The highest Canadian court has just confirmed that an invalid “just cause” termination section in an employment contract will also knock out the entire termination section, including the “without cause” section.
In our earlier blog discussing employment termination packages –Termination Entitlements: Benefits, Bonuses, and Commissions – we promised to keep you updated on 2020’s employment law decision of the year, Waksdale v. Swegon North America Inc. So here we go.
Leave to Appeal Denied
To recap, Waksdale was a decision from the Ontario Court of Appeal that immediately put termination provisions in jeopardy. In the case, the Court of Appeal found that the employer, Swegon North America, could not rely on their properly drafted “without cause” termination provision, in a without cause termination of their employee, Benjamin Waksdale. The reason is that the “with cause” provision in the same termination section of his contract was missing certain criteria and did not comply with Ontario’s Employment Standards Act, 2000. We wrote about the decision last summer here.
The latest update is that the Supreme Court of Canada has dismissed the employer’s application for leave to appeal the Court of Appeal’s decision. This means that the Court of Appeal’s ruling is here to stay. Any employment agreement that can’t withstand a Waksdale challenge will expose employers to liability for common law reasonable notice.
At a time when employees are motivated to litigate over the terms of separation, employers should immediately do a Waksdale review of their contracts to ensure they haven’t inadvertently contracted out of the ESA through an invalid “with cause” section. An illegal provision in an employment contract will be relevant whatever the context and will not be fixed by the Court by relying on another section that is valid.
If you have questions about the contracts being used in your organization get in touch to set up a consultation.