Termination Clause in Employment Contract Violates Minimum Standards

September 15, 2014

After receiving a broadcast email posting for a Director of Finance position with ABM Canada Inc. (the “Employer”), Paul Miller (the “Employee”) applied for the position. It took a few meetings and some encouragement, but the Employee ultimately accepted a job offer starting in September, 2009, subject to entering an employment contract before starting.  Although the Employee received and signed an employment contract, he barely read the document, and some clauses he did not read at all.  The contract addressed his ‘remuneration,’ which included a base salary and matching pension contributions, and had a separate clause for ‘fringe benefits,’ which included a monthly car allowance.  The termination provision stated “Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.”  [emphasis added].

By the fall of 2010 the prospects of the Employee’s advancement with the Employer were dimming due to concerns about his hours and the accuracy of his work. In early 2011 the Employee was terminated without notice, and provided with two weeks of salary plus vacation pay; but with no provision for his car allowance or pension contributions for the notice period.

The Employee asserted that the termination provision in the employment contract was null and void or otherwise unenforceable because it did not meet the requirements of ss. 61(1)(a) and (b) of the ESA, which require payment to the employee of the amount he or she “would have been entitled to receive” during the notice period.  Further, the Employee asserted that he should be entitled to pay in lieu of reasonable notice of the termination of his employment at common law, with a modest enhancement because he was induced to leave his prior job.

The Court held that the termination provision adequately stipulated the length of the notice period, but because it did not provide for the payment of the pension contributions and car allowance over that period, it was in breach of the ESA and unenforceable. The Court underscored that where one clause in the termination provisions of a contract are void by operation of the ESA, then it is null and void for all purposes.

The Court considered the Employee’s age, character and length of employment, and the availability of similar employment, and held that a reasonable notice of period of three months was appropriate, without any enhancement as there was no evidence of promises of job security beyond the normal types of persuasive recruitment for a position.

This case serves as a reminder to employers to consult legal counsel before a contract is presented to a successful job applicant to ensure it complies with all minimum standards.

Miller v. ABM Canada Inc., 2014 ONSC 4062 (CanLII)

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