Employers Get It Right: Court Upholds Contractual Termination Provisions

A recent decision of the Ontario Court, Burton v. Aronovitch McCauley Rollo LLP, 2018 ONSC 3018 (Burton), adds to the considerable case law that addresses when a termination provision is void for failure to comply with the provisions of the Ontario Employment Standards Act, 2000 (the ESA).

In brief, the ESA sets minimum standards, including the following rights on termination (unless an exception, such as "wilful misconduct," applies):

Notice of termination, or termination pay with benefit continuance, for up to eight weeks; and Subject to certain conditions (such as the size of the employer's payroll and the employee's length of service), severance pay of up to 26 weeks. Employers frequently try to avoid the more generous "common law" entitlements on termination by contracting with employees to provide a specific amount of notice or pay in lieu of notice. Such contracts are binding, provided that they comply with the minimum ESA provisions.

The clause at issue in Burton was the following:

"(a) AMR may, at its sole discretion, terminate your employment without cause (a Non-Cause Termination). In the event of a Non-Cause Termination, AMR shall provide you with severance pay in accordance with the Employment Standards Act, as amended, and any successor legislation, if so required as at the time of a Non-Cause Termination; and (b) Notwithstanding the foregoing, and for greater certainty, if the amounts which you would receive upon a Non-Cause Termination, as set out above, are less than the amounts to which you would be entitled under the Employment Standards Act, as amended or any successor legislation, then you shall be entitled to notice, severance pay, and any other payment required by the relevant legislation in force as at the time of the termination."

The employee argued that the Termination Clause was invalid, since it did not explicitly provide for the continuation of benefit plan contributions over the termination pay period as required by the ESA, and accordingly the employee was entitled to the more generous "common law."

After reviewing several recent cases, the court rejected the employee's argument, holding that the Termination Clause did in fact provide for the continuation of benefit plan contributions during the termination pay period. The court held that the phrase "any other payment required by the relevant legislation" included the payment of premiums for benefit contributions over the termination pay period, and therefore...