Waksdale Prevails: Ontario Court Of Appeal Overturns Enforceability Of Illegal Termination Provisions In Rahman

• Published date: 20 July 2022
• Subject Matter: Employment and HR, Contract of Employment, Unfair/ Wrongful Dismissal
• Law Firm: Devry Smith Frank LLP
• Author: Mr Timothy Gindi and Owais Hashmi

The Waksdale Decision

On June 17, 2020, the Ontario Court of Appeal in Waksdale ruled that a contract's termination provisions must be read as a whole, to the effect that if any aspect of the termination clause is found to contravene the Employment Standards Act, 2000 ("ESA"), the entire clause will be rendered null and void for all purposes, despite the existence of a severability clause.

The Case of Rahman

Facts

Farah Rahman was employed by Cannon Design Architecture Inc. ("CDAI") as a Senior Architect, Principal and Office Practice Leader for over four years. She was given four weeks of base salary when her employment was terminated, without notice or cause.

Prior to the commencement of her employment, Rahman sought independent legal advice and negotiated the terms of her employment agreement, including the termination provisions. With the help of legal counsel, Rahman negotiated "material improvements" to the terms of her severance package under her contract.

Rahman signed two employment contracts with distinct termination provisions. The first was an "Offer Letter" asking Ms. Rahman to join CannonDesign, a subsidiary company wholly owned by CDAI, as a "Principal". The second was an "Officer Agreement" between The Cannon Corporation (a corporate entity separate from CannonDesign and CDAI) and Ms. Rahman, to become Cannon Corporation's Senior Vice President and Principal Officer.

The Offer Letter referred to the Officer Agreement, stating that the latter also formed the basis of her employment. It provided that in the event of a conflict between it and the Officer Agreement, the Offer Letter would govern.

After her dismissal, Rahman brought an action for wrongful dismissal. She argued that, in accordance with the decision in Waksdale, the termination provisions of the employment agreement were not enforceable because the "just cause" provision would allow for termination without notice in situations in which the ESA still required notice to terminate an employment contract.

The termination provision:

"CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof if you engage in conduct that constitutes just cause for summary dismissal."

Rahman argued that according to Ontario Regulation 288/01, an employee can be terminated without notice only where they have been "guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer"'...