Changing Tides: Enforcement Of Termination Provisions

From the employer's perspective, one of the most beneficial terms in an employment contract is a prescribed notice period in the event of a "without cause" termination. Parties to an employment contract are free to contract out of the implied obligation of reasonable notice in favor of a "statutory minimum" notice period, provided the contractual wording is clear and does not offend employment standards legislation.

However, in recent years, Canadian courts have been unsettled on the necessary requirements of termination clauses which attempt to limit the notice period to the "statutory minimums". In various decisions, such clauses were found to be unenforceable because of ambiguity or due to a lack of express language providing that the minimum statutory terms apply (with respect to notice periods, continuation of benefits, etc.). However, a recent case from the Ontario Superior Court of Justice, in Farah v EODC Inc., 2017 ONSC 3948, is a welcome sign to employers that a reasonably well drafted clause limiting the notice period, will be upheld.

Facts

The Employee, Mr. Farah, was employed by the Company, EODC Inc., on a series of employment contracts over a period of more than six years. During his employment, he signed five employment contracts with the Company and received a salary increase after signing each contract. Each of the five employment contracts contained a contractual clause that intended to replace the Employee's right to common law notice upon termination, with the statutory minimums, under Ontario's employment standards legislation, the Employment Standards Act, 2000, S.O. 2000, c. 41 (the "ESA"). The relevant provision read as follows:

'At any time, following the conclusion of the Probationary Period, the Employer may terminate the Employee without just cause simply upon providing him/her with the entitlements prescribed in the Employment Standards Act, 2000 ("the Act") or any amendments thereto. The Employee hereby acknowledges that he/she had the opportunity to review the relevant portions of the Act and/or to consult with legal counsel about their impact on his/her current entitlements upon termination of his/her employment."

Upon termination, the Company offered to pay Mr. Farah 6 weeks' termination pay and 6.42 weeks' severance pay1 as required under the ESA, plus one additional week's notice in exchange for his execution of a full and final release. Mr. Farah rejected the offer and brought an application for damages...