Termination Provisions And Employment Contracts: The New Order

Article by Martin Smith & Cassandra Khatchikian (Student-At-Work)

Introduction

Some employers do not see the value in executing employment contracts. However, without termination clauses which limit an employee's entitlements upon termination without cause, damages awarded can be significant. Long gone is the traditional common law "rule of thumb" of one month's notice per year of service.1 The notice period can be dramatically extended by the court when weighing various factors.

Many employers choose to include termination clauses in their employment contracts for non-unionized employees. Termination clauses vary but generally, they include provisions for reserving the right to provide pay in lieu of notice of termination to an employee.

Employers are able to establish a pre-determined contractual notice period in the event the employee is dismissed. This is to rebut the presumption of the common law notice period when an employee is terminated without cause and perhaps limit their entitlement to the statutory minimums.

The statutory minimums are set out in section 57 of the Employment Standards Act as follows:

57. The notice of termination under section 54 shall be given,

at least one week before the termination, if the employee's period of employment is less than one year; at least two weeks before the termination, if the employee's period of employment is one year or more and fewer than three years; at least three weeks before the termination, if the employee's period of employment is three years or more and fewer than four years; at least four weeks before the termination, if the employee's period of employment is four years or more and fewer than five years; at least five weeks before the termination, if the employee's period of employment is five years or more and fewer than six years; at least six weeks before the termination, if the employee's period of employment is six years or more and fewer than seven years; at least seven weeks before the termination, if the employee's period of employment is seven years or more and fewer than eight years; or at least eight weeks before the termination, if the employee's period of employment is eight years or more. 2000, c. 41, s. 57.2 An employer may have acted appropriately in drafting employment contracts. It may have consulted a lawyer, negotiated with employees, had a lawyer draft the contracts, provided it to employees for review, suggested that they obtain independent legal advice, and had it executed before employees started work. However, it is possible that since the execution of...