In Henderson v. Slavkin, a recent case from the Ontario Supreme Court, the Court was asked to determine the validity of a termination clause in an employment contract along with two additional clauses. While the termination clause was deemed valid, the additional clauses were not, and the entire employment contract was held to be invalid. This case is a stark reminder of the importance of reviewing employment contracts with an experienced employment lawyer.
The Plaintiff’s Employment History
Prior to her termination, the plaintiff had worked as a receptionist at an oral surgery office for approximately 30 years. By all accounts, she had been a loyal and dedicated employee.
In 2015, the business owners (who were in their mid-to-late 60s) began planning for retirement and decided to implement employment contracts for all employees so they would have more clarity around future working conditions, hours, and terms of employment. On May 26, 2015, the business owners provided new employment contracts to all employees along with a letter explaining the contracts.
In the accompanying letter, the business owners told the employees that they had two options:
- They could accept the new employment terms in exchange for $500.00; or
- They could reject the new employment terms, in which case their employment would terminate on May 26, 2017.
The Plaintiff’s Termination
The plaintiff signed the new employment contract. On November 1, 2019, the defendants advised their staff that, due to retirements, they would be terminated effective April 30, 2020 (amounting to approximately six months’ notice).
After the plaintiff’s employment was terminated, she moved to her hometown. Given that the plaintiff was terminated during the COVID-19 pandemic, she was unable to obtain new employment as dental practices were closed until June 2020. Thereafter, the plaintiff did not begin looking for a new position until the end of 2020 and obtained a new job in May 2021.
The Plaintiff’s Position Regarding the New Employment Contract
The plaintiff brought an action against the defendants claiming that the new employment contract was unconscionable and contained provisions contrary to the Employment Standards Act, among others. Therefore, she claimed, she was wrongfully terminated. The defendants argued that the new employment contract was not unconscionable or illegal and that they had taken reasonable steps to ensure employees had significant notice and were terminated professionally.
The plaintiff pointed out concerns regarding three clauses in the new employment agreement, as follows:
Clause 13: Termination
The termination clause in the employment contract stated that the plaintiff’s employment could be terminated without cause for any reason upon the employer providing notice equal to the minimum notice (or pay in lieu) under the Employment Standards Act.
The plaintiff argued that the termination clause in the employment contract lacked the “high degree of clarity” required for termination clauses in employment contracts. Specifically, the clause did not clarify whether the plaintiff would be paid severance pay or continued benefits.
Clause 18: Conflict of Interest
This conflict of interest clause stated that the plaintiff would agree to ensure her direct or indirect personal interests did not conflict with those of the employer. Breaching this clause would constitute cause for termination without notice or compensation.
The plaintiff argued that this clause was contrary to the terms of the Employment Standards Act and otherwise ambiguous, as just cause termination under the Employment Standards Act requires that even those terminated with cause to certain entitlements unless the employer establishes that the employee was guilty of wilful misconduct.
Clause 19: Confidential Information
This clause regarding confidential information stated the plaintiff would be required to not disclose, use, copy, reproduce, or make accessible any confidential information relating to the business. Breaching this clause would constitute cause for termination without notice or compensation.
The plaintiff provided a similar argument relating to clause 19 – namely, that the clause did not stipulate that misconduct must be wilful and not trivial to support termination without notice as required by the Employment Standards Act.
New Employment Contract Invalidated By Court Due To Two Invalid Clauses
The court determined that clause 13, the termination clause, was valid. While the clause did not specifically reference severance pay or continued benefits in the event of termination, the clause indicated compliance with the requirements of the Employment Standards Act.
However, with respect to clauses 18, regarding conflict of interest, and clause 19, regarding confidential information, the court agreed with the plaintiff’s assertion that the clauses were overly broad and ambiguous, noting that “an employee would not be able to know, upon entering the contract, what conduct in that case might cause termination without notice or compensation in lieu” (at para. 38).
As a result of the court’s findings, clauses 18 and 19 of the employment contract were found to be invalid. Therefore, the entire employment contract was invalidated.
Did the Plaintiff Fail to Mitigate Her Damages?
After finding that clauses 18 and 19 were invalid, the court went on to consider the defendants’ argument that the plaintiff has failed to mitigate her damages. Specifically, they noted that the plaintiff had not obtained employment for 18 months after her termination despite being “highly and easily employable”.
The plaintiff argued that the COVID-19 pandemic made it difficult to find work, even as businesses began to reopen, and she had acted reasonably.
The court noted the “unique set of circumstances” at play in this case and that, in normal circumstances, her actions after her termination would amount to a failure to mitigate. Given the COVID-19 pandemic and difficulty in finding work during that period, however, the court determined that a shorter deduction of the plaintiff’s award was appropriate. As a result, the court determined that the plaintiff was entitled to 18 months’ notice, less three months.
What this Case Means for Employees and Employers
This case is an important reminder for both employees and employers: a termination clause in an employment contract is not the only factor to consider in a wrongful dismissal claim. If a court determines that another clause in the employment contract that addresses termination for non-compliance is unenforceable, it may render the entire employment contract invalid.
Whether you’re an employee or employer, be sure to carefully examine each clause in your employment agreement with the aid of an experienced employment lawyer to ensure they are valid.
Contact Tierney Stauffer LLP’s Experienced Ottawa Employment Lawyers
When an employer fails to comply with statutory and common law requirements with respect to contracts, terminations or layoffs, it can harm employees and leave employers vulnerable to significant damages awards. No matter which side of an employment dispute you’re on, it is vital to secure the right lawyer to ensure your interests are protected. At Tierney Stauffer LLP, our employment lawyers have extensive experience representing both employers and employees. Our seasoned litigators skillfully represent clients before administrative tribunals and boards, at alternative dispute resolution, and at trial. We bring a sense of compassion and enthusiasm to every case and are committed to helping our clients through their employment issues as effectively and efficiently as possible. Call us at 1-888-799-8057 or contact us online to set up a consultation with our experienced employment lawyers today.