Employer to Pay Reasonable Notice due to “Ambiguous” Termination Clause

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Recently, in Howard v. Benson Group, the Ontario Superior Court of Justice determined that a termination clause was ambiguous and therefore unenforceable. Consequently the Employer had an obligation to provide reasonable notice at common law as opposed to the minimum statutory requirements under the Employment Standards Act, 2000 as amended (“ESA”).

The Employee was a Truck Shop Manager for the Employer’s business of automotive parts and service repair. The Employer terminated the Employee’s employment by providing him with two weeks’ working notice and two weeks’ severance pay. At the time of dismissal, he had completed two years of service with the Employer.

The clause read:

8.1.   Employment may be terminated at any time by the Employer [the defendant] and any amounts paid to the Employee [the plaintiff] shall be in accordance with the Employment Standards Act of Ontario. [sic]

The employee argued that the clause was void and unenforceable for a number of reasons such as:

  • The phrase “amounts paid” in the Clause does not specify which amounts are included in the payments such as base salary, bonus and benefits. Clauses limited to continuation of base salary only are considered in violation of the ESA;

The provision of reasonable notice by an employer to an employee who was dismissed will only be rebutted if the employer achieves the degree of clarity required.

The Tribunal will hear the parties’ submission on the reasonable notice and mitigation issues in October of this year. We will keep you informed on the amount of notice awarded to the Employee.

Termination clauses are a key tool to protect employers at the outset of the employment relationship. Employers must ensure that these clauses comply with the minimum standards under the ESA and that they clearly outline what will be provided to the employee in the event of a termination without cause.

Employers should also consider a periodical review of their employment contracts to ensure their compliance with the most recent court decisions.