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ESA interpretation and reasonable notice.

Usually, there are two things to talk about when somebody is terminated without just cause. First there is the Employment Standards Act which sets out minimum entitlements. Second, there is “reasonable notice” at common law. Common law is judge-made law. A judge will assess primarily your age, seniority, and level of responsibility and, looking at other cases that have been decided, award a maximum reasonable notice entitlement.

Sometimes employers have employees sign contracts that limit them to the Employment Standards Act. No resort to the courts is possible. In order to do that, however, the employer has to do it clearly.

Shelly started a job as a senior manager for a coffee shop company in February of 2016. The employment agreement she signed before she started the job said:
If the employer terminates your employment, it will comply with its obligations under the Employment Standards legislation in the province in which you work (the ‘Employment Standards Act’).

She sued for wrongful dismissal which means that she wanted pay in lieu of notice based on her senior management position within the company.The employer argued that the provision above limited her entitlement to the Employment Standards Act. Given that she was terminated nine months after she started, that would have been one week’s pay. Shelly’s lawyer argued that if the employer wanted to eliminate Shelly’s entitlement to that judge-made law that would give her reasonable notice in excess of  the Employment Standards Act minimum it needed to say so clearly. He argued that all this provision did was confirm that the employer would comply with the minimum legislation, not that it would not do anything more.

The judge found that the provision was ambiguous. It could be read either way. One interpretation limited Shelly to one week’s pay after her nine months. The other interpretation would all him to award reasonable notice at common law.

There is a rule of interpretation in contract law that favoured Shelly’s case. If a provision in a contract is ambiguous and can be interpreted in favour of either party, you read it against the interests of the party who wrote it. In Shelly’s case the employer wrote it. They lost.

Shelly’s argument was aided by the fact that there is a power imbalance between employers and employees. If this was a contract negotiated between two business people, negotiating back and forth on the wording and there were no power imbalance, things might have turned out differently.

Usually, however, when an employee is presented with an employment agreement, they have very little of the power. They can ask for changes but usually it is a take it or leave it scenario.

The exception is the employee who is already securely employed and entertaining a competing offer or has multiple offers to consider. That employee should never even think about signing a contract that limits their entitlement to Employment Standards Act minimums. They could quit their secure job only to be terminated a month later by the new employer with nothing other than their final pay cheque.

Shelly was in a senior management position. The judge awarded her four months’ pay in lieu of notice even though she’d only been there for nine months. The courts assume it is more difficult to find a senior management job. Employers who want to include any provision dealing with termination entitlements in their contract should have them very carefully reviewed by an employment lawyer to make sure they actually have that effect.
Ed Canning is a labour and employment lawyer with Ross & McBride LLP, in Hamilton, representing both employers and employees. Email him at ecanning@rossmcbride.com

Ed Canning
Ed Canning
P: 905.572.5809