is by attempting to restrict the entitlement to damages at common law for Wrongful Dismissal through the use of contractual clauses contained in Employment Agreements.

An employee is entitled to reasonable notice of termination i.e. damages for Wrongful Dismissal. Reasonable notice is based on numerous factors - the most important of which are age, position, years of service, and availability of alternate employment (taking into consideration education and training). Damages for Wrongful Dismissal could be up to 24 months or even more in exceptional circumstances. Common law damages for Wrongful Dismissal are usually significantly greater than statutory minimums. In some cases, common law entitlements to damages for Wrongful Dismissal could be 5 to 10 times more than the statutory minimum entitlement.

Since the 1960’s, Courts have acknowledged that employees dismissed without cause have a common law entitlement to reasonable notice and can seek damages if such notice is not provided by their employer. However, the Courts have also made it clear that an employee and employer can contract out of the right to reasonable notice. Specifically, employers can present an employee with an Employment Agreement containing language that indicates that some “other” amount will be provided upon termination. So long as that amount clearly and unambiguously meets or exceeds the statutory minimum entitlement, then nothing more will be owing upon dismissal.

In light of this, almost every offer of employment or Employment Agreement provided to an employee now contains termination language that intends to restrict entitlements upon termination to statutory minimums or an amount that is typically marginally greater than the minimums. Although Employment Agreements containing termination language are highly prejudicial to the rights of employees, they are often signed back without any dispute. Most employees do not bother to review their Employment Agreement, either because they cannot afford a lawyer, believe that their employer has their best interests at heart, or do not want to risk upsetting their employer by disputing any of its terms and conditions of work. In other cases, when advised of the existence of termination language in their Employment Agreements, our client’s respond that they did not know what it meant, did not notice the clause or simply signed back the document without having read it. This reality has been acknowledged at law as the “inherent inequality of bargaining power” that defines the employer-employee relationship.

Ultimately, in almost all instances where termination language appears in an Employment Agreement, the intent of the employer was to greatly limit an employee’s entitlements upon dismissal. Conversely, for various different reasons, that understanding of the purpose of the contractual termination language is rarely shared by the employee’s themselves. Courts have recognized the inequality of bargaining power between employers and employees and to that end have set out complex legal rules that apply to Employment Agreements. If a termination clause does not meet certain legal requirements or is otherwise deficient in any way, then it will be held void and will not restrict an employee’s rights to reasonable notice. It is therefore important not to simply assume that the existence of contractual termination language is fatal to a claim for Wrongful Dismissal. You should always leave that determination to be made by an experienced employment law.

Perhaps the best advice an employment lawyer can give to an employee is to not execute any Employment Agreement containing prejudicial termination language. However, most employees do not seek out legal advice or alternatively do not consider their rights upon termination at the start of their employment. It is difficult to think of the potential repercussions of a “break up” and the beginning of a relationship. Having said that, if one did not have the foresight to negotiate a reasonable termination clause (which is rare indeed) upon commencing employment, then at the very least they should seek the opinion of experience legal counsel as to the enforceability of such termination language at the time of dismissal. The fact is that contractual termination language will only be enforceable if it meets specific legal criteria. Many of these provisions fail to meet the required test and will not limit an employee’s right to reasonable notice.

The lawyers at Marvin A. Gorodensky Professional Corporation are experienced in these dealing with disputes over the enforceability of contractual termination clauses. We can assist in determining whether your Employment Agreement contains termination language that restricts your right to common law damages for Wrongful Dismissal, and if not, what the value of your claim might be. Do not assume that the existence of a termination clause is the end of the analysis - it is only the beginning.