Why Review Your Employment Contracts?

On June 17, 2020, the Ontario Court of Appeal released its decision in Waksdale v Swegon North America Inc., 2020 ONCA 391. The Court of Appeal for Ontario looked at an employment contract with two separate clauses dealing with termination: an enforceable "without cause" clause that did not adhere to the Ontario employment standards legislation, and a "with cause" clause that, when looked at as a stand-alone clause, was unenforceable. The Court of Appeal for Ontario considered whether the unenforceability of the "with cause" clause made the entire termination scheme invalid.

When the case first came before the Ontario Superior Court of Justice, the court found that because the employee was terminated "without cause", the unenforceability of the "with cause" clause was not a relevant consideration. On appeal, the Court of Appeal for Ontario overturned the trial decision on the basis that a contract's termination provisions must be read as a whole, regardless of where in the contract they are located. It found that because the "with cause" provision is unenforceable, all termination clauses in the contract were invalid.

Why should you care?

By voiding any term in a termination provision, even a term not applicable to the termination of that employee, the Court could strike down the entire termination scheme. This could entitle an employee to larger common law payments on termination, rather than the reduced payments set out in the employment contract. In the past, employers have not paid a lot of attention to the "just cause" provisions of their employment contracts. In the wake of this decision, it is more important than ever for employers in Ontario to revisit their employment contracts to avoid the serious liability that might exist if any part of their termination clauses is found to be invalid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.