In its recent decision, Bertsch v Datastealth Inc., the Ontario Superior Court of Justice (the “Court”) upheld a provision in an employment contract that limited the employee’s termination rights to the minimum entitlements under the Employment Standards Act (the “ESA”).
THE EMPLOYEE’S ARGUMENTS
In this case, the employee (“Bertsch”) asked the Court declare that his employer, Datastealth Inc. (“Datastealth”), owed him common law reasonable notice of termination, rather than the four weeks’ pay in lieu of notice that he received under his employment contract. In particular, Bertsch asked for 12 months’ pay in lieu of notice, which would have totaled around $300,000. The four weeks’ pay in lieu of notice that Datastealth gave Bertsch was more than he was entitled to under the ESA.
In support of his case, Bertsch argued that the termination provisions in his employment contract were ambiguous and in violation of the ESA.
The ESA says that an employee can only be dismissed without notice (sometimes referred to as “for cause dismissal”) where the employee has demonstrated “wilful misconduct, disobedience or wilful neglect of duty” (the “ESA Standard”).
Bertsch claimed that his employment contract was in violation of the ESA because it allowed Datastealth to dismiss him “for cause” without meeting the ESA Standard. That is, the contract did not explicitly reference what entitlements he would receive if he were terminated “for cause”. Instead, it stated that if he were terminated “with or without cause”, he would receive “only the minimum payments and entitlements” he was owed “under the ESA and its Regulations”.
Previously, in an Ontario Court of Appeal (“ONCA”) case, Waksdale v Swegon North America Inc. (“Waksdale”), ONCA held that a termination provision was void because it did not meet the ESA Standard.
Bertsch argued that the Court should see his employment contract in the same way that ONCA saw the contract in Waksdale. The Court disagreed.
THE COURT’S DECISION
The Court decided that the termination provisions in Bertsch’s employment contract were clear and it dismissed his case against Datastealth. The Court disagreed with Bertsch’s argument that the termination provisions were void because they did not reference what entitlements he would receive if he were dismissed “for cause”.
The Court stated that there “is no reasonable interpretation which would be contrary to the minimum requirements of the ESA and regulations”.
TAKEAWAY
For employers, the important lesson from this case is that they must draft termination provisions in their employment contracts with clear language. It is crucial that the language of the contract does not broaden potential “causes” for dismissal to such an extent that they go beyond the ESA Standard.
For employees, the important lesson from this case is that they must carefully review the termination provisions in their employment contracts. If the contract speaks of limiting their entitlements to the minimums set out in the ESA, then it may be prudent to seek legal advice to make sure that their contract does not violate the ESA.
Earlier this year, we wrote about a case where an employee was seeking to have their employment contract voided for breaching the ESA Standard. In that case, the Court held that the employee’s fixed term contract’s termination provisions violated the ESA, and the employee was entitled to damages in the amount of all that they were owed under their fixed term contract.
Should you have any questions relating to Employment Law, Employer Liability, or any other legal questions, please feel free to reach out to Walker Law. We are a downtown Toronto civil and commercial litigation firm, and we are available to provide you with advice and to advocate for you.
Tags: Civil Litigation Law , Commercial Litigation, Employment Litigation Law