On January 29, 2016, Stuart discussed termination clauses at an HRPA York Region event.

1. HRPA – York Region Chapter
January 29, 2016
Presented by
Stuart E. Rudner
Termination Clauses:
Getting it Right!

2. Overview
1. Why are contracts important?
2. Why use termination clauses?
3. Why are they so hard to enforce?
- Recent Case Law
4. How to do it properly
1. Enforceable employment agreement
2. Enforceable termination clauses
5. Review agreement template
2

3. Contracts

4. Why Use Contracts?
 Increase rights & flexibility
 Control costs
 Avoid uncertainty & cost of common law
“reasonable notice” of dismissal
– Reduce Need for Lawyers (especially at
termination)
 Customize to your needs
 Protect corporate interests
 Restrict post-employment conduct
4

5. Common Myths
 Every employee has a probation period during which
they can be dismissed without notice or cause.
 Unless a contract states otherwise, employees are only
entitled to the Employment Standards Act minimum
amounts of notice / severance
 Termination clauses are not enforceable
5

6. Contracts
 Use them for ALL employees
– Not just management
 No boilerplate
 Customize for different people / positions
 Consider needs & wants
6

7. What can you include?
– Term (fixed term or otherwise)
– Duties (maintain flexibility)
– Probation
– Hours of work
– Remuneration and benefits (maintain flexibility)
– Vacation
– Acceptance of policies
– No conflicting obligations

8. – Conflict of interest
– Confidentiality
– Expenses
– Social Media
– Layoffs
– Discipline
– Dismissal
– Jurisdiction
– Restrictive Covenants

9. Doing it properly
– Before there’s already an agreement
– With consideration
– Explained and understood
– Independent legal advice

10. Consideration
 Trusty Francis v CIBC – consideration is critical
 Before there’s already an agreement – offer of
employment is consideration
 If it’s too late (offer already made, worker
already hired or already working):
– Need fresh consideration
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11. What is Consideration
“Something of value”
 Promotion
 Raise
 Bonus
 New benefits
 Cash payment
 Vacation
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12. 12
Why Use Termination Clauses?

13. 13
Dismissals Without Just Cause
 Can let be go any time
 Must provide Notice of Dismissal or Pay in
Lieu
 Sources of entitlement
– Employment Standards legislation
– Common Law
You Can contract out of common law

14. 14
Statutory Notice Requirements
Length of Employment Notice Required
Less than 3 months None
3 months but less than 1 year 1 week
1 year but less than 3 years 2 weeks
3 year but less than 4 years 3 weeks
4 year but less than 5 years 4 weeks
5 year but less than 6 years 5 weeks
6 year but less than 7 years 6 weeks
7 year but less than 8 years 7 weeks
8 years or more 8 weeks
Also severance pay if certain circumstances

15. 15
Common Law: How Much
Notice?
 Requirement: “reasonable” notice
 The Bardal Factors
1) Length of service
2) Age
3) Position / Character of Employment
4) Availability of Similar Employment

16. What is “reasonable”?
 No “rule of thumb”
– Length of service is not only factor
 Beware the short-term employee
 Watch out for Inducement
 Factors are always evolving
16

17. 17
Reasonable Notice Periods
0
0.5
1
1.5
2
2.5
3
.6 to 2.5 2.6 to 5 6 to 10 11 to 15 16 to 20 21 and
25
26 and
30
31 and
35
36 and
40
Years of Service
Months Per Yr.
of Service

18. 18
0-2 Years of Service
Position Average Mons. Mons. Range
Clerical 2.82 .2-12
Supervisory 3.67 .2-9
Sales 3.54 .01-15
Lower Mngmnt 3.42 1-10
Upper Mngmnt 6.76 3-12.75

19. 19
17-19 Years of Service
Position Average Mons. Mons. Range
Clerical 10.58 6-15
Supervisory 12.63 9-16
Sales 13.67 8-18
Lower Mngmt 13.38 7-24
Upper Mngmnt 18.14 12-24

20. Termination Clauses:
CASE LAW
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21.  MANY recent cases
 Case law is largely unsettled & evolving
 Formerly “good” clauses may be
unenforceable
 Courts favour unambiguous and clearly
worded provisions
 Just because employee signed does not
mean you are in good legal position
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22. Main Points
 Courts will enforce termination clauses
 Even if they are “harsh”
 BUT will find any excuse not to
– Ambiguity
– Breach of employment standards
– Lack of consideration
– Duress / lack of independent legal advice
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23. An employee may contract-out of his or her common
law entitlements upon a wrongful dismissal, but this can
only occur by clear, express and unambiguous language
in the employment contract that rebuts the common
law presumption that an employee can only be
terminated on reasonable notice: Christensen v.
Family Counselling Centre of Sault Ste. Marie & District,
[2001] O.J. No. 4418 (Ont. C.A.); Machtinger v. HOJ
Industries Ltd. (1988), 66 O.R. (2d) 545 (Ont. C.A.).
23

24. Benefits must be addressed
24
Clause: “Agree to accept
notice/payment in lieu and/or
severance in satisfaction of all
claims which may arise out of
statute of common law
Clause Upheld? No
Reasoning: Clause attempted to “draw the
circle” around rights and didn’t
mention continuation of
benefits
Stevens v. Sifton Properties Ltd. (2012)

25. Termination Clause Upheld
Dimson v. KTI Kanatek Technologies Inc.
The Clause
18(c) In addition, KANATEK may terminate this Agreement at its sole
discretion for any reason, upon providing Employee all payments or
entitlements in accordance with the standards set out in the Ontario
Employment Standards Act, as may be amended from time to time.
18(d) If at any time KANATEK provides you with a bonus, it will not
be included in the calculation of payment for the purpose of this Article
or as otherwise agreed to or required by the Employment Standards
Act.
25

