Canada: British Columbia Court Finds Termination Clause Enforceable Because It Complied With Statutory Individual Notice Provisions

• Supreme Court of British Columbia held that a termination clause was enforceable because it met the minimum statutory requirements for notice in individual termination scenarios; it did not matter that the agreement in this case waived the minimum notice requirement for group terminations under the Employment Standards Act.
• This decision deviates from how courts in Ontario interpret termination clauses; there,factfinders must analyze termination agreements as a whole rather than on a piecemeal basis, and if any termination provision in the agreement is contrary to the requirements of the Employment Standards Act, 2000, all termination provisions in the contract will be considered unenforceable.

In Forbes v. Glenmore Printing Ltd., 2023 BCSC 25, the Supreme Court of British Columbia (BC) disagreed with the employee's argument that the termination clause in his employment agreement was invalid because it required the notice to which he would be entitled only under the individual termination provisions in section 63 of the Employment Standards Act (BC ESA), and effectively waived the minimum notice to which he would be entitled under the group termination provisions in s. 64 of the BC ESA. The court dismissed the employee's action, finding that the termination clause was enforceable because s. 63, not s. 64, establishes the minimum statutory requirements needed to oust the common law entitlement to reasonable notice, and the termination clause allowed for the same notice provided for in s. 63.

Background

On December 16, 2020, due to the COVID-19 pandemic, the employer placed the employee, a senior pressman in its printing department, on a layoff. The parties agreed that the layoff amounted to a constructive dismissal, and that the employee was entitled to a severance payment; the single issue before the court was the amount of severance to which he was entitled.

The termination clause in the employment agreement provided, in part:

Glenmore Printing may terminate this Agreement by giving the Employee,

(a) After the first three months of continuous employment, one week's notice or wages,

(b) After the first year of continuous employment, two weeks' notice or wages, and

(c) After three consecutive years of employment three weeks' notice or wages, plus one additional week's notice or wages for each additional year of employment to a maximum of eight weeks' notice or wages.

Employee's Position

The employee argued that the termination clause was void and he was entitled to reasonable notice at common law. He reasoned that the termination clause was unenforceable because it capped his notice entitlement to eight weeks, which he would be entitled to under the individual termination provisions in section 63 of the ESA, and effectively waived the additional minimum notice he would be entitled to under s. 64 of the ESA, in the context of a group termination.

Section 64 provides that if an employer terminates 50 or more employees at a single location within any 2-month period, each employee is entitled to between 8- and 16-weeks' notice of the termination or pay in lieu of notice (depending on how many employees are affected), in addition to any notice the employee is entitled to under the individual notice provision at s. 63. The employee noted, for example, that had he been employed for more than eight years and was subject to a group termination, and would therefore be entitled to 24 weeks' notice (the eight weeks contemplated by s. 63 plus the additional 16 weeks contemplated by s. 64). Finally, relying on case law, the employee argued that it did not matter that he had not been subject to a group termination; the fact that the termination clause would contravene the minimum notice requirements in s. 64 had he been subject to a group termination, was sufficient to render the termination clause unenforceable.

Decision

The court conducted a review of applicable judicial precedent and commenced its analysis with the following acknowledgement: "It is a long-established common law principle that within indefinite contracts of employment there is an implied contract term that employment can only be terminated if reasonable notice is given." It then noted that this presumption is rebuttable by express contractual language that clearly specifies another period of notice, which must, at a minimum, comply with the minimum ESA requirements for notice. If a contractual notice provision does not comply with the statutory minimum, or could potentially violate the statutory minimum, it will be void and the common law presumption of reasonable notice will apply.

The court dismissed the employee's action, finding that the termination clause was enforceable because s. 63 (individual terminations), not s. 64 (group terminations) of the ESA, establishes the minimum statutory requirements needed to oust the common law entitlement to reasonable notice, and the termination clause provided for the same notice that is provided for in s. 63 in the circumstance of an individual termination. Moreover, the court found that since nothing in the termination clause waived the employer's obligation to provide s. 64 notice to the employee in the context of a group termination, it did not breach the ESA. Since the employer paid the employee six weeks' pay for his six years and four months of employment in accordance with the termination clause, the court held that the employer had fulfilled its obligation to the employee on the termination of his employment.

Bottom Line for Employers

The Supreme Court of British Columbia's approach in Glenmore for assessing the enforceability of a termination clause in an employment agreement does not conform with how such an assessment would be conducted in Ontario following the 2020 decision of the Ontario Court of Appeal (OCA) in Waksdale v. Swegon North America Inc., 2020 ONCA 391.

In Waksdale, the OCA established that to determine whether a termination clause in an employment agreement is enforceable, the factfinder must analyze the agreement as a whole rather than on a piecemeal basis, and if any termination provision in the agreement is contrary to the requirements of the Employment Standards Act, 2000 (Ontario ESA), all termination provisions in the contract will be considered unenforceable, regardless of the existence of a severability clause, which may not be utilized to sever the offending portion of the termination provisions.

Since Waksdale was decided, its reasoning has generally been applied in Ontario to invalidate termination clauses that do not comply with the Ontario ESA. In Henderson v. Slavkin, 2022 ONSC 2964, however, Ontario's Superior Court of Justice went even further than did the OCA in Waksdale. In Henderson, the employment agreement contained a termination without cause clause, a conflict-of-interest clause, and a confidential information clause. The court agreed with the employee's claim that because the agreement contained provisions contrary to the Ontario ESA, it was illegal and should be set aside, and the employee was entitled to common law damages. In Henderson, the court did not believe it was required to restrict its focus on whether an actual termination clause was enforceable; it believed it was entitled to examine all provisions in any of the employer's agreements or policies that provide that an employee's failure to comply with them would be cause for termination without compensation. The court found that the termination clause complied with the Ontario ESA, but the confidentiality and conflict-of-interest clauses were unenforceable because they did not comply. Accordingly, the court found that all termination provisions in the employment agreement were invalid and held that the employee had been wrongfully dismissed.

In contrast, in British Columbia, as evidenced by Glenmore, the courts find that a termination clause is enforceable if it meets the minimum statutory requirement for notice provided for in the circumstance of an individual termination, and the common law will not imply a contractual term that is contrary to the ESA. It is only if a contractual notice provision does not comply with the statutory minimum, or could potentially violate the statutory minimum, that it will be void and the common law presumption of reasonable notice will apply.

Employers in Canada are encouraged to ensure that their in-house legal and HR personnel are aware of the approach taken by the courts to assessing the enforceability of termination clauses in employment agreements in each province in which they operate, and to draft their employment agreements accordingly to oust the employee's common law entitlement to reasonable notice.

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