Ontario Court Of Appeal's 'Failsafe Provision' Decision Adds More Confusion Than Clarity

On August 30, 2019, the Ontario Court of Appeal dismissed the employer's appeal in Andros v. Colliers Macaulay Nicolls Inc. (Andros),1 thereby affirming the motion judge's finding that the employee's termination clause was unenforceable because it represented an attempt by the employer to contract out of the employment standards provided for under the Employment Standards Act, 2000 (ESA).

Background

This case arose following the without cause termination of an employee at a large commercial real estate company. The parties did not dispute that, upon termination, the employee received what he was entitled to under the ESA, including a lump-sum payment in lieu of notice of termination representing eight weeks of salary, coverage for all benefits during that notice period, and a lump-sum severance payment representing about 12 weeks of salary. Moreover, the parties agreed to settle the matter by summary judgment.

Where this decision gets interesting, however, is with respect to the enforceability of the termination clause in the employee's employment agreement. The employee argued that the termination clause was unenforceable because it attempted to contract out of the ESA. Accordingly, the employee maintained that he was entitled to reasonable notice under the common law.

The Termination Clause

The termination clause, found within the employee's employment agreement forces a choice between "the greater of":

the [employee's] entitlement pursuant to the [ESA] (the "first clause"); or at the [employer's] sole discretion, either of the following: Two (2) months' working notice with compensation and benefits "during the working notice period" (clause 4(a)); or Payment in lieu of notice in the amount equivalent to two (2) months [b]ase [s]alary" (clause 4(b)). Employer's Position

The employer argued that the termination clause provides at least the statutory minimum amount of pay in lieu of notice and preserves the statutory entitlements to severance pay and continuation of benefits. The employer contended that regardless of whether the "greater" entitlement was under the first clause or clauses 4(a) or 4(b), the termination clause ensured that the employee would always receive his minimum statutory entitlements under the ESA. The employer characterized the reference to the "greater of" at the outset of the termination clause as the "failsafe" clause, meaning that even if clauses 4(a) or 4(b) applied, the minimum statutory entitlements relating to...