Ontario Court Of Appeal Confirms Law On Contract Provisions That Will Breach The Employment Standards Act In The Future

Ontario's highest court has confirmed that employment contract provisions that will breach the Employment Standards Act ('ESA') in the future are void and unenforceable.1 The Court has also confirmed that fixed-term employees who are terminated under an unenforceable termination clause are entitled to the salary they would have earned had they worked their entire fixed term.

Background

In Covenoho, the employee had a one year fixed-term contract with the employer. After being employed less than three months, the employee was dismissed without notice or payment in lieu thereof. A lower court found that because the employee had not worked the prerequisite three months for statutory notice, the employee was not entitled to any notice and was validly dismissed.

Decision

The Court of Appeal found issue with the terms of the employment agreement, namely that the termination provisions allowed the employer to terminate the employee without cause or notice. One of the provisions required no notice for dismissal and the other specified that the employer will have "no liability to [the employee], save and except to pay any accrued and earned compensation."

Although the ESA allows an employer to dismiss an employee without notice if they have not completed three months of employment, the Court of Appeal found that the contractual provisions must be construed as if the employee's employment continued beyond three months. The Court found that if a "provision potentially violates the ESA at any date after hiring, it is void."

If the termination provision is void...