Sometimes Termination Clauses Are Effective

November 21, 2021

By Brian Babcock

We have written extensively warning employers about relying upon the terms of a termination clause in an employment contract. Judges feel a need to protect employees who are vulnerable and have limited bargaining power when it comes to the terms of a contract. Often, an employee eager to take a job will overlook provisions which restrict their rights to reasonable notice upon dismissal without cause.

Sometimes, these clauses are found to be not enforceable in Ontario on the basis that they contravene the Employment Standards Act, which sets out minimum notice provisions. Other clauses are found to be ambiguous, and the wording is interpreted in favour of the employee, because it was the employer who drafted the contract, and had their shot at being clear.

The law is similar though not quite identical in Alberta, where we find a decision that favours the employer. It is of interest because the principles of contract interpretation ought to be the same, and the Alberta case references Ontario cases and Supreme Court of Canada cases common to both provinces’ law.

In Bryant v Parkland School Division the employment contract required that the employer give “60 days or more written notice”.

The employee, realizing after termination that their common law notice might be greater than 60 days, argued that the clause was ambiguous and unenforceable, on the basis that “or more” was unclear. Alternative, the employee argued that “or more” meant “or more if the common law is more”.

The court rejected both arguments.

“Or more” is not, according to this case, ambiguous. Ambiguity is found when the wording in a document may give rise to two or more reasonable interpretations. Ambiguity does not mean “could be expressed more clearly”.

On the judge’s reading of the words “or more” they support only one meaning: 60 days, or, in the discretion of the employer, something greater.

“Or more” also does not mean “reasonable notice.” As pointed out in an Alberta Court of Appeal decision, when one party (in this case the employer) is given discretion, the courts ought not to second guess how the discretion is exercised. Rather than incorporating reasonable notice into the clause, this phrase displaces common law notice in favour of the 60 days.

One of the Ontario cases referred to states that employers are not required to use any specific phrase or formula to displace common law notice.  Older Ontario cases had found that “at least” and “no less than”  were not found to be ambiguous.

Although employers may take some comfort from this common sense decision, care must still be taken in drafting employment contracts. The cost of having a lawyer review or draft your template, or where appropriate, create a custom agreement, is modest compared to the cost of litigation, and may save you considerable money.

Employees on the other hand, might look at this decision and think about taking more care to review notice provisions at the time of hiring. Common law reasonable notice may be substantial, and this is a right worth protecting, especially if you plan long term employment. are senior management, highly specialized, or nearing retirement. If reasonable notice is important to you, a discussion with a lawyer might be a sound investment before you agree to something less. Also, upon termination, it is always wise to get legal advice before accepting the employer’s offer.