26. Dimson v. KTI Kanatek Technologies Inc.
The Decision
[6] We agree with the motion judge’s
observation that it would be inconsistent to
interpret 18(d) as denying the appellant his
entitlement under the ESA when 18(c) expressly
provides that the appellant would be provided
with everything to which he was entitled under
the ESA.
26

27. Termination Clause Struck
Down
Wright v. The Young and Rubicam Group of
Companies (Wunderman)
The Clause
“Payment will be inclusive of all notice, statutory, contractual and other
compensation and statutory severance and termination pay you
have…and no other severance, separation pay or other payments shall
be made”
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28. The Decision
The clause evinced an intention “to treat the payment of
base pay under the termination provisions as the totality of
the employee’s entitlements to compensation on
termination, regardless of whether the contractual
provisions met the statutory minimum or not.”
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Wright v. The Young and Rubicam Group of
Companies (Wunderman)

29. Miller v. Convergys CMG Canada Ltd.
Partnership (BCCA)
29
Clause: ESA Minimum Notice on
Termination + Probationary
Period for each time
employment contract renewed
Clause Upheld? Yes
Reasoning: No intention of employer to
contract out the ESA

30. Brown v. Utopia Day Spas and Salons
(BCSC)
30
Clause: Employer may terminate
employment without cause or
notice in accordance of ESA
(BC)
Clause Upheld? Yes
Reasoning: Reference to Act incorporated it
into the contract; minor
grammatical errors in clause do
not create material ambiguity
so long as parties/intentions
were discernable

31. Miller v. ABM Canada Inc. (ONSC)
31
Clause: Dealt with notice period but did
not address pension
contribution or car allowance
Clause Upheld? No
Reasoning: Language in clause was
sufficiently ambiguous as to
true extent of employee’s ESA
entitlement that it had to be
construed against the employer

32. Hosford v. Warren Gibson Ltd. (ON
SCSM)
32
Clause: “Your employment may be
terminated for just cause at any
time without notice. Any other
termination will be made in
accordance with Labour Canada
Standards.”
Clause Upheld? No
Reasoning: No such thing as Labour Canada
Standards; ambiguous clause
failed to rebut presumption of
reasonable notice

33. Leeming v. IBM Canada Ltd. (ONSC)
33
Clause: Two weeks’ notice or ESA
entitlement if dismissed
between 3 and 5 years; >5
years = ESA or 3 weeks notice –
whichever greater
Clause Upheld? No
Reasoning: Not sufficiently clear, express
or unambiguous to deny
common law notice entitlement

34. Oudin v. Le Centre Francophone de Toronto
34
Clause: Employer may terminate the
employment of the employee for
all serious incidents (negligence,
continuing incapacity, breach of
confidentiality)
Clause Upheld? Yes
Reasoning: “Continuing incapacity” is an
invalid ground for termination,
but does not render the whole
clause invalid

35. Howard v. Benson Group Inc. (ONSC)
35
Clause: Employment may be terminated
at any time by the Employer
and payments will be made
according to ESA
Clause Upheld? No
Reasoning: Language in clause was
sufficiently ambiguous as to
true extent of employee’s ESA
entitlement that it had to be
construed against the employer

36. Mlotek v. York-Med Systems Inc.
(ONSC)
36
Clause: New contract signed by
employee in 2011 included
clause focused on “entitlement”
(singular); Argued to be
ambiguous
Clause Upheld? Yes
Reasoning: Word “entitlement” when read
with the rest of the clause
found to be interpretable in the
plural sense – no ambiguity

37. Pare and Corus Entertainment Inc. (Unjust
Dismissal), Re (Canada Labour Code)
37
Clause: Provided for 2.5 weeks notice,
pay in lieu, or severance for
each year. “In no instance will
you receive less than your
statutory entitlement.”
Clause Upheld? No
Reasoning: Clause was not drawn to
complainant’s attention;
wording lacks certainty, is too
long, and could support several
different interpretations

38. DeGagne v. Williams Lake (City) (BCSC)
38
Clause: Employee will receive on
dismissal either 1 month
written notice (if dismissed
during probation) or 6 months
if dismissed in first year, or
severance pay in amount equal
to notice
Clause Upheld? Yes
Reasoning: No ambiguity

39. Carpenter v. Brains II, Canada Inc.
(ONSC)
39
Clause: Provide notice or salary in lieu
thereof, and severance pay. No
other compensation
entitlement in common law or
equity.
Clause Upheld? No
Reasoning: Only mentioning “salary” was
interpreted to exclude
benefits/other compensation,
which is contrary to the ESA

40. Getting it Right
40

41. Lessons to Learn
 Enter into contracts at time of hiring
I. Make the contract the offer
II. No agreement until signed
III. Do not commence onboarding /announce
IV. Adequate time to review, obtain ILA
V. Confirmation of ILA or opportunity for it
Or use consideration if later
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42. Lessons to Learn
 Draft termination clauses clearly
 Ensure compliance with employment
standards
 Use “Saving Clauses”
 Invest in legal counsel now to save time,
money and risk later
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43. Sample: Employment Contract
43
See HANDOUT

44. Termination Clauses – what to
include
 Probation
 With cause – may have to pay statutory
amounts
 Without cause
 Temporary layoff
 Resignation
44

45. Sample: Termination Clause
I. Clear and unambiguous
II. Employment standards compliant
III. Address benefits
I. What will and will not continue beyond
statutory period
45
See HANDOUT

46. 46
Stuart E. Rudner
srudner@rudnermacdonald.com
416.640.6402 or 905.530.2484
Web: www.rudnermacdonald.com
Twitter: @CanadianHRLaw
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Canadian HR Law Group and visit the Rudner
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